IT cost transparency is a new approach for most organizations, and is used in a bid to trace technology expenses as they are accumulated throughout the company. In most companies the Information Technology department remains rather mysterious; especially in terms of costs and budgeting. Therefore, the issue of cost transparency in IT is being embraced by most businesses, due to the fact that it simplifies the task of quantifying and attributing their expenses correctly.
There are several solutions available to businesses that seek IT cost transparency. It is not that easy for businesses to trace return on IT investment, so they tend to focus on expenditure alone. This places all the pressure on the budget, in some cases, rather than a focus on benefit gained, and has led to the need for stronger financial management in IT.
Organizations now frequently seek to find the relationship between expenses and service consumption throughout their business, and in every department. Focusing on IT cost transparency can mean tabulating the budget, expenses and specific utilization of technology in order to form a direct link to the spending in IT with the multiple activities of a business. This creates a situation in which IT managers can share vital information with analysts and executives, allowing for open discussion and often can lead to a reduction of the costs of running businesses.
There are multiple benefits associated with IT cost transparency. As already mentioned, the most important factor of this strategy is that it enables reduction of costs through analyses. This is due to the fact that the finances being used in a business are clearly highlighted through IT cost transparency, so that there is no misuse of funds. There is a growth of cloud computing in most organizations, which requires a clear attribution of funds and costs. With a transparent costing strategy, the IT department is able to report on its expenditure clearly, providing those in charge of budget management with the exact data they need to assess this portion of the business.
Another important benefit of transparency in IT budgeting is that it enables not only proper attribution, but proper utilization of every single resource that is used in an organization. Allocation of resources is done according to the resources each department needs, and each department can then have those costs attributed to it more efficiently resulting in a lower likelihood of that department over-utilizing IT resources.