Aligning Tech Financials and Labor Resources

Are you able to quickly shift your teams’ focus as your organization’s priorities evolve?

Innovation is the growth engine for every tech-driven organization. Whether it’s accelerating cloud adoption or pouring investments into the feverish AI space, forward-looking companies always aim to “skate where the puck is going,” as the saying goes. But how do you ensure your company can quickly pivot to these new priorities while staying efficient and keeping a close eye on outcomes?

These waves of high-impact innovation – not to mention changing markets and corporate goals – necessitate a significant shift in how IT invests. Given the substantial expenditures involved (AI investment is projected to approach $200B globally by 2025), the projects you’re working on require agile resourcing models that ensure alignment between finance and human capital. Labor planning calculations are essential to ensure you have the right skillsets to keep your business operating and delivering products and services profitably. Likewise, finance needs transparency into where their funds are going and what return they’re generating. With proper tooling, organizations can gain visibility into these two key components with a single source of truth that drives alignment, improves success rates, and ensures a competitive edge.

The Solution: Labor Financial Management (LFM)

This is where what we call, ‘Labor Financial Management’ (LFM) comes in. LFM connects strategy, finance, and delivery, helping organizations align labor costs with their strategic goals, improve transparency, and increase operational efficiency. By implementing IBM Targetprocess along with Technology Business Management (TBM) tools, organizations can fully realize the benefits of LFM and gain unparalleled visibility and control over their IT labor investments.

According to Gartner, as much as 70% of IT initiatives don’t deliver the expected business outcomes – often because of people challenges¹. After all, technology failure rates are not that high! Challenges often include misalignment of work to strategy, lack of transparency between the PMO, IT, and Finance, and inefficient manual processes. So, organizations are having a hard time optimizing their labor resources, maximizing the value they create from their tech investments, and rolling out innovations like AI.

On top of that, labor costs can make up close to 40% of total IT spend (Gartner, IT Key Metrics Data 2024). Without proper visibility and management, these costs can quickly get out of control – often leading to budget overruns and missed opportunities. Clearly, this is not the way to beat the competition when you are trying to gain an advantage in rolling out innovations like AI before your peers!

Benefits of LFM

IBM LFM tackles these challenges head-on by providing a unified platform that integrates financial management with Agile work management. By using IBM Targetprocess together with IBM Apptio, you can:

• Align your labor investments with your strategic objectives: LFM helps you create a clear link between labor costs and strategic objectives. Define and track key results (OKRs) at the portfolio, product, and team levels, making sure that everyone is working towards the same goals. This alignment lets you prioritize investments based on business value. And more importantly, adjust resource allocations dynamically as priorities change – as they often do.
• Improve transparency: One of the main benefits of LFM is that it increases transparency across the entire technology delivery value stream. Get a single source of truth for all work, resources, and financials, eliminating data silos and manual reconciliation efforts. With automated visibility into labor costs, project progress, and team performance, you can proactively identify risks, make informed decisions, and communicate effectively with stakeholders.
• Drive efficiency: LFM streamlines labor cost tracking and allocations, replacing time-consuming manual processes with automated workflows. Track work efforts at a granular product level using story points or capacity, depending on your preferred methodology. This detailed tracking enables accurate capitalization of labor costs, optimizing CapEx/OpEx splits to ensure alignment with financial regulations.

Moreover, IBM Targetprocess’ capabilities help you optimize team utilization and capacity planning. With it, you can identify skill gaps, forecast resource needs, and make data-driven decisions to balance the supply of human capital with its demand. By improving efficiency, you reduce waste, minimize unnecessary overhead costs, and can focus on delivering value to the business – and ultimately win market share.

Customer Success Stories

Many organizations across industries have already seen significant benefits from adopting LFM with IBM Targetprocess. Here are a few:

• McGraw Hill streamlined their processes, reduced manual effort, and enabled cost tracking and allocation at the teams level. The implementation of IBM Apptio Targetprocess enabled them to achieve accurate variance reconciliation and robust financial reporting.
• Lowe’s increased their speed to market and productivity when using Agile methodologies across their organization. The solution provided a holistic view of their costs and connected them to delivering value, simplifying forecasting processes and enabling better investment decisions.
• The Standard reduced cloud spending by 10% and subscription budgeting by 25% through improved visibility. Here, IBM Targetprocess enabled better resource and program management, creating granular budgets that aligned with strategic initiatives.

Getting Started

Labor Financial Management is a game-changer for organizations looking to optimize IT labor spend and to drive better business outcomes. If you want to get started with LFM, we recommend you follow these steps to incorporate LFM into your TBM practice:

1. Assess the current state: Identify your pain points and challenges in managing labor financials. Determine the key metrics you need to make data-driven decisions.
2. Define objectives: Articulate the business outcomes you want to achieve. Then set measurable goals and KPIs to track your progress.
3. Engage with us: Reach out to discuss your human capital and labor financial requirements and explore how IBM Targetprocess can augment and transform your technology financial management practice.
4. Plan the implementation: Work with our professional services team and/or partners to design a solution that aligns with your organization’s needs. You can develop a phased implementation plan to ensure a smooth transition and get faster time-to-value.
5. Empower your teams: Provide training and support to your IT finance and delivery teams. Ensure they can fully leverage the capabilities of IBM Targetprocess. In our experience, it always helps to foster a culture of collaboration and continuous improvement.

Labor Financial Management, powered by IBM Targetprocess and IBM Apptio, is the key to unlocking the full potential of your IT labor investments in the age of AI. Don’t let labor challenges hold back your IT initiatives any longer. Embrace the power of LFM and take control of your labor financials today.

To learn more about LFM and how IBM Targetprocess can transform your IT financial management, download our comprehensive eBook, or start a free trial today.

Sources:
^{1. Gartner’s Critical Capabilities for Strategic Portfolio Management Tools, 04/2023, ID G00771224↩}