YourStory in conversation with Hardeep Singh, Co-founder of Costnomics, SaaS based IT Financial Management software provider.
Tell us about Costnomics.
In one sentence Costnomics provides the CIO’s with the knowledge needed to gain control over expenditures, helping them run IT like a business through improved cost transparency and enhancing service delivery. Our company is a delivering SaaS based IT Financial Management establishing a strong foundation for the understanding of the economics of IT and, assisting CIOs get better control over the effectiveness of their enterprise IT spend. Our goal is to significantly improve the knowledge and decision making capabilities of IT Organizations, far beyond what is achievable today with existing solutions and methods. Costnomics delivers a true bottom-up costing capability built on a lean Activity Based Costing(ABC) methodology.
What are the services/products that you offer?
We deliver a next generation product for the emerging IT ecosystem handling trends, such as consolidation, virtualization and cloud. Costnomics is a suite of four tightly integrated products:
Service Cost Management (SCM) delivers an integrated approach to the build of IT service costing and enables IT to benchmark its services against internal and external industry benchmarks. SCM delivers a powerful, innovative and forward thinking method of linking Financial Planning to Business Strategy, leading to predictive IT budgeting and forecasting.
IT Investment Management (IIM) is a set of Innovative Decision Support tools designed to assist the CIO make the most informed IT Investment decisions. IIM provides enhanced modeling of the projected Total Cost of Ownership (TCO) of IT services, Return on Asset (ROA) and Operational Run activities, providing continuous improvement opportunities.
IT Performance Management (IPM) is a Business Intelligence Framework that provides an integrated view of IT and its performance.
IT Charge Management (ICM) provides an enterprise chargeback or show back solution for IT. ICM enables the tracking, allocation and control of costs.
Costnomics also offers a managed service to take care of the data management needed to maintain cost transparency. Our solutions can also help CIOs better understand and predict the financial aspects of many types of strategic initiatives, for example Data Center Consolidation, Cloud Enablement, Virtualization and Application Rationalization.
What is Costnomics' differentiator in the market? How is it different from other players?
Before I answer this question let’s try to understand how the industry has tried solving this problem over last few years. IT Finance historically has allocated IT costs to cost centers with nearly always, the costs being treated as uncontrollable in the P&L statement. The traditional method, that existing market solutions use today to make costs controllable, is to define the services and cost them. The methodology used is purely assumption based. We also hear from the current solution players that they believe that there is no need to get to the actual details, as it will not provide value.
We have a completely different view on the solving of this problem. We use the “bill of material” costs to create “an accurate bill of IT”. If we use the analogy of a manufacturing company, there are benefits from a complete view of the raw materials costs required to manufacture their products and the associated overhead. Similarly, the Costnomics solution builds a bill of materials view of IT Services.
In addition, we treat financial models for each technology as different. For example, the Costnomics methodology ensures that the way physical storage is modelled is specific to the storage domain and would be different to the costing of a physical server in the Server domain. The basic concept remains the same but the business rules are different. You may hear the term “Bottom-up Costing” from every other provider however, the truth of the matter is that we are the only true provider of this methodology and, we can prove that by the intelligence and value that our solution delivers to customers.
How did the idea for Costnomics come about?
Costnomics has a number of Industry IT Financial Management practitioners who have led several Financial Transformation and Transparency initiatives, and more recently led a Financial Transparency initiative for the largest Investment bank in the US. After seeing gaps in existing IT Cost Transparency solutions and, in conjunction with listening to many other company leaders, we decided that we had enough experience and know-how to do it right ourselves and to bring a high value solution to the market. Our Investment Banking experience showed us the importance of insightful analytics and the matching of these analytics with the most complex of problems, the economics of IT.
Tell us about your background. Do you have a co-founder? How did you guys meet?
Let us know about the tie-ups that you have (if any). Is there acceptance for your concept? Can you give us some incidents to illustrate the same?
