Beyond the Books: Navigating TBM for Budget, Actuals, and Multi-Year Planning

Please note: This conversation was based on peer-to-peer engagement and shared experiences, not formal research. The insights shared reflect personal perspectives from within the community.

Hello everyone! The TBM Council recently hosted an engaging "Coffee Chat" focused on "Past, Present and Future with TBM – What challenges do you have to deal with when trying to use TBM for Budget, Actuals and Multi Year Planning?" This session brought together members of the TBM community to share insights and discuss the evolving landscape of technology business management. Attendees from various organizations, including Newberger Berman and Country Financial, shared valuable perspectives on leveraging TBM for financial planning and analysis. Our hosts, Tiago Nascimento and Jon Sober, led a dynamic discussion around crucial questions concerning TBM implementation for different financial views.

What is a TBM Council Coffee Chat?

TBM Council Coffee Chats are informal, peer-to-peer engagements where we create a relaxed space for community members to share real-world insights, ask questions, and learn from one another. It’s all about connecting and growing together.

These sessions are held every four to six weeks per strategy community and typically last about 30 to 45 minutes. They're hosted by fellow TBM community members who are passionate about sharing their experiences and lessons learned. You won’t see any formal slides—just honest, practical conversation focused on the ‘how-tos’ of implementing and evolving TBM in your organizations. We encourage you to participate—ask questions, drop thoughts in the chat, and let this be a space where you feel comfortable sharing. It’s the community that makes these chats valuable.

Key Insights from "Past, Present and Future with TBM"

During our lively discussion, several key themes and valuable lessons emerged regarding TBM implementation for financial management:

• Strategic TBM Implementation: While the optimal starting point for TBM (budget-first, actuals-first, or both) often "depends" on organizational context, aligning with clear problem statements and leadership questions is crucial for executive sponsorship and visibility.

• Navigating Cloud Cost Complexities: Managing highly variable cloud costs requires a deliberate approach to consistent tagging, attributing shared costs, and leveraging historical data with buffers to break down budgets by division.

• Realistic Multi-Year Planning: Effective long-term planning prioritizes known realities over optimistic projections, integrating historical actuals and market forecasts with close collaboration between finance and business units to foster agreement.

• Leveraging TBM Taxonomy & Framework: The TBM Taxonomy (with upcoming V5.0 offering guidance for AI costs) and Framework 2.0 are vital for classifying costs, aligning them to business processes, and understanding the distinction between IT towers (for benchmarking) and business solutions (for customer services).

Prior to this coffee chat, a survey was conducted to gauge the community's interest in various topics. The results indicated a strong focus on financial planning within TBM:

• Past, Present and Future with TBM – What challenges do you have to deal with when trying to use TBM for Budget, Actuals and Multi Year Planning? (40.5% of votes)

• Taking TBM principles beyond the Technology organization (27.0% of votes)

• Is TBM ‘one size fit all’? How different are TBM implementations between organizations? (24.3% of votes)

• How to integrate TBM and CSDM (8.1% of votes)

This clear interest set the stage for a deep dive into the practicalities of TBM in financial management.

The Starting Point: Budget, Actuals, or Both? 

The discussion kicked off with a poll asking participants about the ideal order to implement TBM: budget first, actuals first, or both together. While some felt it "depends" on organizational needs, a definite majority leaned towards "budget first, then actuals."

One of the hosts, drawing from their experience across different implementations, acknowledged that "it depends" is often the reality. They noted that starting a TBM model with the annual budget cycle can be a strong approach, provided there's a plan to regularly integrate actuals. Implementing both simultaneously, however, was described as the most challenging experience due to differing levels of financial granularity.

A participant from a financial organization echoed the sentiment for starting with budget, stating that a budget is always necessary, regardless of actuals. Their organization is working to understand actual costs, moving beyond high-level departmental needs. This organization is building an in-house version of TBM, defining services and driving actuals from them, seeing it as a precursor to potentially adopting external tools. The value, they emphasized, lies in understanding the methodology and framework first, as tools merely facilitate the process.

Another participant strongly advocated for starting with the problem statement. Understanding the specific questions leadership is asking – whether about budget, actuals, variance, or other insights – is crucial to gain executive sponsorship and ensure visibility for the TBM initiative. This aligns with the idea that leveraging actuals provides regular, monthly results, as opposed to only annual budget insights.

