Systematic Cost Reduction through IT Cost Transparency

Most organizations recently went through a drastic and frantic round of IT cost reductions. Many are now saying, "There has got to be a better way." Apptio enables a data-driven, proactive approach to cost reduction. With proper visibility into the cost drivers of IT, front line managers can find ways to reduce fat, improve operational efficiency, analyze ROI on big savings project ideas and be better prepared to react to annual cost cutting mandates. Ideally though, IT organizations will take a proactive approach to driving 10% reductions year over year through a process of Continual Cost Optimization.

"We've reduced our cost per customer by 50% while working with Apptio." Ravi Balwada, Vice President On Demand Operations, SumTotal Systems

Data Driven Cost Reduction

Too often cost reduction projects are reactive, urgent and don't start with a proper analysis baseline costs and cost reduction possibilities. Urgent cost cutting starts with projects being killed, contracting employees being let go and vendor contract renegotiation. Even more advanced projects based on the best cost reduction practices of the day—server consolidation, application rationalization, storage deduplication—lack the initial analysis to be able to calculate whether cost reduction was successful, or not.

With Apptio's Technology Business Management (TBM) solution it is possible to track all the unit costs in IT providing deep insight into fundamental cost drivers and the ability to do complex analysis on the cost of infrastructure, support and applications. Given this insight, front line IT managers are empowered to make cost optimized decisions at every level of the organization.

With a detailed understanding of how costs are flowing through their IT infrastructure, IT can analyze financial and operational data to make more effective, ROI-based decisions. For example:

• Application Rationalization – IT can map the total cost, the usage and value of all applications to identify candidates for rationalization
• Platform Standardization – Infrastructure teams can understand the cost of all platforms in use and the ROI of standardizing on a specific infrastructure brand that has a proven lower TCO
• Data Center Management – Application and Infrastructure teams can easily decide which data center a new application should be provisioned into based on capacity and cost metrics mapped to business needs
• Optimize Service Levels – Business requirements change over time, but often the corresponding support service levels do not. IT Operations can uncover applications with high support costs and high work volumes and project the benefits of reducing service levels where applicable.
• Storage Optimization – With good Cost Transparency, storage teams can make better decisions about what storage systems to use, which applications should be on which tier, use of deduplication and document lifecycle management and whether to use cloud storage

Decide when to use cloud or other third party services

A TBM solution enables IT to evaluate the ROI of using third party services within the IT supply chain. While many IT organizations are focused in the near term on building an internal private cloud, they are actively evaluating the use of targeted cloud services such as Email, Storage and Virtual Servers for immediate use. Likewise, IT can evaluate SaaS, IaaS and Cloud storage offerings.

• SaaS – Compare total per user cost of an in house CRM system to an on-demand CRM alternative (e.g. Salesforce.com) for accurate ROI.
• Email in the Cloud – Calculate the total internal cost of delivering email including hardware, software, storage and application costs to evaluate email hosting service such as Google.
• IaaS – Calculate the TCO of a server, cost of tiered storage and data archival can be calculated and compared with AWS, EC2 and other cloud offerings

Continuous Improvement

Successful TBM customers have turned cost reduction exercises from a reactive exercise to a proactive and systematic process. With the proper tools and insight, every manager within IT can be responsible for hitting cost reduction targets. Cost reduction becomes a quarterly exercise, and freed-up funds can be reapplied to more strategic projects.