A Better View of Technology Spending Improves Business Outcomes

Real-time analytics, a product view of spending and shared accountability help
executives see where the money is (and isn’t) generating value.
By Darren Johnson and Vishy PadmanabhanA Better View of Technology Spending Improves Business Outcomes
At a Glance
➢ Full transparency of technology spending gives companies a better understanding of
where this funding is paying off, and where it is not.
➢ Transparency also helps companies become more agile in shifting spending so it can
generate the most value.
➢ A three-part program helps companies achieve better transparency of technology
spending: real-time analytics, a product view of spending and shared accountability across
the organization.
Companies spend a lot on information technology every year, but few are achieving what they want from those
investments. Bain’s research finds that only 8% of companies say they are getting their money’s worth in terms
of good business outcomes and advanced digital capabilities. (For more, read the Bain Brief, Four Myths of
Digital Transformation: What Only 8% of Companies Know.)
It’s no coincidence that companies in this leading group have a deeper understanding of how their technology
budgets are spent and are better at redirecting spending to where it creates value. Our research finds that these
leaders are 3.5 times more likely to say they have full transparency over IT spending, compared to the rest. In
these companies, technology spending data is available in real time (not last month’s numbers on a PowerPoint
slide) and in customized views that provide the right data to each stakeholder, whether they are in finance,
technology or business functions (see Figure 1)

Getting this visibility is hard and maintaining it over time is harder. Because the technology budget can be
spread across several departments and business units, many companies struggle to get a clear picture of where
the money is going, how it changes over time and whether or not the investment is worth it. And yet every year,
the technology budget grows. Moreover, most business and finance executives cannot fully decode the spending
information and link it back to the products and services they spearhead. The promise of transparency is only
partially fulfilled.

 Full transparency can help reduce run spend by 10%
Increasingly, companies are implementing third-party software systems that track spending data in real time
and deliver it in customized dashboards across the organization. These IT financial management (ITFM) tools
lead to better decisions based on facts, but they are only one part of a three-part program that companies need
to follow to move toward transparency.
• Real-time data and analytics. Accurate and relevant data about spending helps executives draw
meaningful insights and reallocate investments where they can generate the most value. ITFM tools are
an increasingly important capability to enable this analysis, particularly for large and mid-size
companies whose spending on technology is rising. As companies pursue their digital goals, finance and
technology leaders typically buy these tools when spending levels increase and priorities change
frequently.
• Product view of technology spending. Traditional thinking divided the spending into technology
categories like hardware, software, telecom and labor. This view falls short of what business leaders
need. Companies can generate more value by framing the spending view around products, customer
experiences or business capabilities. This perspective is especially well suited to companies using Agile
methods. Each Agile team, product or portfolio of products should have its own spending dashboard so
it can see how resources are spent and the business value being generated. It also helps product
managers reprioritize their backlogs and identify ways to improve return on investment (ROI) in their
area of focus. Senior leaders can access the data they need to decide when to reallocate spending from
one product to another and across product portfolios.
• Joint accountability. By developing product-level transparency and a culture of shared accountability
for spending, leaders from finance, technology and business functions can continually adjust spending
and save costs. For example, finance might support IT by conducting a benchmarking analysis across
different parts of the IT organization, a process that can free up funds that can then be redirected from
“run” to “grow the business.” Understanding technology costs across these categories helps product
managers and engineering leads make better decisions about resource allocation, while increasing trust
between them. Best practice offers product managers real-time views of their spending along with the
objectives and key result measures they are pursuing as a team (For more on this, read the Bain Brief,
Getting More Value from Objectives and Key Results.)
A major airline implemented this three-part solution recently. Executives wanted to know, for example, how
much they were spending on generating revenue compared to operational costs or improved passenger
experience. Within any of these categories, they could dive deeper: In passenger experience, they could see how
much they’re investing in initial bookings vs. online check-in. This data helps identify opportunities to redirect
technology spending where it would be more valuable to the business. They implemented an ITFM solution,
Apptio, as part of a broader process aimed at understanding how the technology budget maps to strategy and
business goals (see Figure 2).

The airline’s finance and technology departments worked together to identify cost-savings opportunities—for
example, by conducting benchmarking analysis across different parts of the IT organization—which could
either be reinvested in discretionary “grow” IT efforts or banked as a budget reduction. The bottom line was
clear. It became easier for leaders to demonstrate returns on technology investments, and finance grew more
confident that the technology budget was being spent on the right things.
This journey is not without its share of difficult steps. Buying the tool is the easy part. It takes more effort and
is more critical to organize the company into a taxonomy that serves the customer, detail the right set of
products and journeys, map accurate technology cost data, and ensure training for senior and mid-level
management. The airline invested significant time training leaders from the CFO and CIO down to product
managers on how to use this in their daily work. They also invested time defining the taxonomy and making
necessary decisions around product manager accountability and decision rights.
To get started, companies should take three concrete steps.
•
Reorient executive conversations around transparency. Changing expectations is the first step to
bringing spending insights forward. This also helps ensure buy-in and shared commitment among
finance, IT and business leaders.

• Reaffirm the goal of improving ROI. Transparency in thinking and the tools to accomplish it aren’t the
goal; they’re a critical part of the continuous process of examining spending which, in turn, allows future
investment to grow the business rather than just keep the lights on.
• Create an initial view, then invest in the right tool. Some companies create this view manually with,
for example, Tableau or another data visualization tool. Next-level performance usually requires more
resources and a commitment to the long-term goal of transparency—often with an ITFM, which can take
several months to implement.
Achieving full transparency into IT spending isn’t enough to transform a company into a technology leader. But
it is a vital step in that direction, one that provides immediate and long-lasting benefits for companies that
achieve it.