As organizations shift from Projects to Products and have an increased reliance on digital technology, they require new frameworks for measuring and managing resources for optimal decision-making. With traditional projects, the end goals are determined by timelines, resources and financial budgets. For example, if the project is construction of a highway off-ramp, it is relatively straightforward to understand the materials, equipment, labor and time needed from the outset. In contrast, Product Management requires the agility to change and adapt as a key component of the product development process.
With an Agile Product approach to developing digital products, teams work in Sprints to release a minimum viable product, establishing feedback loops with customers and then iterating to learn and improve the product as it is developed. Accounting and control for business decision-makers are not as straightforward when the effort is driven by learning about and solving a unique problem while gaining understanding of it throughout the process.
Technology Business Management (TBM) is a value management framework developed in response to the inherent differences between traditional and technology-based projects. It is a framework that transparently communicates the value digital resources provide and their costs in business terms that can be understood from the Finance, IT and Business perspectives. TBM provides technology leaders with the data-based, factual information needed to collaborate on business decisions and optimize run-the-business spending while accelerating business change. In the TBM Council’s book, Technology Business Management, Todd Tucker describes the following essential elements of TBM:
The TBM framework provides a decision-making model for maximizing the business value of an organization’s IT assets. The main purpose of the framework is to realize greater business value by optimizing run-the-business and change-the-business spending. The framework is designed to complement rather than replace existing IT governance frameworks and models. It defines the essential elements of an organization’s TBM program including unique considerations and is a catalyst for value conversations and understanding tradeoffs.
Like businesses’ reliance on Generally Accepted Accounting Principles (GAAP), the TBM taxonomy provides a standardized way to report IT costs and other metrics. It provides leaders with the ability to benchmark and compare technologies, IT resources and solutions across time and with peers and third-party solutions. TBM taxonomy creates alignment between Finance, IT and Business leaders by providing a standardized way to communicate business value and expenses. Like GAAP, each organization has its own TBM taxonomy reflecting its unique purpose and context.
The TBM Model is a software-based mapping and allocation of costs and resource consumption from their sources (hardware, software, labor, outside services) to the solutions they develop, deliver and support. The TBM model uses the taxonomy objects and layers plus data, allocation rules, reporting and metrics to create visibility to inform the value conversations of TBM.
TBM generates metrics and Key Performance Indicators (KPIs) that provide insight into the following value conversations:
- Cost-for-Performance KPIs help IT continuously improve the cost efficiency of its services while maintaining quality.
- Business Aligned Portfolio KPIs allow IT to focus its time and resources on the services, applications, technologies and vendors that drive the most value for the business.
- Investment in Innovation KPIs help IT and its business partners improve governance and collaboration on optimizing the level of project spending.
- Enterprise Agility KPIs facilitate the creation of a more Agile cost structure for IT and allow for more timely and effective decisions.
Benefits of TBM
By using the TBM framework, CIOs and business leaders have information to collaborate on fact-based tradeoffs and decisions that address value conversations and questions that arise in technology endeavors.
- Are there opportunities to improve efficiency without impacting service quality?
- Should we engage with a third party to rationalize technology initiatives and manage risk?
- Does a proposed new application or service add business value?
The TBM taxonomy and model allows CIOs to illustrate how user demand shapes the cost of the IT resources they maintain, and non-IT business leaders can use the same insights to guide their demand for and consumption of IT resources. TBM tools allow for benchmarking and comparison of unit costs of technologies over time or from one business unit, vendor or data center to another. TBM connects technologists and business leaders in a way that accelerates and increases value delivery based on improved collaboration and transparent, fact-based decisions.