Taking the guesswork out of IT budgets

I don’t know how many times I’ve heard the phrase “IT must align itself with business.” Usually that buzz phrase means exactly nothing when you parse the verbiage. What makes the talk of alignment so eye-glazing is the fact that it’s so, well, abstract. What does it really mean to be aligned with business? How do you quantify that? It sounds like an ad for a chiropractor: “Get your IT aligned.”

Having said that, I recently met with a SaaS vendor called Apptio that has an interesting take on the issue — and, yes, software to sell. Refreshingly, the Apptio execs talked about things that can actually be quantified: costs and cost savings.

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The company’s selling point goes something like this: Controlling costs, always an issue for IT, has become more complex as it is called to deliver services. “Three years ago, applications ran on dedicated infrastructure, so costs were easy to figure out,” says Michel Feaster, the company’s VP of products. “Today, most apps run on shared infrastructure, and developers are shared across projects.”

How much does virtualization really cost? Virtualization and cloud computing, of course, make the math even more complex. How many virtual servers is a given department — say, corporate finance — using to run its applications? How many administrators are dedicated to supporting the accounting app or the forecasting system? Hard to tell. Enter Apptio.

What the young, venture-backed company attempts to do (I don’t know enough to say if it succeeds) is address a couple of straightforward questions: Where is IT money being spent, and is it being spent well?

“Our core premise is to give cost transparency, to present a bill that show what services are used and how much it costs to deliver. We can give a metric down to the cost of a single transaction,” says Feaster.

To derive the answer to those questions, Apptio’s hosted software performs a detailed analysis of what those resources are actually doing and what they cost. The software, which is sold in a number of modules, starts by automating the collection of data about what the system is doing. It uses what Apptio calls an inference engine to detect relationships among the different tasks and build a cost model, an application of business intelligence techniques.

Is benchmarking realistic? One module allows users to build what-if scenarios, an important tool when it comes time to budget for the future or to make decisions about deploying new technologies or outsourcing old ones.

Apptio also claims the ability to do IT benchmarking — that is, compare costs and usage to similar companies or to lines of business within the same enterprise. However, at least one analyst, Donna Scott of Gartner, expressed some skepticism about Apptio’s plans to build a user community that would contribute data to be used for benchmarking. “If you’re going to compare costs, you have to compare apples to apples. In what I call a desktop service, I might include five things in it. You might include ten things in it,” she said. The community might provide useful benchmarks if some parameters could be set, she said.

I should add that Scott made those comments in June 2008 as Apptio was coming out of stealth mode. (I wasn’t able to reach her for this blog entry.) Currently Apptio has about three dozen customers in financial services, telecom, and health care, all with an IT budget exceeding $75 million. Cisco is a major customer, and the two companies are developing a close relationship; Cisco CIO Rebecca Jacoby is now a strategic advisor to Apptio’s board of directors.

Whether Apptio is as good as it claims to be is better left to the analysts and customers who have experience with its products. It is, however, clear to me that Apptio is asking questions that enterprise IT needs to answer.

I welcome your comments, tips, and suggestions. Post them here so that all our readers can share them, or reach me at bill.snyder@sbcglobal.net.

This article, “Taking the guesswork out of IT budgets,” was originally published at InfoWorld.com. Follow the latest developments on cloud computing at InfoWorld.com.