Finance and technology leaders often lack full visibility into technology spending and the value of digital innovation. They require integrated solutions for planning, billing, benchmarking, and optimizing technology investments, irrespective of the underlying technology stack, delivery method, or development model.
While technology leaders can often articulate their adopted practices (such as Agile or FinOps), their chosen operating models (product-oriented or service-oriented), and their staffing composition (full-time or contractor), they frequently encounter difficulty in meaningfully linking this information to tangible business outcomes or explaining the technology-related costs associated with achieving those outcomes.
For many organizations, particularly small and medium-sized enterprises, technology spending still lacks transparency. This is because spend views frequently overlook fully loaded costs such as labor and facilities, business units consume technology without considering its true cost or limitations, and planning processes are slow and quickly become obsolete.
Consequently, investment decisions often suffer from incomplete information. This makes it challenging to allocate funding effectively to the most valuable innovations, as technology resource reallocation struggles to keep pace with shifting business priorities.
Organizations require a method to connect technology investments with business value, converting expenses like cloud invoices, data center outlays, third-party software, and developer expenditures into concrete business results.
Technology Business Management (TBM) facilitates the communication of technology’s value by translating financial and technical perspectives into a business-oriented view, utilizing terminology tailored for each audience.
What is Technology Business Management?
Technology Business Management (TBM) is a framework and discipline that provides IT leaders with the tools and insights to run their IT organizations like a business. It’s about bringing financial transparency to IT spending, enabling organizations to understand the true cost of their technology services, applications, and infrastructure.
The TBM Framework connects the core elements that leaders need to adopt, operate, and mature for creating an actionable system for technology value management.
By categorizing and analyzing IT costs, TBM allows for better decision-making, improved resource allocation, and a clearer alignment of IT investments with business objectives. It helps translate technical IT language into business terms, making it easier for all executives to grasp the value and impact of IT on the overall enterprise by transforming technology management into a series of quantifiable business outcomes.
- Transparency: Providing clear visibility into costs, consumption, and performance for informed decision-making.
- Insights: Delivering analytical understanding of how technology investments generate business value.
- Benchmarking: Enabling comparisons of cost, performance, and investment levels against industry best practices and peers.
- Strategy: Aligning technology spending and initiatives with overarching business goals and strategies.
- Alignment: Fostering coordination among IT, finance, and business leaders around shared priorities and trade-offs.
- Optimization: Continuously improving technology investments and operations to maximize both efficiency and value.
TBM Framework: https://www.tbmcouncil.org/framework/
What does “Run IT like a Business” mean?
The concept of “running IT like a business” is a shift in how IT departments have operated historically, moving beyond their traditional role as cost centers, still prevalent in many SMEs today, to become value-driven functions that contribute directly to an organization’s financial success and strategic objectives.
This transformation involves adopting a business-oriented mindset, where IT leaders and their teams think and act like business executives, focusing on return on investment (ROI), efficiency, customer satisfaction, and continuous innovation.
This requires managing IT finances as investments, not just expenses, understanding the true fully loaded cost of IT services, and implementing chargeback or showback models to business units consuming IT services. It also involves defining and optimizing IT services to align with business goals, practicing proactive demand management for IT services, and managing vendor relationships for cost-effectiveness and quality more strategically.
Additionally, it involves establishing clear KPIs and metrics to gauge IT’s performance against all business objectives and not just IT service delivery uptime and security by cultivating relationships with a broader group of internal stakeholders, and proactively investigating and introducing innovative technologies that foster new business capabilities for competitive advantage.
How is TBM Different from Historical IT Financial Management?
Traditionally, IT financial management was focused primarily on tracking and reporting IT spending. This often involved siloed budgets for hardware, software, personnel, and operational costs. While this approach provided a basic understanding of where money was being spent, it lacked the strategic insight needed to optimize IT investments and align them with business objectives.