Technology partners are critical in providing complementary offerings in the Financial Management environment. Costnomics is working to forge strong relationships with technology providers like Microsoft, giving us the opportunity to enhance the total user experience. We are thoughtfully expanding our partnerships with our strategic and technology providers. To help us satisfy customer demand for greater ITcosttransparency the partnerships include IT Infrastructure and Service providers, System Integrators and Consultants.
Typically we start working with our customers on understanding one aspect of their technology financial structure. Once the high value of our solution is understood our customers are keen to gain transparency into more and more of their IT costs, until complete IT cost transparency is established.
Where do you see Costnomics five years from now?
Our goal is to be the first choice for customers in the IT financial management solutions market, retaining the most capable staff, working with the strongest partners and, offering highest ROI for our customers. As a trusted partner to our customers provide powerful accurate analysis and intelligence into all Business IT decisions.
What is the company's revenue model?
Costnomics offers a SaaS or traditional on-premise licensing model. We offer flexible deployment models to meet the needs of our customers. Our licensing models are extremely adaptable for example, we enable the CIO to understand simply the storage economics or undertake a complete Data Center Consolidation costing. Our aim is to provide sustained value to our clients through the provision of powerful financial intelligence and decision support tools.
Did you fundraise to start up?
We are generating revenue and our costs are very controlled. We are self-funded today and, have had early discussions with a handful of venture capitalists. It is important to us to find the right partners for long term success.
Do you have any plans to fundraise?
Yes, fundraising is critical to our success in growing our market share globally.
Who are your clients? How difficult was it to acquire your first few clients?
Our customers and prospects are G2000. Of course, there are always going to be challenges initially, but we know that there is great deal of focus on this space by CIOs. Sometimes on the ground there is a perception that there is no problem or if it is understood there is one, that it is seen as too difficult to solve. Our competitive advantage is our complete customer focus, problem understanding, agility and know-how in the IT Financial Management space.
Costnomics aim is about bring genuine IT financial transparency to organizations. We work with both the Business and IT to build an extensible IT financial model that will deliver real fiscal visibility into IT expense. You will appreciate at this stage of our business cycle we are not be able to disclose our beta customers but we can tell you that they are all multi-billion dollar companies who have huge IT investments.
As an entrepreneur, what are your joys? What are the challenges?
The best thing about being an entrepreneur is the level of satisfaction you get from creating solutions to solve really hard problems, for our customers. We are passionate about our suite of solutions and get an adrenaline rush when we are able to deliver cost transparency to our customers. We have a very strong team that has worked together for many years. Our people are working in US, UK, Australia and India. We span multiple markets and this keeps us open and available to our customers 24 x 7.
We are faced with challenges of course, staying focused, to keep the ball moving and not get bogged down. A challenge is the realignment in the way that I think. As an entrepreneur I need to have a different mindset compared to when I was working for a company. Today I need to focus on the activities that can create value, return on investment and make my product of worth to my customers.
How big is the team? Give us some info on team composition. Number of people, their backgrounds. Are you looking at hiring?
Costnomics is a young software company with less than twenty staff today. We are hiring a carefully in India and in the US. Our team consists of seasoned Consultants, IT Executives and Developers. We are looking for people to join us who are very bright, highly motivated and have a deep passion to work in an exciting startup culture.
Let us know about your expansion plans.
Today our business focus is in the US and Europe, as many of the G2000 companies are in these two geographies. There is a major expansion in IT taking place in Asia and in the medium term we will look to expand our presence in Asia. However, we always welcome contact from companies throughout the world who are interested in solving their IT Financial Management challenges.
Would you like to share something else with us?
There is an interesting trend in the market today with lots of noise around cloud computing. Estimates by analyst put the cloud market anywhere from $56B to $150B, by 2014. We have worked with some clients who would like to move to cloud but do not fully understand their current costs. The vendors will always find a business case justifying the need to move to cloud. Our cost management and investment solution helps a customer to understand their current costs and create what-if scenarios for enabling technologies like “cloud”. We foresee, that as customers move to the cloud they will realize that it’s not a one-size-fits-all approach and, there is a pre-requisite to cost their internal services before reaching out to a cloud vendor. This is where Costnomics can give CIOs the power not only make right decisions but also defend their decisions with factual data.