TBM at a Glance: The Most Important KPI You May Have Never Heard Of

“How’s business?” That’s a question more appropriate for CIOs to answer than ever. We’re in the age of digital transformation, with IT moving away from its traditional role as cost center and responsible for a growing, increasingly influential budget. Today’s strategic CIOs and IT leaders are focused squarely on increasing efficiency, improving business processes, and delivering reliable IT services. As a result, they need to run IT as a business where creating and proving value is the highest priority — with integrated insight into the cost, quality, performance, and value of their services. 

Of course, putting IT value first — before spending — is no easy task, requiring a significant transformation within the IT organization. Taking action around such issues as cost transparency, progressive benchmarking, and tracing costs to specific business objectives may not come as naturally to the average IT leader as it does to the CFO and the accounting department.  It is these types of issues that drove the development of today’s internationally recognized discipline of Technology Business Management (TBM), with the goal of guiding IT leaders towards the management of IT in a fact-based, customer-focused way.

KPMG’s approach to TBM revolves around a framework of the right people, processes, and technology to enable companies to operate IT as a business, in turn unlocking the greatest value from its investments. This approach can create three outcome-based capabilities, built on the foundation of financial transparency modeling, that include: IT planning and budgeting, IT funding and service charging, and IT financial analytics. With the resulting improved visibility into costs and performance data, organizations can make more informed, fact-based technology decisions and better communication the value of IT services across the entire organization. 

“We use our TBM framework as a platform that serves as a guide and a roadmap toward providing business value from IT — it’s a way to align your costs with what IT delivers as value,” says Jason Byrd, advisory managing director at KPMG, LLP (KPMG). “TBM can be an organization’s discussion facilitator that begins with very specific use cases in mind. It’s not just about hooking data points together and modeling for modeling’s sake; the value of what TBM can really do is take the foundational engine of modeling and build on that toward the other three key capabilities.”

Byrd adds, “For the past five years, KPMG’s framework has helped organizations understand how the practice of TBM is maturing, highlighting the challenges of the TBM journey and measuring organizations on their progress. Through our Global TBM Survey, KPMG has gathered and analyzed data from organizations around the globe, analyzing how they perform against key capabilities for TBM success and determining which companies have achieved the greatest results in generating true IT value for the business.”

A Core Discovery from the 2016 KPMG Global TBM Survey

The core finding from the 2016 survey reveals that TBM disciplines can play a pivotal role in beginning and guiding the business-minded IT transformation. With the right metrics aligned across the entire organization and presented in a language that the boardroom and executives   can understand, TBM can deliver a range of benefits — from improving the credibility of IT as a service provider and fostering better partnerships through data-driven strategies, to understanding portfolio performance relative to expectations and improved budget-cycle accuracy.

But what defines TBM proficiency? What are the success metrics that prove that following the TBM path is beneficial? As part of the survey, KPMG created a TBM Proficiency Index based on how organizations perform against a set of objectives to achieve successful outcomes, such as:

Driving IT Operational Transparency

• Is IT cost information accurate and readily available?
• Is there clear visibility into IT spend?
• Is there an accurate bill of IT for business spend distribution?

Delivering IT Operational Success 

• Do technology cost structures impede rapid response to changing business demands?
• Are there reduced operating costs and increased effectiveness in IT spend control?
• Is effective IT planning, budgeting, and forecasting supported by transparency? 

Demonstrating Business Value

• Are business stakeholders able to understand the value of IT?
• Is there clear and demonstrable business return on IT spend?
• Do senior business leaders rely on data more than opinions to make key decisions?

This year’s Global TBM Survey found that more than 55 percent of respondents have achieved some repeatable success through TBM in driving visibility into IT spend, while reducing operational costs and increasing spend control. 

In addition, 30 percent of respondents have demonstrated delivery of true business value. “Some organizations begin their modeling and assume that’s the end of the story,” says Byrd. “But really, that’s just the foundation: You should think about your business-driven use cases at the onset of your journey and ask, what you are going to do with this? What is the end game?”

TBM Leaders — Ahead of the Pack

Fifteen percent of surveyed organizations have a TBM Proficiency Index score that puts them ahead of the rest – as such, they are referred to as TBM Leaders. One important common element: they manage IT through a service lens, driving their ability to consistently deliver business value through IT. They realize it’s not just about cutting costs; it’s also about aligning the portfolio with the business strategy and linking IT costs to value.

TBM Leaders use service management tools to collect and maintain the data accuracy of service consumption information, which helps allocate IT costs, the survey found. They are systematic about reviewing their service portfolios and assessing their structure and management, and make it very clear to their business partners what services they offer.  

Among those organizations identified as TBM leaders, the CIO is also clearly in charge of achieving TBM success. The CIO has a unique vantage point, with an intimate knowledge of IT operations and how it needs to align with business processes. The CIOs are the ones with the most impact, and they can articulate the value of IT in ways that appeal to business partners — one of the biggest benefits of TBM.

Overall, the survey found no real difference between TBM Leaders and other organizations as far as what they consider important to driving TBM success. The biggest difference is in execution. TBM Leaders can execute on their TBM priorities and achieve their objectives — but the rest fall short of their goals.

Ready to Follow the TBM Path?

TBM is a long-term, multi-step process that moves a business towards sustained value over time. Are you ready to begin your TBM journey, or take your TBM efforts to the next level? Learn more about the KPMG TBM Proficiency Assessment or how KPMG TBM services can help your organization add IT value to the business here.