Guide

How IT Finance Leaders

and CIOs Can Analyze
Spend, Optimize Costs,
and Improve Agility

Introduction

70%
Disruption is a business reality these days. It’s so commonplace, in fact,
that 90% of enterprises in the last four years have experienced a significant
change that has disrupted normal operations.1

When sudden change occurs, businesses must adapt. Executive leaders

of successful CIOs will
often shift priorities, with emphasis on streamlining costs and optimizing
have a dedicated IT
resources. And this often places stress on IT departments to reduce costs
and to shift resources to new initiatives. In fact, a recent survey revealed
financial management
that 80% of IT decision makers report being pressured to reduce IT spend
system by 2024
because of the disruption caused by the COVID-19 pandemic, with the
average budget cut equaling 25% across all industries. 2

Organizations that thrive in periods of disruption are those agile enough to

re-plan, re-budget, and re-forecast quickly. But many organizations lack this
agility because finance leaders are still using spreadsheet-driven budgeting
and forecasting processes. This is especially true for IT departments,
where corporate finance systems are incapable of providing the granular
detail needed for managers to make data-driven decisions. This is such a
widespread issue that Gartner predicts 70% of successful CIOs will have a
dedicated IT financial management system in place by 2024.3

Apptio is designed to automate the budgeting and forecasting processes

for IT organizations.

This guide will explain how leading organizations use Apptio to view
budget allocations and spending, perform variance analysis, and find areas
for optimization and cost reduction.

Apptio.com
 The spreadsheet-driven process
Creating a budget starts with gathering data.
Finance leaders use prior-year expenditures
and forecasts to create a baseline budget, and
then budget owners build off of that baseline,
estimating and projecting out current-year
expenditures, to establish a budget for the next
fiscal year.
For IT departments, budget expenses typically
are allocated into five main categories: labor,
contracts, assets, projects, and miscellaneous
expenses. When using spreadsheets for
budgeting and planning, IT finance analysts
pull this information from disparate systems—
HR, ERP, CPM, time tracking systems, and
The spreadsheet-driven planning process
Figure 1: Spreadsheet-driven planning process flow
2 How IT Finance Leaders and CIOs Can Analyze Spend, Optimize Costs, and Improve Agility
others—normalize it, and create complex sheets
with embedded macros and pivot tables to
present the data in a format that makes sense to
budget owners.
This approach has several drawbacks. The
process is manual and time-consuming, prone to
human error, and often takes months to complete.
The data represents only a point in time. There
is no relationship with expenses or business-
outcome initiatives. And the data is extracted
from corporate finance systems that were not
designed to capture the detail-level information
IT managers need to make informed decisions.
Apptio.com
 Re-planning, and re-forecasting
Once the IT budget is set, what happens when
priorities suddenly change? IT managers engage in
a process to re-plan their projects and to find ways
to reduce costs. The process often begins with
a mandate from senior executives. For example,
economic conditions change. Senior leaders assess
the impact and severity to business operations. A
decision is made to reduce costs. And a directive is
issued for IT to cut expenses.
After a target is set by corporate finance—such
as, reduce costs by 25%—IT finance then pulls
data from disparate systems to refresh the
budget spreadsheets. The data is normalized and
aggregated manually and sent to the VP of IT for
scenario analysis. But analysis is challenging because
the data represents only a point in time with
no relationships between expenses. In addition,
there is no view of how plan aligns to the target set.
Inputs and comments are made by managers and
sent back to IT finance. Templates are often broken
at this stage, comments conflicting or confusing, and
the spreadsheets are sent back and forth asking for
clarification. Answers are captured and integrated
manually. In large departments, where there could be
hundreds of budget owners, this process is slow and
tedious with limited collaboration between managers.
Once questions are answered, the VP of IT updates
the budget forecast and resubmits it. IT finance
aggregates the changes and forwards to corporate
finance. Submissions are reviewed and questions
sent back. At this stage, there are several challenges.
Since the process is driven by spreadsheets, with no
sure method of version control, the back-and-forth
process must be repeated until all three—corporate
finance, IT finance, and the VP of IT—agree the data
is as accurate as they can make it, and the plan is
finalized.
Once a full planning cycle is completed, if another
significant event occurs, the process must be repeated.
For CIOs to respond to change, they need quick
access to relevant data to make informed decisions.
Spreadsheet-driven budgeting and scenario planning
is slow. And the data lacks the detail and insight
to provide full visibility into the IT budget that is
needed for accelerated decision making. For these
reasons, many senior IT leaders are implementing
dedicated IT financial management systems.

Apptio is designed to overcome the challenges of spreadsheet-

driven budgeting, forecasting, and scenario planning. It does
this by ingesting data from disparate sources and intelligently
structuring those data so that stakeholders across the business
can visualize spend data to better analyze, optimize and plan
technology investments.

