Why Technology Business Management and Technology Expense Management Are Misaligned

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One of the most frequent questions Amalgam Insights receives is how Technology Business Management and Technology Expense Management are related to each other. And what do these topics have to do with the new phrase of “FinOps,” that is starting to appear? Amalgam’s perspective is definitely different.

Why FinOps is a Misnomer

FinOps is an abbreviation for “Financial Operations” and is derived from the abbreviation “DevOps” for Developer Operations. Over the course of 2019, a group of IT professionals have started to use the FinOps term to describe their work.

DevOps is based on the operations associated with Software Development and Deployment.

So, FinOps is around the operations of Finance, right?

Contrary to belief, “FinOps” professionals do not focus on Financial Operations, Instead, “FinOps” focuses specifically on the expense management of public cloud Infrastructure as a Service costs.

Seems odd, right? Why Define FinOps This Way?

Amalgam Insights believes there is room for compromise where the term “FinOps” regains its common-sense meeting while allowing IT to continue using the term.

A Modest Proposal:

FinOps should refer to Financial Management and the cross-departmental tasks associated with the CFO office. If a specific part of IT is conducting Financial Operations, these FinOps should refer to the specific IT activities being managed as Cloud FinOps, Application FinOps, Telecom FinOps, Mobility FinOps, or the appropriate subcategory.

Figure 1: FinOps Examples

This makes more sense as Finance is already a tech-enabled and cross-departmental challenge with its own ERP and business planning systems. In addition, by consolidating this role as a “FinOps” role, this will help a wide variety of siloed IT and finance workers in specialized expense positions to realize that they are not starting from scratch in supporting IT expenses.

Aligning Technology Business Management to Technology Expense Management

What is Technology Business Management? First proposed by the technology vendor Apptio, Technology Business Management provides a framework for holistic IT budgeting and planning. The TBM Taxonomy provides a standard for categorizing IT costs. Amalgam Insights considers a framework like this to be necessary, but not sufficient to manage costs.

Figure 2: TBM Taxonomy

Why TBM Users Are Reinventing the Wheel

Technology Business Management does a good job of structuring IT for planning and budgeting. However, Technology Expense Management focuses on day-to-day invoices, payments, contracts, SLA management, and vendor disputes and this is a mature market.

In theory, TBM and TEM should work hand-in-hand to manage costs, as TBM provides planning and business alignment while TEM handles daily operational concerns and corrections. In reality, TBM and TEM are like ships passing in the night: two parallel processes that barely acknowledge each others’ existence.

A Small Sample of Companies in Technology Expense Management covered by Amalgam Insights include the following.

Amalgam Insights covers over 100 companies in the TEM market managing over $200 billion in IT spend.

Where Technology Expense and FinOps Must Evolve

As previously seen, Technology Expense Management or IT FinOps is still a very fragmented market. Network, enterprise mobility, traditional software, SaaS, IaaS, and traditional IT assets all have their own Best-in-Breed solutions.

What needs to happen?

Market leaders across each of these separate areas need to start coming together because no CIO really wants to go across six different systems just to track expenses on a regular basis.

How likely is this?

There have been a few promising acquisitions, such as

• Flexera’s purchase of Rightscale
• Motus’ acquisition of Wireless Analytics
• Tangoe’s purchase of MOBI
• Upland’s acquisition of Cimpl

But the challenge is that there is still massive greenfield opportunity across all of these areas. Most of these vendors are more interested in perfecting their current offerings than in providing a single solution for IT even if IT departments may want that kind of solution. So, in reality, enterprise IT departments seeking to optimize cost, rationalize portfolios, and increase efficiency and governance need a variety of Best-in-Breed solutions to cover all the boxes in that TBM or ITIL or other IT taxonomy of the CIO’s choice.

Also, there’s additional opportunity for IT expense and inventory management. An obvious gap in today’s market is the management of security portfolios. Nobody has a great solution for tracking and managing their security portfolio.

An interesting wildcard: the majority of market leaders across the IT FinOps world are currently either venture capital-backed or private equity owned, which will lead to a continued and rapid pace of mergers and acquisitions.

Big Takeaways

1. Although the term “FinOps” is currently misused, the idea of “IT FinOps” has a lot of potential.By sharing best practices across IT spend categories, organizations can avoid a lot of repetition in creating mature spend management environments.
2. Currently, getting Best-in-Breed Results in Technology Expense Management or IT FinOps requires a portfolio of solutions due to a fragmented environment that is ready for consolidation.
3. Realize that some areas such as security and IT consulting lack strong expense management solutions and still require custom approaches… at least for now.
4. Expect limited consolidation from vendors as private investors seek to get efficiencies of scale and plug specific gaps.But don’t expect any single vendor to effectively manage costs across the enterprise IT environment and solve the CIO’s expense visibility issues in the way that TBM has done for planning budgeting.

 

For more information on building technology business cases, evaluating technology strategy, or
working with Amalgam Insights on technology consumption management, DevOps, Data Science, and Augmented Analytics initiatives, please contact Amalgam Insights at: Info@amalgaminsights.com or call us at +1 (415) 754 9686.