In our last blog, we tackled the Technology Business Management framework. We explained the difference between the language IT leaders and business leaders speak, why Technology Business Management can offer a solution, as well as the importance of having a common language to fall back on. This shared language is known as the Technology Business Management taxonomy.
What is the Technology Business Management taxonomy?
The short answer: it’s a language that connects IT, the business, and finance. The longer version: the Technology Business Management taxonomy provides a hierarchy (cost pools, towers, IT products and services (solutions), and business units/business capabilities) which can be described in a standardized way. The Technology Business Management taxonomy allows organizations to compare their own costs and performances to their peers and better plan, manage, and track investments.
Organizations usually ensure that their financial statements are consistent and comparable. To do so, they rely on guidelines provided by government agencies or Generally Accepted Accounting Principles (GAAP). These systems, however, don’t provide the view and clarity IT needs. The Technology Business Management taxonomy provides a generally accepted way of categorizing and reporting IT costs. This allows CIOs and IT finance leaders to communicate value. Working with the Technology Business Management taxonomy to create transparency into IT cost allocations helps to bridge the gap between the business, CFOs, and IT leaders.
The hierarchy of the Technology Business Management taxonomy
The Technology Business Management taxonomy consists of three views, imparted by four layers. The views represent the parties we’re trying to get on the same page: Finance, IT, and the business.
The Technology Business Management taxonomy layers are:
- Finance (cost pools)
- IT (towers)
- Business (solutions)
- Business (units)
Finance layer: cost pools and sub-pools
Cost pools and sub-pools make cost allocations easier and enhance reporting. They are made up of labor (internal and external), services (internal and external), hardware and software, facilities, power, and telecom. Cost pools include CAPEX as well as OPEX: as it’s best not to blend the two.
IT layer: towers and sub-towers
This layer in the Technology Business Management taxonomy consists of towers (data centers, end-users, storage, network, etc.) and sub-towers (servers, mobile devices, compliance, etc.). The towers and sub-towers form the building blocks of solutions. They reflect the direct costs of solution teams, and indirect costs are included in the solutions layer.
Business layer: solutions
The business layer consists of the solutions which IT delivers to end consumers, like business leaders, customers, or other third parties. It has three classes: applications, services, and products.
Business layer: units and capabilities
At the very top of the Technology Business Management taxonomy hierarchy is the business layer, which consists of units and capabilities. They are divided into three objects: business units, business architecture, and customers and partners.
Use of the Technology Business Management taxonomy
So, now what? The Technology Business Management taxonomy is needed to support the modeling of costs and other metrics. In doing so, you create a language that is understood by all stakeholders: server and network means the same to everyone, and includes the same types of underlying costs calculated using the same methods. The next step: a Technology Business Management model.
In this blog, we’ve covered the Technology Business Management taxonomy. We’ve written 3 more blogs on Technology Business Management; you can find them here:
