Today’s IT organizations may or may not adopt an IT Showback or IT Chargeback strategy. Regardless, they are increasingly challenged to deliver greater IT spending transparency. Such transparency allows business management to be more involved in decision making and controlling rising IT costs.
The main thrusts for IT Showback and IT Chargeback can be traced to the adoption of Lean objectives. Business units are already launching internal Lean initiatives through Business Process Management (BPM) projects. From the growing knowledge and results achieved through these initiatives and projects, many CIOs and Business Leaders have realized that it is possible – though complex – to apply Lean objectives to IT. Even though applying Lean objectives to technology operations is an extremely complex task, the resulting benefits outweigh the required effort.
When IT organizations adopt standard business-driven Lean objectives, they can realize the following results:
- eliminate unused or low value IT services and capabilities,
- free up IT capacity,
- speed up IT service delivery,
- eliminate IT errors and defects, and
- provide a clear and understandable strategy to the delivery of IT services and capabilities, based on user demand and cost.
The second thrust of an IT Showback or IT Chargeback strategy to achieving Lean objectives is this: it fundamentally changes the IT financial management, control, and measurement practices between the IT organization and business units.
As a result, each party is motivated to work together to achieve greater:
- improvements and innovation,
- understanding of customer value,
- business intelligence that is suitable for more accurate decision-making, and
- accuracy about the financial cost of IT service, capabilities, and usage.
Achieving Lean objectives within IT requires IT to establish:
- value-based cost or pricing models,
- simple summary and costing of IT service and capability value streams,
- radical simplification or elimination of technology transactional reporting,
- IT service and capability business, not technology-driven measurements,
- business intelligence that supports improved IT decision-making and reporting,
- financial reports that are timely and presented in “plain business language,” and
- a deeper understanding of the value created for the customers resulting from IT services and capabilities.
As an IT organization becomes more mature in its IT Showback or IT Chargeback practices, the staff will recognize that it creates a Lean Management System (LMS). Such a LMS is designed to provide the planning, operational and financial reporting, and motivation for change and innovation required to achieve the enterprise’s on-going Lean objectives and growth of the business.