3 How IT Finance Leaders and CIOs Can Analyze Spend, Optimize Costs, and Improve Agility Apptio.com
 Data ingestion
Data is the basis for planning. When it comes
to determining IT costs, there can be many data
sources that contain the information needed
to make accurate cost calculations. The Apptio
platform ingests and unites data across disparate
sources and dimensions automatically into a
meaningful structure.
Apptio automates the data ingestion process
through Datalink. First, IT managers configure
data sources based on their IT environment. Then,
through software connectors, Datalink uses ETL
(extract, transform, load) operations to ingest data
Figure 2: Apptio data ingestion through Datalink
4 How IT Finance Leaders and CIOs Can Analyze Spend, Optimize Costs, and Improve Agility
from those sources. General connectors for SQL
and Excel are included with Datalink. Specially-
built connectors for commonly-used IT systems
like ServiceNow, Oracle, SAP, and Clarity are also
provided. For uncommon data sources, where
a pre-built connector is not available, Datalink
provides the capability for IT managers to create
custom connectors. Once Datalink is configured,
the connectors pull in data at user-defined intervals.
The frequency of the intervals—monthly, weekly, or
daily—is customizable by data source.
Apptio.com
 Standard taxonomy and cost model
Once data is ingested, Apptio categorizes it using a
standardized taxonomy that aligns with common IT
functions and creates a cost model based on a user-
defined algorithm. Once built, the cost model then
forms the basis for budgeting and forecasting.

The standard taxonomy and cost model eliminates

the manual effort of data gathering and aggregation,
and provides detailed information to IT budget
owners, enabling them to make informed decisions.

The Apptio TBM Taxonomy

Business Units or Capabilites Business Business Business Business Business

Business View
Unit or Unit or Unit or Unit or Unit or
Describe the consumers of the technology
Business Business Business Business Business
supported by IT spend Capability Capability Capability Capability Capability

Applications & Services Business Services Shared Services

Describe the products or output delivered by
End User Delivery Platform Infrastructure
IT and consumed by business units Services
Services Services Services

IT View
IT Towers Security & IT
End User Application Delivery
Describe the technology functions supported by Compliance Management
IT spend in terms and groupings relevant to the Data Network Compute Storage Platform Output
owners and consumers of those functions Center

Finance View
Cost Pools Internal External Outside
Hardware Software
Describe the types of assets or services Labor Labor Services
purchased using terms and groupings Facilities
Telecom Other Internal Services
relevant to both IT and Finance & Power

Figure 3: The TBM Taxonomy provides standard, benchmark-aligned IT categories.

5 How IT Finance Leaders and CIOs Can Analyze Spend, Optimize Costs, and Improve Agility Apptio.com
 The taxonomy and process are described below:
Cost Pools
This is the starting point for Apptio. Data is
extracted and first categorized into cost pools. The
pools are broadly-defined using names that are
understood by both IT and finance to establish a
familiar foundation. Examples of cost pools include:
hardware, software, facilities, internal/external
labor, and telecommunications.
IT Towers
Moving up to the next layer, cost pools are further
categorized into IT Towers. These towers represent
technology functions that business owners and
consumers of IT are familiar with. Examples include:
data center, compute, storage, application, network,
and IT management.
Applications and Services
Continuing up the layers, the cost model is refined
even further into common products and services
delivered by IT and consumed by business units.
Examples include: delivery services, end user
services, infrastructure services, and business
application services.
Assumption-based Attribute-based
Costs routed based on assumptions Costs weighted by an attribute of an item
Labor costs allocated using a 25% / 75% Data center cost allocations weighted by # of
spread across Wintel and Unix Compute CPUs or kWh power rating
Data center costs estimated with a Desktop cost allocations weighted by desktop
“rate card” value (e.g. $50/kW-mo) make/model
Application support labor costs allocated to Application support labor cost allocations
applications based on “peanut butter spread” weighted by size or complexity of an application
Business application cost allocations
Business application costs allocated across LOBs
weighted across LOBs based on # of assigned
based on % revenue
login accounts
Figure 4: Cost allocation methods and examples
6 How IT Finance Leaders and CIOs Can Analyze Spend, Optimize Costs, and Improve Agility
Business Units or Capabilities
Finally, the cost model allocates spending across
the different business units or business capabilities.
Examples include: HR, accounting, manufacturing,
sales, and marketing.
Cost Allocation Methods
As cost data flows up the layers of the taxonomy,
the cost calculations and allocations become more
granular and complex. For example, cost data maps
in a straightforward way into the first two layers
(cost pools and IT towers). But as the data is further
divided through the applications, products, and
services layers—and the myriad of sub-categories
within them—the calculations become more
complex, accurate, and meaningful.
Several cost allocation methods can be used,
depending on the preferences, maturity, and needs of
the organization. These range from assumption-based
calculations, to weighted attributes, to sophisticated
consumption-driven metrics.
Consumption-based
Cost allocated by measured consumption
Data center costs allocated based
on measured power consumed during month
Server costs allocated to applications based on
total compute hours per month
Application support labor costs allocated to
applications based on support tickets
Business application cost allocated across LOBs
based on # of business transactions
per month
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 Budget automation and workflow

