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November 23, 2008
Scalpel or Cleaver: CIOs Can Show CFOs the Light
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Unless you secure passage to an alternate, idyllic IT universe, you’ll be hearing frequently about cutting costs in the coming quarters. As Gartner analyst Jorge Lopez told the crowd in October at the Gartner Symposium/ITxpo, organizations next year will be faced with cuts in the 20 percent to 30 percent range, if not worse. Even the optimistic predictions are not exactly chirpy; IDC, for example, recently revised its 2009 U.S. IT spending forecast downward to +0.9 percent.
So while the cleavers sharpen, the IT group needs to figure out where and what to cut -- an exercise that doesn’t get easier with practice. What would be useful is a tool that can find answers: Out there in that vast and dense infrastructure, what are the costs we’re not seeing?
Expense reporting and analysis solutions are quite common, but one year-old company, Apptio, brings a few twists that should be appealing in these financially interesting times. First, Apptio offers its tools on a SaaS platform -- “on-demand IT cost transparency solutions,” they call it. Apptio’s services also allow easy and automated data collection, a visual modeling environment, and some functions that could help IT managers respond to brass talking about “aligning IT with business objectives” (i.e., “How much is IT costing us this year, Bub?”).
“Cost transparency” might sound too much like consultant-speak, like something you’d get with one of those “framework” systems of the ‘90s that promised to solve every problem except how to use it. But it really means being able to see the cost of every little thing, and even costs hiding behind other costs.
Apptio’s idea is to make this X-ray vision easier to attain, and more useful, as well. “We were able to rapidly establish greater visibility into the costs of our core infrastructure services,” says Joel Chaplin, senior vice president of IT operations and enterprise systems at Motricity, a provider of managed services to mobile carriers like Verizon and AT&T. Apptio yielded cost and utilization data that helped prioritize targets for a server consolidation initiative across its nine datacenters, Motricity says.
Another customer, Skytap, provides a cloud-based virtual lab that enables organizations to scale their lab environments on demand. “Skytap Virtual Lab is designed for high-cost dynamic environments, such as application development and QA, IT ops testing, training and demo environments,” says Scott Roza, Skytap CEO. “In order to be successful, it is essential for Skytap to deliver great value to customers. One area we focus on is ensuring costs are kept low by optimizing management of our datacenters. Skytap uses Apptio to monitor usage of cloud resources and identify ways to reduce the costs of provisioning virtual infrastructure.”
Apptio’s platform lets users start by compiling data on IT costs -- from servers to cooling and everything in between, at whatever level of detail is needed, from licensing fees to electricity bills. This sort of thing often is done with spreadsheets, but, as some experts will tell you, that approach on a large scale can become too rigid, and can depend too much on the one staffer who understands the formulas. With Apptio, users can input data manually or pull it from multiple sources, including accounting files, reporting systems, asset databases, tech support databases, spreadsheets and so on. Utilization and operational metrics also can be captured and worked into the mix.
After entering the system, data goes into templates intended to make it easier to get an accurate cost model. (There is a “transparency template” for application services, for example, and one for datacenter infrastructure services.) Apptio has built business intelligence and best practices into these templates. As data pours in, algorithms indentify patterns and relationships between costs and cost drivers. This is not so much a way to build a cost-collecting repository, but rather a system of analytics, rules and business logic designed to help make smart, dollar-collecting decisions. Once this logic is nailed down, it can be applied to future data uploads. This is one of Apptio’s “automated cost transparency” features, with another being hooks to automatically pull in data from different sources.
“We’re helping service providers and enterprises understand how their IT infrastructures operate so they can focus on cost optimization,” says Eric Berg, Apptio vice president of product management and marketing. “We help them answer several fundamental questions: What does it really cost to offer a service? How profitable are we? Where can we cut costs?”
Customers can use Apptio services to help them manage their service-level agreements, Berg says. “Our core technology has a robust analytics engine that can do correlation, relationships, identify metrics and do the analysis necessary to find out if performance is meeting SLAs,” he says. “And once they gain that visibility into total costs at the IT service level, they can understand all the drivers. Not just financial numbers, but also CPU and storage utilization rates, server-to-admin ratios, rack space, you name it.”
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