Technology Portfolio Management (TPM) Best Practices

Overview

Technology costs that are tracked at the technology level but not allocated to the applications and business capabilities that consume them produce financial information that is accurate in aggregate but not actionable at the decision level. The question that financial leadership and business leadership both need to answer is not only “how much does technology X cost?” but “how much does it cost per application that uses it, and is the value those applications deliver proportionate to their technology cost?” That question requires technology cost allocation to the application layer and from the application layer to the business capabilities those applications support.

Best Practice

Establish a technology cost allocation model that attributes the cost of every technology in the Technologies Inventory family to the applications that use it and from those applications to the business capabilities they support, using the Technology Spread data and the APM-TPM inventory connection as the allocation mechanism. The allocation model should be proportional to usage where usage data is available — a technology whose cost is consumption-based should be allocated based on actual consumption by each dependent application. Where usage data is not available, a seat-based or capability-based allocation approach should be applied consistently. Connect the technology cost allocation to the APM Total Cost of Ownership model so that every application’s TCO in the APM portfolio reflects not only its direct costs but also its allocated share of the technology platform costs it depends on.

Use the cost allocation data to produce capability-level cost views — the total cost of all technologies and applications supporting each business capability — that give business leadership the ability to assess the cost of the technology estate supporting their specific domains and to make informed decisions about technology investment and rationalization in the context of the capabilities those decisions affect.

Benefit(s)

Technology cost allocation to applications and business capabilities transforms technology financial management from an IT cost accounting function into a business decision support capability. Business leaders can see the technology cost profile of the capabilities they own and can make informed trade-off decisions between technology capability and technology cost. Technology investment decisions are grounded in the business capability value they support rather than evaluated in technology-centric terms that business stakeholders find difficult to engage with. And the APM-TPM cost connection produces application TCO calculations that are meaningfully complete rather than limited to the direct application costs that most APM financial models capture.