Once the cost model is established, new budget
plans can be created in Apptio. The budget process
owner—in most cases, a member of IT finance—
creates a plan and sets targets. Budget owners, of
which there could be many, input data to carry out
and support their projects and submit their plan
for approval. Up to five levels of approvals can be
configured. Once all approvals have been received,
the budget process owner finalizes the plan.
Apptio’s data ingestion process and integrated
workflow simplify each step in the process.
Review and approve
Submission of a plan by a budget owner initiates
the review and approval step. Each approver in
the workflow then reviews the plan and either
approves it or returns it to the submitter with
requests for changes.
The process is repeated, each approver being
notified when the previous approver in the
workflow accepts the plan, until the final approver
signs off.
Finalize plan

Upon final approval, the budget plan is returned

Create a plan
to the budget process owner. The plan is marked
At the beginning of the planning cycle, Apptio final, and budget owners are notified. Then, a new
enables the budget process owner to create a baseline is established and budget owners can
new budget plan in the application. The business measure their progress against plan and spend
process owner defines the plan type (budget or versus budget as the planning period progresses.
forecast), start year, length, baseline (from an
existing budget plan or prior forecast), and name. Forecasting
The plan is populated with data and organized based Forecasting in Apptio follows the same process flow
on reporting structure and department hierarchy, as budgeting. A forecast is created. Budget owners
as defined by the organization. This eliminates the input data and submit the forecast for approval.
manual effort of data gathering and aggregation. Approvers review and either accept the forecast
Once the plan is created, the business process or return it with requests for changes. Finally, the
owner has a comprehensive view of the budget forecast is approved and finalized.
and can adjust the baseline if desired and set plan
targets for each department. By automating the budgeting and forecasting
process, Apptio eliminates the need to email
Edit plan and a submit spreadsheets to budget owners, reduces manual
intervention, minimizes the risk of human error, and
After the budget plan is opened, Apptio notifies
accelerates the review and approval process.
each budget owner. This signals the budget owner
that a plan is awaiting their input and begins the
budget automation process. Inside Apptio, budget
owners can see all the elements of the budget—the
hardware, software, labor costs, projects, contracts,
and miscellaneous expenses—that represent their
group or sub-group. From there, each budget owner
enters data for the planning timeframe and submits
the plan for approval.

7 How IT Finance Leaders and CIOs Can Analyze Spend, Optimize Costs, and Improve Agility Apptio.com
 IT scenario planning

76%
Most CIOs agree that today’s competitive
marketplace requires continuous planning and
forecasting, especially in times of major change. In
fact, three out of four CIOs (76%) surveyed during
the COVID-19 pandemic said the ability to rapidly of CIOs said the ability to
adjust plans (re-plan) during the crisis was critical to rapidly adjust plans during the
their business. And 69% believe it will continue to
pandemic was critical to their
be critical after the pandemic.4
business
In whatever form it takes—economic, physical,
or social—further disruption is almost certain to
occur in 2021 and beyond. Change is best met with
critical thinking, wise planning, and swift action. And
that requires agility and data. When it comes to IT
budgeting and scenario planning, however, manually
reconciling spreadsheets and disparate systems
detracts from an organization’s agility, adaptability,
and overall fitness to respond to uncertainty.

Apptio enhances IT scenario planning through its platform

capabilities that surface insights and optimization
opportunities, enable on-demand reporting, and drive
variance analysis at the IT-specific level.