Tackling Cloud Costs and Multi-Year Planning 

The conversation shifted to the complexities of managing cloud costs, which are often highly variable. One participant shared their journey from recognizing the need for better cloud cost management through FinOps to exploring TBM. They highlighted challenges with inconsistent tagging and the difficulty in attributing shared costs, such as reservations, to specific cost centers or customers, creating "black holes" in reporting. Their current approach involves using historical spend with a buffer for budgeting and aims to break down cloud budgets by division or cost center.

Regarding future planning, a host recalled an experience where business partners consistently underestimated mainframe shrinkage, leading to a decision to rely on known realities rather than declared future plans.

Another host detailed their organization's mature approach to multi-year planning. They work closely with financial counterparts and business unit representatives to present historical actuals and proposed budgets, fostering agreement. They integrate historical data with market forecasts into their cloud budget, broken down by division, using FinOps tools to ingest cloud costs into their TBM tool and account for overhead.

Navigating the TBM Taxonomy and Framework 

A participant brought up challenges with integrating new technologies like AI into the TBM model. One of the hosts pointed to the upcoming TBM Taxonomy Version 5.0, which includes new guidance on classifying AI costs and aligning them to business processes. They also recommended exploring TBM Framework 2.0, describing it as "fantastic" for understanding how the taxonomy fits into an organizational perspective. It was noted that while Version 5.0 is expected to be finalized this year, most changes are straightforward, with Version 4.x remaining relevant for years to come.

The difference between TBM towers and solutions was clarified: towers represent the functional costs of IT (e.g., hardware, software, labor, depreciation) and are ideal for benchmarking, while solutions represent the business services provided to customers. A participant shared the common struggle of allocating application costs when one application supports multiple solutions or capabilities (e.g., Microsoft 365 with Excel, PowerPoint, Outlook) across various internal companies. They questioned whether to split by capability or service, or by consumption-based user licensing, noting that the services/solutions side quickly becomes complex, unlike the clearer "resource groups" defined in towers.

It was suggested that a consumption model is key, and to avoid excessive granularity, focusing on simpler metrics like headcount or linking licensing structures to business units. The importance of listening to pushback from business units and adjusting allocation structures was also highlighted, along with working with budget offices to align funding mechanisms. In a chargeback model, the cost flow typically involves rolling server costs up to applications, and then to the businesses utilizing those applications, with tagging being essential for this process. One organization holds an "application alignment forum" where stakeholders debate metric changes and their cost implications, and they engage in annual debates during the budget cycle to educate business units on changes to IT service metrics. They also use consumption-based charging for certain services, like email and storage, and offer tiered pricing for different machine requirements based on licensing and infrastructure demands. This can also be used as an incentive, for example, by pricing physical desktops higher to encourage adoption of virtual alternatives.

Join the TBM Maturity Community!

The TBM Council's TBM Maturity Community Workgroup is actively looking for more members to participate in open forums, coffee chats, engage with the community, and contribute to assets. They meet regularly and discuss a variety of topics focused on helping organizations successfully implement and mature their TBM practices.

If you're interested in connecting with peers, sharing real-world insights, and helping shape the future of TBM maturity, we encourage you to join the TBM Maturity Community and Workgroup. You can continue these conversations and ask questions on the TBM Connect forum. 

Next Steps: Engage and Learn More!

To continue your journey with Technology Business Management, we invite you to explore our website, log into TBM Connect here, dive deeper into the TBM framework, learn the fundamentals of TBM modeling, and review our latest research here—including the State of TBM report and our ongoing study of TBM salaries. Consider enrolling in a TBM course, joining the TBM Council to connect with a global community of peers, or attending the next TBM Conference to engage with thought leaders driving innovation at the intersection of technology and business. You can also explore our network of partners for additional resources and expertise, and subscribe to our newsletter to stay informed about the latest insights, events, and tools in the world of TBM.

Ready to connect, learn, and grow? Join one of our TBM Strategy Communities on TBM Connect to participate in open forums, attend upcoming Coffee Chats, and contribute to our growing body of shared knowledge!