It was largely a reactive process, driven by a mix of historical spending patterns and budgetary constraints, rather than proactive decision-making based on potential value and business impact. The historical model often struggles to provide transparency into the true cost of specific IT services or applications, making it difficult for non-technology leaders to understand the value they were receiving for their IT investments.
Furthermore, it rarely provided a common language or framework for discussions between IT and business stakeholders, leading to misunderstandings and a perception of IT as a cost center rather than a strategic enabler. IT funding requests often stemmed from a desire for trendy tools or fear-driven needs, making them challenging to justify to business leaders with diverse objectives primarily focused on growth and transformation and not just running the business.
How Do Companies Use TBM?
Cost Optimization
By breaking down IT costs into granular components, TBM helps identify areas of inefficiency, redundant spending, and opportunities for cost reduction without compromising service quality.
Service Portfolio Management
TBM provides a clear understanding of the cost and value of different IT services, allowing companies to make informed decisions about which services to invest in, optimize, or discontinue.
Budgeting and Forecasting
With accurate cost data, companies can create more precise IT budgets and financial forecasts, leading to better financial planning and resource allocation.
Vendor Management
TBM offers insights into the costs associated with different vendors, enabling organizations to negotiate better contracts and manage vendor relationships more effectively.
Showback/Chargeback
Many organizations use TBM to implement showback (reporting IT costs to business units) or chargeback (charging business units for IT services consumed), fostering greater accountability and awareness of IT spending across the organization.
Strategic Planning
By linking IT costs to business outcomes, TBM supports strategic planning, ensuring that IT investments directly contribute to the company’s overall business strategy.
TBM differences to FinOps
While both Technology Business Management (TBM) and FinOps aim to optimize cloud spending and bring financial accountability to technology, they differ in their scope and primary focus.
Scope
TBM is a broader framework that encompasses all IT spending—on-premise infrastructure, applications, cloud services, and IT labor. It provides a holistic view of the entire IT landscape. FinOps, on the other hand, is specifically focused on managing and optimizing public cloud spending.
Focus
TBM emphasizes financial transparency, cost allocation, and the overall business value of IT across the entire enterprise. It helps IT leaders run IT “as a business.” FinOps, while also focusing on cost, emphasizes the collaboration between finance, operations, and development teams to achieve continuous cost optimization in the cloud. It’s about establishing a culture of financial accountability and efficiency in the cloud.
Maturity
TBM often represents a more mature and comprehensive approach to IT financial management, built on established accounting principles. FinOps is a newer, rapidly evolving discipline born out of the complexities of cloud environments.
Technology Business Management Complements FinOps
Technology Business Management (TBM) is highly complementary to FinOps. In fact, FinOps can be seen as a specialized extension or application of TBM principles within the cloud domain.
TBM provides an overarching framework and can provide the foundational financial management principles and data structures that FinOps can leverage. It establishes the enterprise-wide context for understanding and allocating technology costs.
FinOps enriches TBM with cloud-specific insights and can drill down into the nuances of cloud spending, providing granular data and optimization strategies specific to cloud platforms. This detailed cloud cost data can then be integrated into the broader TBM framework for a comprehensive view of IT spend.
Together, they offer a complete picture by combining TBM’s holistic view of all IT costs with FinOps’ specialized cloud optimization capabilities. Organizations can achieve financial control and efficiency across their entire technology landscape, whether on-premise or in the cloud.
Implementation Challenges
Implementing Technology Business Management can present unique challenges for Small and Medium-sized Enterprises due to their often limited resources, smaller IT teams, and less complex IT environments compared to large enterprises.
Achieving TBM maturity and successful implementation can be a lengthy process, potentially spanning several years. This is particularly true for older companies undergoing digital transformation, especially if their IT department is traditionally managed, or if the organization has historically operated in silos with limited communication among IT, finance, and business leadership.
However, the benefits of TBM, even in a scaled down form, can be substantial for SMEs looking to optimize their technology investments and improve business agility.
Resource Constraints: SMEs may lack the dedicated financial analysts, specialized IT finance tools, or extensive IT staff often found in larger organizations to drive a full-scale TBM implementation.