8 How IT Finance Leaders and CIOs Can Analyze Spend, Optimize Costs, and Improve Agility Apptio.com
 Dashboard insights and variance analysis Besides reporting, Apptio provides drilldown
capability for analysis. This allows budget owners
In Apptio, data drives the planning process.
to unpack budget elements, diagnose specific
Throughout the budget period (typically, the fiscal
variances, and make adjustments to prevent budget
year), Apptio’s automated data ingestion and cost
overruns without waiting for the next forecasting
model allows the budget plan to be updated with
cycle or relying on guesswork.
actuals pulled from corporate financial systems and
other data sources. Lag time in refreshing data, a Modeling and reallocation
common issue with spreadsheet- driven processes,
When re-planning is required, budget owners
is nearly eliminated. And this enables budget owners
must look at their entire budget portfolio, reorder
to find opportunities to reduce costs and to optimize
priorities, add new projects, remove projects, and
resources much faster.
reassign resources. Apptio allows budget owners
To simplify analysis, Apptio provides visualizations to create a new plan—based on their current plan—
and dashboard views through through Self-Service and then model changes. They can add and remove
Reporting. Budget owners can toggle between resources, add and remove projects, adjust spending
multiple views and quickly see performance allocations across their project portfolio, and more.
against plan, both from a high-level business-
Through plan modeling, budget owners can see the
initiative perspective (see Figure 6) and a line-item
results of changes at a macro and micro level. They
perspective (see Figure 7).
can revise changes, comparing different scenarios
In addition, Self-Service Reporting enables budget and assessing the advantages and disadvantages
owners to author and share custom reports with of each, until they have achieved their objectives.
specific views using data from actuals and the This allows budget owners to align their spending
current plan. Enabling any user to create custom with business priorities and to reduce expenses
reports using real-time data prevents reliance on wherever possible.
admins or other roles from needing to create a
customer report in Excel with data that can become
stale. As a result, any user can aggregate data and
personalize reports to answer nagging questions
faster and to uncover savings opportunities.

Figure 6: A line-item perspective

Figure 5: View custom reports and visualizations side-by-side to answer questions faster

9 How IT Finance Leaders and CIOs Can Analyze Spend, Optimize Costs, and Improve Agility Apptio.com
 CHRISTUS Health – A case study in
transformative IT planning
CHRISTUS Health is an international faith-based,
not-for-profit health system with a mission to take
better care of people. As one of the largest Catholic
health care systems in the U.S., comprised of more
than 60 hospitals and long-term care facilities, 175
clinics and outpatient centers, and dozens of other
health ventures, the organization is focused on
driving advancements and innovations to improve
patient care.
The problem
We are no longer being asked ‘do I have
this budgeted?’ or ‘is this in there?’
Instead, budget managers are asking
for clarification about the value they’re
getting from services, the effect demand
has on specific areas of the budget, and
the impact of adjustments we can make
throughout the year. Apptio has helped
us get back to financial analysis, which is
where we longed to be.
”
Stephanie Rendon,
Director of Finance

The IT finance team struggled with a tedious manual

process of pulling data from payroll, contract, and
asset management repositories, creating multiple
password-protected spreadsheets, and meeting
face-to-face with CHRISTUS Health’s 35 diverse
budget owners, group cost center owners, and the
leadership team. Reviews and revisions were handled
via email, where last minute notes and requests
were difficult to track and sometimes missed.
From start to finish, the planning process typically
required 5-6 months.

To help the organization better align budgets with

project and operational demands, improve business
unit engagement in planning, and address SaaS-
related shadow IT, the IT finance team needed to
streamline the planning process.

The solution

Leveraging a 12-week window between budget

cycles, the team was able to rapidly configure
Apptio and train managers in the new system,
eliminating inherent inefficiencies involved in data
collection and improving visibility into IT spend.
Today, the information management team at
CHRISTUS Health is using Apptio to build stronger
relationships with business units, supporting
smarter spend strategies, and fostering increased
accountability among budget owners.

10 How IT Finance Leaders and CIOs Can Analyze Spend, Optimize Costs, and Improve Agility Apptio.com
Get Started
Apptio’s products empower business leaders to drive optimal financial performance
across their organizations. More than 60 percent of Fortune 100 enterprises trust
Apptio to manage spend across the entire IT portfolio and beyond, so that they can
focus on delivering innovation. Apptio automatically ingests and intelligently structures
vast amounts of enterprise and technology specific spend and operational data and
enables users across disciplines to report, analyze, plan, and govern their investments
collaboratively, efficiently and with confidence.

For more information, please visit Apptio.com/get-started

References
1
“Gartner Survey of More Than 1,000 CIOs Shows That ‘Fit’ Enterprises Will Win When Business Conditions Turn.” Gartner press
release. October 22, 2019. Accessed June 15, 2020. https://www.gartner.com/en/newsroom/press-releases/2019-10-22-gartner-
survey-of-more-than-1000-cios-show-that-fit-enterprises-will-win-when-business-conditions-turn
2
“COVID-19 Implications: Early Perspective from IT decision makers in North America.” Bain & Company, March 2020.
3
”Gartner: Build a Focused ITFM Cost Model and Use a Simple Allocation Approach to Deliver Rapid Value” 7 February 2020,
Robert Naegle, Chris Ganly
4
Apptio CIO survey 2020.

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