Does cost transparency exist in IT budgeting and are CIOs in control?
"The CIO’s job is to source products and services that businesses consume. Some products they want to build on their own and some they want to procure externally from cloud providers and outside suppliers, so they want to become a broker of services."
"But what is missing is a technology business management system to measure the cost structure. There is nothing to assess the value metrics, performance elements and service level agreements," says Sunny Gupta CEO of Apptio.
"Technology has matured, the spend on cloud alternatives has matured. The impact of IT on IT spend itself is no different from what happened in manufacturing and supply chain which were revolutionised by the application of technology."
This view that there exists no clear insight into IT spend is not uncommon.
"What the customer is saying is I have data centres, I have compute, I have storage, I have different legacy servers running Windows, Linux and large Unix. But I don’t have something to tell me all the costs including power, cooling, server, software – everything across the stack."
So if Apptio can provide visibility across the stack, can it for example help navigate the infamous opacity of IBM enterprise software licensing?
Gupta says yes. "Because of the companies we deal with, many have large software engagements with IBM. For example, on behalf of one large insurance company we are taking direct IBM invoices on outsourced services and software and we can dissect their true consumption of their software licence for a product or a service by business unit. "
Gupta offers another example citing a large beverage company engaged with a top tier software firm.
"They did not know what a set of applications cost them. And we did a complete discovery and we found a $50m opex. They thought it was only $10m. What we found was that in 30% of cases the software that was licensed was not being used. So they were able to renegotiate with the vendor. Data doesn’t lie, facts don’t lie. It is true transparency and insight into your cost structure and use."
How it works
"Because of the size we don’t use relational databases but we use columnar databases because they are optimised for patent matching and for what if analysis," he says.
"We take data in raw format from general ledger systems, from web sites, from IBM from Amazon, and operational systems like VMware, BMC and hp and our system can automatically correlate data from these disparate systems and also give you a road map to clean your data and from there we map that data to a visual model of IT products and services."
And then on top of that there are analytics. The company says it has built a standard model for cost transparency.
"Now we have standardised the cost model in the product views so Company A versus Company B can have a common view of the products they use," says Gupta.
The firm’s offering is split across five modules covering cost transparency; bill of IT; app benchmark testing; budgeting and planning, benchmarking
As well as licensing Apptio has a spend under management model. This is based on an annual subscription fee over what is typically a three year licence. The percentage charged scales with the more spend under management the lower the relative cost.
What’s the plan
At a company level the immediate plan is continuing to increase distribution in the UK, Benelux and Germany. The firm has around 60 in the UK and claims a 200% growth rate in Europe.
Product innovation is across three vectors.
Gupta says the cost analytics stack is benefitting from more customer data feeding into it which is giving more metrics coming out.
More innovation on the planning – budgeting and forecasting is one aspect but IT being able to collaborate with business is the goal and we’re trying to bring IT and business together around planning.
Data aggregation – the data we have from general accounting across 200 companies – so we’re working on aggregating on data sets so better serve customers
Having raised around $140m in VC and private funds with some public interest in the latest round Gupta says his firm is late stage privately held.
The SAAS is hosted in data centres in Europe and North America with Asia expansion plans. It has 170 developers and offices in Europe with Asia as the next big target. The firm expects to at least double its number of applications with three years.
"We’re serving 200 customers to date and we believe every company will need this and enter this cycle. We see ourselves in year three of a 15 year cycle – and we believe that every company will need a technology business management system."
Apptio is a founder of the Technology Business Management Council.
Its 2014 conference takes place in Miami on October 28th-30th. A non profit organisation the council conference will be attended by 800 CIOs www.tbmconference.org