Data Granularity and Integration: Gathering and integrating detailed IT cost data from various sources (hardware, software, cloud services, labor, etc.) can be challenging without effective IT asset management or financial systems.
Lack of Formal Processes: Many SMEs operate with less formalized IT budgeting and reporting processes, making the adoption of a structured framework like TBM a significant cultural and operational shift.
Perceived Complexity: The comprehensive nature of TBM might seem overwhelming for an SME with a lean IT department already stretched thin.
5 Quick Wins for SMEs
The goal of TBM is to create an IT operating model that clearly connects IT costs to business outcomes. Even with limited internal resources, SMEs can achieve significant “quick wins” by adopting core TBM principles and focusing on areas that yield immediate value.
Identify and Eliminate Redundant Software Licenses/Subscriptions
By tracking software usage and subscriptions, SMEs can quickly identify unused or duplicated licenses, leading to immediate cost savings. This often involves a simple inventory and reconciliation process.
Optimize Cloud Spending on Underutilized Resources
Even without full-fledged FinOps, SMEs can use cloud provider dashboards to identify and right-size underutilized virtual machines, storage, and other cloud services, achieving rapid cost reductions.
Renegotiate Key Vendor Contracts Based on Usage Data
By analyzing actual usage data for IT services (e.g., internet providers, SaaS applications), SMEs can gain leverage to renegotiate contracts with vendors, potentially securing better terms or discounts.
Consolidate and Rationalize IT Tools and Applications
Many SMEs accumulate multiple tools that perform similar functions. A quick TBM-inspired review can identify opportunities to consolidate to a single, more cost-effective solution, reducing licensing and maintenance overhead.
Gain Visibility into the True Cost of Key Business Applications
By simply allocating internal IT labor and infrastructure costs to critical business applications (even roughly), SMEs can start to understand their true fully loaded operational cost, informing future investment decisions and identifying high-cost, low-value applications. This initial visibility can lead to targeted optimization efforts.
Implementing TBM
Implementing TBM is an undertaking that requires a structured approach to ensure its successful adoption and realization of benefits.
Define Your TBM Vision and Objectives
Before diving into the technicalities, it is crucial to establish a clear vision for what you want to achieve with TBM. Engage IT leaders, finance, and business units to understand TBM requirements and define how TBM supports key organizational goals (e.g., cost optimization, IT service delivery, investment decisions, business alignment).
Clearly define success with measurable KPIs (e.g., reduced IT spending, improved cost transparency, increased business satisfaction) and then communicate the “why” for buy-in to everyone it will touch.
Assess Your Current State
To begin, understand your current IT cost structure. Analyze how costs are categorized, allocated, and reported to identify areas of inefficiency or opacity. Simultaneously, evaluate the accessibility and quality of your IT financial data from all sources (e.g., general ledger, vendor invoices, asset management systems), noting any inconsistencies or gaps. This initial understanding is crucial before planning your journey.
Next, review your current processes for budgeting, forecasting, chargeback/showback, and reporting, including the tools you currently use. Finally, assess the readiness of your IT and finance teams to adopt a data-driven approach and new processes, identifying any potential training needs.
Develop a TBM Roadmap
Effective Technology Business Management implementation requires a phased roadmap: foundational data, cost transparency, and advanced planning. Select a TBM software platform that integrates with existing systems and offers data integration, cost modeling, reporting, and dashboarding.
A defined data integration strategy (APIs, or ETL) is crucial. Outline TBM’s impact on IT financial management processes to ensure enhancement, not disruption. Allocate resources (TBM experts, data analysts, project managers), set realistic timelines, and define milestones for each phase.
Implement the TBM Framework
The practical work starts with gathering and standardizing IT financial and operational data in the TBM platform, ensuring accuracy. Configure the platform to model IT costs, defining categories and allocating shared costs. Define IT services in business terms, creating a service catalog linking costs to services.
