With 3.3M members and $18B in annual revenue, Blue Shield of California is one of the nation's largest healthcare providers. And like every company of its size, it has long had its share of IT financial management headaches—mind-numbingly repetitive data-entry tasks, line-of-business managers demanding bigger budgets, and senior management wondering if IT was delivering the value they needed to achieve their objectives.
What they found was TBM supported by a quartet of Apptio apps—IT Planning, Cost Transparency, Business Insights and vendor insights—addressed all of these issues and turned a one-time cost center into a true friend of the CFO. Not only can finance teams do far more analysis and better long-term forecasting and planning, TBM has increased cooperation, trust, and data sharing between departments, corporate, and IT.
Removing roadblocks through rolling forecasts
The first problem to go was the repetitive data-entry tasks. Apptio's automated data collection and reporting giving business units far better visibility into their true all-in IT costs as well as the ability to factor in and project costs on a wide range of IT expenditures, such as contract renewals.
"Everything was being done with Excel," said Qian Wang, senior manager for IT Finance. "Now, having the rolling forecast availability with Apptio, we have this super powerful tool just to get everybody in the right place. We're looking to their past and also breaking out their future within a day or two. It is a huge step for us to be opened up and looking beyond a very narrow-sighted view to a three-year, five-year forecast, which is more aligned with the company's overall financial goals.”
These monthly forecasts allow BSC's IT department to factor in changes and calculate variances almost in real-time. This gives IT a very up-to-date accounting of their spending. So when the business units come to them with new requests for services or when a project finally gets launched into production, IT knows what resources it has available or needs to procure to support the business in the future—like hiring developers and provisioning servers to maintain a new app or business service the company wants.
"There’s a couple of things that make us successful in this process," said TBM Specialist Michelle Brinson. "The first one is the ability to put all of our contracts within a tool that allows us to forecast whether or not that contract is going to be extended, know all the details related to that contract, and have the ability to extend into future years without knowing the specifics.
"And the other part is the process of documenting the ongoing expenses related to projects. This gives us the ability, as projects get approved for implementation, to document those ongoing costs and understand where those costs are going to have an impact.
"Before we start creating the next cycle's budget, we can have a proactive conversation with cost center owners to go over what costs are going to be added or benefits are going to be added to their operational cost center in the coming year before it becomes part of their budget."
Put another way, the combination of new cost transparency and planning tools allows IT and the business unit to have a business-focused conversation about the actual costs of what a business unit wants to achieve and, most importantly, if it is worth the spend—an important question to answer when the goal of the organization is to become the most affordable, high-quality health plan in all the markets we serve.
"If you think about the company and the aspirational agenda we have, which is reducing the cost of health care for all Californians, and the fact that that itself is a very long-term, aspirational goal, then we need to be able to support business planning with that longer-term view in mind and be able to provide a ready answer to questions like, 'Well, what does this look like two or three years out? Are we trending in the right direction or not? If we're increasing costs in IT, then can we actually manage the decrease somewhere else?'”, said Carol Wyatt, Director of Enterprise Service Business Management. "And so this forward planning, the rolling forecast, is critical to actually enable our ability to support that big picture, aspirational agenda."
Forward planning, the rolling forecast, is critical to actually enable our ability to support that big picture, aspirational agenda.
Director of Enterprise Service Business Management, BSC
Proving the value of IT to the business
Taking the strategy up one level, company officials quickly found that this insight helped senior management (including the CFO) appreciate the important role IT plays in advancing the organization's goals. Few appreciated this more than Michael Dahlem, VP of IT Shared Services.
"With the Apptio apps, the overall intent has always been to show the value of IT," he said. "I suspect many companies struggle with the same thing with regards to understanding IT. Is it just a cost center or is it bringing value to the business? The ability to capture operational details from capital investments being made today and what that means looking out multiple years has really enabled us to change the conversation with the CFO and with senior leadership.
"We're not here spending money because we like to spend money. The things that the business is asking us to invest in do, in fact, have an impact in terms of what costs are going forward. It also helps focus everyone on the cost-benefit by identifying where the benefit will come from versus 'What's the cost?'"
These conversations did not change in a vacuum—hard numbers backed up by solid accounting coupled with real-dollar savings in IT's operational spending is what got everyone paying attention.
"Because of these rolling forecast exercises and because we have much more aggressive management of our operating budget, we are able to find room within that operating budget to fund activities that are in the grow-the-business, transform-the-business space," said Juan Jose Jarillo, the TBM office's senior manager.
"We're the only business unit in the company in the past five years that's made their budget every year and we attribute that to the regimen, to what Apptio has helped us do in terms of expense management," added Dahlem.
Giving back to the business
The accounting improvements brought by TBM and Apptio allow funds to be redeployed for innovation within IT or back to the business. This is especially true when IT's budget is skewed by non-IT costs being misallocated to IT's operational cost center. In 2017, Quin was able to identify $6M of such costs.
"One of the things that we are now regularly doing is we are regularly reviewing and giving back dollars from our approved budget," said Wyatt. "And we contribute that back to the company in general, and therefore those dollars are actually redeployed for other parts of our portfolio because we're now making investment decisions through the year.
"A couple of years ago, our investment decisions across all of our portfolios were made at the beginning of the year and then somewhat stuck in concrete or static. Now we have the ability to make decisions throughout the year and we are constantly looking at and moving dollars from one business unit to another, where they’re needed. So we're giving back."
Expanding a successful TBM practice beyond IT
Keeping pace with a rapidly evolving industry, BSC has made much progress over the past five years towards transforming a dysfunctional healthcare into one that is worthy of our family and friends and sustainably affordable. Because challenges are constant, delivering on BSC aggressive business goals requires a well-oiled machine. TBM principles that have proven so effective for IT are now being applied to other parts of the organization.
Earlier this year, the Customer Experience organization, as well as the enterprise project portfolio, were integrated into the BSC TBM model and its processes to provide the same transparency and accountability originally developed for IT. Today, 60% of the operating expense is accounted for via TBM.
Conversations are outcome-focused
TBM has helped the organization far more than just freeing up funding for this or that project. It has empowered and challenged everyone in the organization to spend more wisely and to have outcome-focused conversations about technology, their technology requests, and the money that goes towards fulfilling those requests.
"More than anything, what TBM has done is put us in a place where we're having fact-based conversations with the business that aren't accusatory," said Dahlem. "It's been pretty remarkable how that's changed because we don't get into discussions anymore about IT being a cost drain or non-relevant or whatever. We have a very good relationship with all the business units that we support and it's based upon the notion that we are good stewards of the corporate treasure we're responsible for."
We have a good relationship with our business units, based on the notion that we are good stewards of the corporate treasure we're responsible for.
VP of IT Shared Services, BSC