Traditionally finance has had a significant impact on vendor costs and price per unit. However IT finance professionals often find that after competitive pricing has been negotiated, another challenge arises from continuing internal pressure due to ever increasing demands. What are the key demand drivers and how does each of these affect cost? Dominic Calvert-Lee, Finance Director at Microsoft, presented at an IMF web forum in May to discuss how finance can impact the quantity or demand side of the IT cost equation.
Microsoft began with an inconsistent framework. There were no standard process roles and tools across operation groups, the infrastructure was disjointed, and there was weak understanding of key service performance and cost drivers. Since then, the process at the organization has become more stabilized, consistent, and visible as groups are being brought together. The organization aspired to reach a more reliable point that would enable them to deliver at the service level. According to Calvert-Lee “Reliability is where we want to go to and where we are building and investing on.”
Calvert-Lee notes that the significant growth in IT was well beyond the growth experienced in the number of employees and Microsoft revenue. In other words, requests for IT were on the rise and there was a need to manage that demand. Microsoft had a few key tactics to manage the demand of services. One way was to reduce cost through consolidation. Another tactic was working with internal customers, external customers, and shared goals.
In order to create more visibility and accountability Microsoft transformed financial data in “non-financial data” by indicating who was using what service, what each of the utilizations were, as well as the ticket volume. These data points were brought together so that costs could be allocated by customers who requested specific applications to be built in order to depict the cost in the MSIT budget. The presentation divides the cost into five different categories including programs and maintenance for instance. In terms of invoicing, Calvert-Lee provided an invoice mockup. He says, “Microsoft is trying to get away from the cross-charge model, so for the most part there has been a lot of cross-charging from IT to services external, to our IT group.” Calvert Lee also adds, “We’ve moved most of those dollars and stop a lot of what seems to be overhead. It also created some synergies and some ability to manage the economies of scale.”
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