Centralized IT Creates Need for More Effective Cost Management by Ann All, IT Business Edge Apr 1, 2010 5:21:29 PM

Ann All spoke with Yisrael Dancziger, president and CEO of Digital Fuel Technologies, a provider of IT cost visibility solutions including IT cost management and service level management (SLM) applications used by enterprises and commercial service providers. Customers include the BBC, BT, Capital One, Cisco, Computacenter, CSC, Cummins, Dell, Deutsche Bank, General Electric, Global Crossing, IBM, Nationwide, Nestle, Procter & Gamble, Siemens, SITA, Sprint, Steria, Telefonica, Telus, VW and Wipro. The company recently sponsored an independent study of IT cost visibility, and confirmed its results with a series of multi-city roundtable meetings with CIO-level executives during 2009's fourth quarter. All: How do most IT organizations do cost management today? Dancziger: Most IT organizations focus on high level only, Excel spreadsheet hell or don’t do at all. All: Yikes. These approaches obviously seem inadequate. Dancziger: Yes, with no detailed visibility into P&Ls, there is no predictability. Also, with no detailed visibility, you can’t optimize cost benefit of IT on an ongoing basis and you can't be proactive about controlling costs. Not to mention, doing all of the necessary tasks manually costs an arm and a leg, and it is after the fact and error prone. It's becoming even more of an issue in a world of virtualization and cloud commuting, where you must perform usage-based IT cost allocation to comply with tax and regulations. All: What are the key challenges in cost management for most IT organizations? Dancziger: The key challenges in cost management for your typical IT organization include automation of data gathering and handling, as well as cost model and allocation rules management. All: Is the profile of cost management rising? I would think so, with the added emphasis on controlling and cutting costs in this post-recessionary environment. Other than the recession-driven focus on cost reduction, are there any other market forces contributing to an increase in interest? Dancziger: Yes. The importance and profile of cost management is rising very much. The recession-driven focus on cost reduction is tactical; the key driver of this market is because of virtualization, centralization of IT and cloud computing. All. OK. I know in Digital Fuel’s recent research there was a finding that virtualization and cloud computing are making it even harder for IT organizations to achieve cost transparency, and thus optimize and rationalize their investments. Why are these technologies making it even tougher on IT departments? Dancziger: They are not making it tougher, they are requiring better IT cost management. When resources are virtualized, and the allocation and usage of specific resources are consistently changing, how do you allocate costs to a specific BU? How do you know the cost of a specific application? How do you bill and charge for IT? These and many other questions can only be answered with a system, as changes and volume are way too frequent for manual solutions to handle. The cloud is characterized by central shared resources delivered over the Web, multiple vendors, easy to activate, easy to shut down, usage-based pricing models, mix-and-match options to create most cost-effective solutions. In such a world, corporate IT is not only about running IT, it is mainly about managing the business of IT. That is all about making sure you chose the best cost benefit effective alternatives and change them when better alternatives come, in addition to making sure you can comply with regulation and taxation requirements in this shared resources world. All: Do you have any suggested cost management best practices for IT organizations? Dancziger: My best advice is to start small. Find a specific area of pain and start there.