Develop reports and dashboards for IT spending, consumption, and performance, tailored for different audiences and key executives. Finally, train IT finance, service owners, and business stakeholders to use the platform and interpret data for promoting a higher degree of data-driven decisions.
Operationalize and Optimize TBM
Continuously refine your TBM model, data, and reporting based on feedback and evolving business needs to improve accuracy and insights.
Use TBM data to track IT service performance against KPIs, identifying areas for cost optimization, efficiency, and value creation. Integrate TBM insights into IT strategic planning and budgeting to rationalize investments, prioritize projects, and demonstrate IT’s value to the business.
Why Implement TBM as a SME?
Small and medium-sized enterprises may look at this and initially find implementing Technology Business Management challenging, primarily due to perceived complexities and upfront costs without immediate returns. However, the long-term advantages still outweigh these initial obstacles.
Even a simplified version of TBM provides a strong foundation for future growth and operational efficiency. Early adoption is critical because as an SME expands and its operations become more complex, integrating the principles and a structured framework becomes substantially more intricate and expensive.
This escalation in complexity and cost is due to how deeply entrenched legacy systems, departmental silos, and diverse IT assets and services typically develop as organizations become larger. Retrofitting TBM into such environments demands extensive re-engineering, re-training, and often significant cultural shifts, all of which contribute to higher expenses and longer implementation timelines.
While the initial TBM investment may seem daunting, it is a strategic necessity for SMEs aiming for sustainable growth. Neglecting TBM in the early stages inevitably results in a far more complex and costly undertaking later, potentially hindering an organization’s competitive edge against better equipped rivals.
The 2024 State of TBM Report found that TBM continues to enable organizations to realize savings across Run and Change, while providing the insights necessary to identify higher return investments.
- 89% Decreased cost to serve customers
- 88% Increased innovation funding
- 78% Improved customer engagement and satisfaction
Further Info: TBM Council Links
The Technology Business Management (TBM) framework is an open-source framework managed by the TBM Council. The TBM Council is a non-profit organization dedicated to advancing the discipline of TBM through best practices, education, and standards.
To promote alignment between IT, Finance, and Business Unit leaders, TBM provides a standard taxonomy to describe cost sources, technologies, IT resources (IT towers), applications, and services.
Just as businesses rely on generally accepted accounting principles (or GAAP) to drive standard practices for financial reporting—and thus comparability between financial statements—the TBM taxonomy provides a generally accepted way of categorizing and reporting IT costs and other metrics.
Key Takeaways
- TBM is for Transparency and Value: Technology Business Management (TBM) offers IT leaders the necessary tools to operate their IT departments as a business. It achieves this by introducing financial transparency to technology expenditures, which in turn facilitates a more precise comprehension of the genuine cost and inherent value of IT services.
- Beyond Cost Center: The “Run IT like a Business” concept shifts IT departments from traditional cost centers to value-driven functions, focusing on ROI, efficiency, and direct contribution to organizational success.
- Strategic vs. Reactive: Unlike historical IT financial management, TBM offers strategic insights to optimize IT investments and align them with business objectives, moving beyond reactive spending patterns.
- Practical Applications: Companies leverage TBM for cost optimization, service portfolio management, improved budgeting and forecasting, enhanced vendor management, showback/chargeback models, and strategic planning.
- SME Benefits Outweigh Challenges: While SMEs face resource and complexity challenges in TBM implementation, even a scaled-down version provides substantial benefits like quick wins in cost savings (e.g., license optimization, cloud spend reduction) and a strong foundation for future growth.
- Early Adoption is Key: Implementing TBM early in an SME’s lifecycle is critical. Retrofitting it into a larger, more complex organization with entrenched systems becomes significantly more intricate and expensive, potentially hindering competitive advantage.
- Structured Implementation: A successful TBM implementation requires a structured approach: defining vision and objectives, assessing the current state, developing a phased roadmap, implementing the framework, and continuously operationalizing and optimizing.
