Why Cost Transparency is NOT just Business Intelligence 

The main principle behind adopting a Shared Services approach is to reduce costs across the business, thanks to the economies of scale that come along with the centralisation of services. Cost Transparency, in its turn, aims specifically to create a higher level of visibility and understanding regarding the costs and volumes of the Shared Services portfolio. With greater visibility, organisations can make more informed and fact-based strategic and tactical decisions concerning these Shared Services investments.

This is critical, since the nature of the shared services environment is such that the calculation, allocation and the reporting of costs to the relevant business units can be difficult to get right. And this is where Cost Transparency comes into the picture, since it enables costs to be assigned to specific business units, while still allowing these players to drill down to the exact source of those costs. This provides them with the platform to understand their cost levers and therefore make better informed shared services decisions moving forward.

But isn’t this merely Business Intelligence (BI) with a new name, I hear you ask? While BI can facilitate the understand of Cost Transparency, the fact is that Cost Transparency offers a far deeper understanding of the cost allocation value chain than is possible through using BI alone.

Essentially, Cost Transparency affords the user a more granular view of the relationships between different activities and entities within the business, as well as all the costs and drivers associated with these. In other words, it takes into account both direct relationships and oblique connections. This means that in the end, the true cost and value of every aspect of Shared Services can be thoroughly understood.

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I would describe the difference like this: BI offers the ability to extract and display information. Cost Transparency, on the other hand, not only extracts, it also configures and processes the information before displaying it. It’s no surprise that these two additional stages are where the detailed lines are drawn between the various relationships, delivering much greater granularity of insight.

BI Tools are great at showing patterns and highlighting trends or outliers but a great Cost Transparency solution needs to be able to process complex business logic at run time and present this to the BI layer.

Think about it: if you have a tool that can effectively unpack the costs of Shared Services, you can use this knowledge to drive improved savings by reducing, consolidating and standardising expenditure. Cost Transparency is designed to give businesses access to the levers it needs to make well informed decisions, unlocking greater value from its existing shared services investments and delivering increased savings regarding future investments.

It is my opinion that in today’s economically strained times, Cost Transparency is essential to getting the best bang for your buck. It also means you will not only have the big picture available when it comes to planning the best strategies for the future, but also ensures business growth is not impaired by the pressure that would be created through high Shared Services costs.

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Much like Tom Cruise in the film Jerry Macguire, Cost Transparency’s biggest aim is to ‘show you the money’ – it provides a complete view of where finances are actually being spent throughout the Shared Services environment. This ensures you can make well informed data-driven decisions regarding current needs as well as future innovations.

Whichever way you look at it, Cost Transparency is the kind of solid investment that will, in the medium and long term, provide insights that will save businesses huge amounts of time and money. After all, by reporting your assets, understanding business system correlation, and seeing how BI interplays with other systems, enterprises will not only have the transparency they desire, but will also find themselves one step closer to true cost optimisation.

Source: Blake Davidson – Head of Delivery at Magic Orange