What is TBM?
Technology Business Management (TBM) is a discipline that improves business outcomes by giving organizations a consistent way to translate technology investments to business value.
TBM Council board member Atticus Tysen of Intuit explains TBM and its critical role in the modern digital business. From May 2022.
Finance and technology leaders need comprehensive visibility, planning, billing, benchmarking, and optimization of their technology investments regardless of technology stack, delivery, or development model.
TBM defines the tools, processes, data, and people needed to manage the business of technology. Based on a standard taxonomy that can be used by technology, finance and business leaders, TBM enables organizations to react quickly to changing market dynamics, make data-driven decisions, and align organizations around a common business objective.
With TBM, Technology leaders deliver impactful outcomes…
- 3-5% budget optimization
- Decisions and insights real-time
- Make migration decisions 25% faster
- Optimize multi-cloud / SaaS by 30%
- Cut capacity planning time by 80%
- Continuous product delivery at scale
Why is TBM Needed?
The pace of technology
evolution is quickening…
Top 10% of companies evaluate opportunities and reallocate budget on a monthly to weekly basis.
...but Tech & Finance Leaders
suffer from fragmented visibility
into technology spend and
value of digital innovation.
- Doubts about cloud migration plans
- Cloud sprawl and unplanned spiraling costs
- Duplicate SaaS vendors & wasted licenses
- Hard to direct funding to most valuable innovation
- Labor spend inertia on tasks instead of outcomes
- Lag in resource reallocation when priorities shift
- Too much “run” spend starves innovation budgets
- Spend views miss “fully loaded” costs like labor & facilities
- Business units consume tech like it’s free & unlimited
- Planning takes too long and is immediately out of date
Tech spending is black-box
Existing systems are too slow
Decisions made on guestimates
- Confidence in cloud migration plans
- Financial accountability for IaaS spend
- Optimization of SaaS vendors & licenses
- Funding/tracking value streams of new innovation
- Aligning development labor to business outcomes
- Allocating resources in real-time to portfolios
- Optimize run budget to invest in growth
- Infra/vendor/application TCO
- Consumption-based chargeback/show back
- Dynamic planning (e.g. monthly)
Visibility & insights into spend
Real-time, continuous analytics
Informed & trusted decisions
Value & outcome clarity
Connecting Technology Investments to Business Value
Organizations need a way to connect technology investments to business value. In other words, organizations need to consider how they can translate the things that money is spent on – cloud bills, data center investments, 3rd party software, and developers – to outcomes that the business cares about.
First we need to consider the practices and operating models that a company is adopting or wishes to adopt. These impact the business outcomes that matter to an organization. For example, a company that is adopting FinOps will care about unit economics. An organization that is moving to a product-oriented operating model will care about product TCO. How your business operates must be considered in building the map.
Organizations need to collect all the resources they have – both the technology assets and the people involved. People are typically a significant portion of an organization’s technology spend, so it’s important to include this in the framework.
Organizations need to map these resources to the actual solutions – these are the things that an organization builds or maintains. Depending on the chosen Operating Model, solutions may be standalone apps, services used by internal and external customers, or products.
The most important step is to connect these solutions to desired business outcomes. Without this last step, it remains challenging for business leaders to understand why technology investments are worthwhile. Tying them to business outcomes enables a shared understanding and common set of data from which to make decisions.
Looking to Accelerate Your Cloud Adoption?
TBM helps drive measurable outcomes with your cloud strategy.
Making the Project-to-Product Transition?
TBM facilitates outcome-focused development via agile transformation.
Allocating Costs Fairly According to Use
To unlock TBM’s biggest benefits, organizations must master the art of allocating costs equitably according to each element’s use and dependence on other elements, and in a manner that’s defensible to those paying the costs. The first step is understanding how services are composed.
(Hover over diagram to pause)
In this example, a hypothetical retail products company needs to understand the cost composition of their mobile ordering capability.
The Mobile Ordering business capability is comprised of elements from several different Solutions. In order to apportion costs equitably, the organization uses operational metrics to allocate the portion of the underpinning Solutions’ costs consumed by the Mobile Ordering capability.
In turn, each Solution is comprised of various technology and people Resources. Again, the organization uses operational metrics to allocate the portion of the underpinning Resources’ costs to Solutions according to their consumption.
Finally, each Resource incurs various types of Costs. The organization uses simple rules to allocate the incoming Costs to the Resources they support.
Backed by a Standardized Taxonomy for Technology Costs
The complexity and variety of technology architectures mean that every business uses their own terminology or lingo to describe the elements in their purview. This makes it very difficult to adopt best practice allocation methodologies or make efficiency comparisons across industry. That is why in 2014, the TBM Council standardized on a TBM Taxonomy to help take the guesswork out of naming and organizing cost structures. The TBM Taxonomy translates from a financial view to a technology view to a business-facing view with terminology that makes sense to each audience.
The TBM Taxonomy makes adoption of TBM much easier, because it settles debates about what to call things or how to group costs together. It also lays the groundwork for vendors to standardize other important tools, such as the allocation model that defines the math for apportioning costs and reporting systems for quickly deriving insights about an organization’s spend.
“TBM is a game changer at Liberty Mutual. We are already seeing significant wins in migrating workloads to the cloud, data center consolidations, strategic sourcing, and rightsizing.”
Vice President and Chief Financial Officer of Technology
Leveraging TBM Throughout the Business Operation Lifecycle
TBM is not a static framework or activity that is performed a few times a year – it should be leveraged throughout a business operation lifecycle to guide strategic planning and ideation, demand and capacity management, financial planning, delivery management, and value management.
- Review previous performance
- Define business objectives
- Review demand of both assets & workforce
- Identify available resources
- Budgeting & forecasting over different time horizons
- Investment planning
- Deploying products & services
- Manage efficient use of resources (e.g. rightsizing)
- Measure business value
- Review KPIs & metrics
- Manage & revise contracts & procurement
TBM brings visibility and data to each of these stages to help inform decisions. And it is this cycle that is accelerating today, driving the need for accurate information that is available at the speed of business.
Getting started with TBM
Most organizations start their TBM journey with an emphasis on technology costs and planning, typically focusing on traditional IT, public cloud, or agile development costs. As they mature, organizations use TBM to track app or services TCO, and translate the value of IT-as-service-provider to the organization. Eventually, leaders use TBM to connect technology investments to the business strategy and outcomes.
Check out our TBM Tuesdays video series for live and on-demand conversations about today’s hottest TBM topics and trends.