Navigating the TBM Taxonomy: Three Views for Enhanced Decision-Making

The Technology Business Management (TBM) taxonomy is a powerful tool for organisations to understand their IT spending comprehensively. It serves as a common language and framework, allowing companies to align IT investments with business objectives and to demonstrate IT's value to stakeholders. The TBM taxonomy offers three distinct views that bring clarity to different aspects of IT financial management: the Finance view, the IT view, and the business view. Each of these views serves a unique purpose, providing decision-makers with the insights needed to optimise technology investments. The Finance view focuses on cost transparency and accountability, helping organisations track and manage IT spending more effectively. The IT view provides visibility into the cost and performance of IT services, enabling IT departments to make informed decisions about resource allocation and service delivery. Lastly, the business view connects IT investments to business outcomes, allowing executives to make strategic decisions that drive growth and innovation. By leveraging the TBM taxonomy, organisations can improve IT cost management, enhance decision-making processes, and drive more excellent business value.

The Finance View: Grounded in Financial Accountability

The Finance view serves as the foundation for the TBM taxonomy, enabling a financially transparent understanding of IT spending. This view starts with the organisation's general ledger as the primary source of truth. Still, it can also incorporate data from other financial systems, such as fixed assets registers or payroll systems. Its primary aim is to ensure that every IT cost is accurately captured and accounted for.

Key Features of the Finance View

1. Standardised Cost Pools: The TBM taxonomy uses a set of standardised cost pools, which categorise similar expenses under common headings. This simplifies cost allocation and financial reporting by grouping related expenses together. Some common examples of cost pools include:

• Hardware: The physical technology infrastructure, such as servers, computers, and related equipment.

• Software: Licensing, subscription fees, and maintenance costs for software products.

• Internal Labour: Costs associated with the time IT staff spend on delivering services.

• External Labour: Contractor or consultancy fees for supporting technology projects.

• Facilities and Power: Data centre utilities and other facility-related expenses.

• Telecom and Other Services: Network, communication, and outsourced services costs.

2. Separation of Operating and Capital Expenditures: The finance view distinctly separates operating expenditures (OpEx) from capital expenditures (CapEx). This clear differentiation is crucial for understanding the full picture of IT investments and supporting accurate financial reporting. It also allows IT leaders to optimise spending strategies, balancing maintaining existing infrastructure and investing in new technologies.

3. Traceability and Transparency: The finance view provides the transparency needed to track costs throughout the TBM model, revealing the composition of expenses across different IT components. This visibility allows financial managers to understand the underlying drivers of IT costs and helps identify opportunities for optimising resource allocation. Tracing where costs are incurred and why, the finance view empowers informed decisions that contribute to financial efficiency and accountability.

The IT View: Assessing the Cost-Effectiveness of Technology

The IT view dives into the technology resources that form the foundation of IT services. This perspective leverages standardised towers and sub-towers, which serve as the building blocks of IT infrastructure. These towers represent different components of IT services, such as:

• Data Centre: Physical or cloud-based data storage facilities.

• Compute servers, virtual machines, and processing power.

• Storage: Databases and other forms of data storage solutions.

• Network: Routers, switches, and network management tools.

• Software and Applications: Tools used across the organisation to support different business needs.

• End User Services: Devices and applications that interact directly with users.

Key Benefits of the IT View

1. Evaluate Cost-Effectiveness: The IT view allows IT leaders to assess the cost per unit of technology—such as the cost per server or per terabyte of storage. This enables the evaluation of IT efficiency and helps identify opportunities for improving infrastructure or reducing costs without compromising on quality. Leaders can make better technology upgrades and resource optimisation decisions by understanding these metrics.

2. Benchmarking Against Industry Standards: With the standardised TBM taxonomy, organisations can benchmark their IT spending against industry averages or best practices. This type of analysis is instrumental in revealing areas where the company might be overspending or underinvesting. Benchmarking provides a data-driven basis for setting targets and making informed decisions on technology investments, helping align spending with performance and value.

3. Make Data-Driven Decisions: The IT view offers detailed insights that facilitate data-driven decisions about infrastructure investments, vendor negotiations, outsourcing strategies, and cloud migration. By having a clear picture of costs at the technology level, IT leaders can negotiate better contracts with vendors, decide on what services to outsource, and assess the benefits of moving to cloud services while maintaining cost control.

The Business View: Connecting IT Spending to Business Outcomes

The business view bridges IT spending and business value, providing the context for conversations between IT and business stakeholders. It helps demonstrate how IT investments translate into business outcomes and supports strategic planning.

Key Components of the Business View

1. Solutions and Business Capabilities: The TBM taxonomy defines a standard set of solution categories, such as workplace, business, corporate, delivery, platform, and infrastructure solutions. These solutions represent the services, applications, and products IT delivers to the business. Mapping these solutions to business units and capabilities allows organisations to see which areas benefit from IT investments and which are lagging.

2. Mapping IT Costs to Business Units and Capabilities: The business view maps IT spending to the business units and capabilities that consume IT services. This mapping exercise provides visibility into how IT investments support different parts of the business, thus helping assess IT initiatives' return on investment (ROI). This perspective ensures that investments are being used in ways that directly contribute to the organisation's strategic objectives.

3. Customers and Partners: The business view also considers how IT spending affects customer and partner relationships. By understanding the value of IT services to external stakeholders, organisations can make better investment decisions aligned with their customer-centric strategies.

Empowering Business Leaders with the Business View

1. Understanding the Value of IT Spending: Business leaders can use the business view to understand the value proposition of IT spending. By linking technology investments with business outcomes, this perspective makes it easier for non-technical stakeholders to appreciate IT's role in driving business success.

2. Facilitating Informed Discussions on IT Investments: The business view provides a common framework that allows IT and business leaders to engage in informed discussions regarding IT budgets, priorities, and projects. This collaborative approach ensures alignment between IT and business strategy, helping shape IT demand to maximise value for the organisation.

3. Shaping IT Demand: The business view also helps in shaping IT demand by providing insights into the costs associated with different IT solutions and business capabilities. By understanding the financial impact of IT consumption, business leaders are more likely to make responsible, cost-effective decisions, fostering greater accountability and collaboration.

Conclusion

The three views offered by the TBM taxonomy—finance, IT, and Business—provide a holistic perspective on IT spending, enabling organisations to achieve transparency, accountability, and efficiency in their technology investments. By leveraging these views, IT and business leaders can collaborate effectively, align IT investments with overall business goals, and demonstrate the value of IT to stakeholders. Through the combined power of the TBM taxonomy and the TBM model, organisations can navigate the complexities of IT financial management and ultimately drive business success.