E.ON Leverages IT Cost Transparency to Succeed in an Ever-Changing Energy Industry

“To talk about how IT costs are supporting the business, you need a clear taxonomy. Apptio helps us talk to the business in a common language.”

Christoph Hanewinkel
Chief Financial Officer
E.ON Digital Technology GmbH

Background

E.ON is an international energy company focused on smart grids and customer solutions to drive the energy transition in Europe. As one of Europe’s largest energy companies, it plays a leading role in shaping a clean, digital, decentralized world of energy. In 2020, E.ON recorded sales of €60.9 billion. The company is headquartered in Essen, Germany, and has around 78,000 employees, serving more than 50 million customers. E.ON Digital Technology (EDT) plays a key role in leading the group-wide digital transformation.

Facing industry challenges

The energy world is becoming considerably more decentralized, more complex, and interconnected. Digitalization is the only lever that will enable the energy sector to manage the increasingly complex processes in the system, in the energy networks, and also at customers. Due to the growing importance of digitalization, the number of IT projects and digital solutions is increasing significantly at E.ON. The complexity is further increased by a large number of legal entities in the Group. EDT needed a solution to improve cost transparency that would provide them with a standardized and easy-to-use reporting tool so that business units can better understand and manage their IT consumption. The tool should also enable IT cost allocation to all group companies based on a common taxonomy and be able to track savings. This has already been a key success factor for realizing the synergy savings after E.ON integrated an energy company named Innogy into their business. Looking forward, it will remain important to identify efficiency gains to be able to implement as many digitalization initiatives as possible.

The solution

With industry changes driving large investments in digitalization and the need for more focus on cost and efficiency, E.ON Digital Technology — the IT and digital unit of E.ON — concentrated on improving IT cost transparency by implementing Apptio and Technology Business Management (TBM) in 2015. And the organization has been using the solution ever since.

“What we’ve learned is that the business is ever-changing,” said Christoph Hanewinkel, chief financial officer for E.ON Digital Technology, “and we need a clear methodology to keep a grip on our financials for IT.”

Apptio enabled the company to establish a clear service portfolio and standardized Bill of IT. Using the Apptio TBM Unified Model (ATUM), E.ON was able to create a common taxonomy that everyone, both business users and IT, could understand. Costs were allocated to IT service categories and projects, and then ultimately aligned with business segments using Apptio’s cost allocation methodology. This enabled every stakeholder in the organization to get a clear picture of what IT services they were paying for and where they could potentially reduce costs.

“We need to track and ensure synergies are being delivered,” Hanewinkel said, “and we measure this using the Bill of IT.” However, he added, their Bill of IT is not simple. “Our Bill of IT affects 250 different legal entities,” he said. “It is very important that everyone clearly understands their IT targets.”

Apptio has provided E.ON with a solid framework for IT financial management that continues to help the company by serving as a fundamental component of the company’s overall enterprise architecture platform.

The results

An effective model for cost collection, allocation, and chargeback

Apptio provided the capability E.ON needed to gather IT-cost data from different sources across the organization — from vendor reports, the general ledger, the CMDB (configuration management database), and others — allocate that data to service categories, and then chargeback costs to business units. “Linking our IT service portfolio in a joint model with business capabilities,” said Hanewinkel, “was the best decision we made.”

Improved communications with business stakeholders

Getting on the same page when it came to articulating IT costs to different groups in the organization was a challenge at E.ON. But Apptio provided a framework and taxonomy that enabled the IT team to communicate effectively with stakeholders on the business side. “To talk about how IT costs are supporting the business, you need a clear taxonomy,” Hanewinkel said. “Apptio helps us talk to the business in a common language.”

Definition and tracking of key performance indicators (KPIs)

“Everyone wants meaningful KPIs,” said Hanewinkel. With Apptio, E.ON was able to tailor KPIs for individual groups and establish standard reports that stakeholders could use to track spend on key initiatives.

Cost management component of enterprise architecture platform

Enterprise architecture plays a key role at E.ON. “Like every other organization,” said Markus Rink, head of Digital Technology Architecture at E.ON, “we are going through a change in the way our business gets delivered and how we serve our customers.”

This change has led E.ON’s IT to focus on three primary efforts: IT modernization, digital transformation, and synergies. “It’s quite a challenge to have all three targets in place,” Rink said. “It requires a close communication and collaboration with all stakeholders.”

One way E.ON is addressing this collaboration is through enterprise architecture governance. “Today, our architecture governance is embedded in all major decisions to be made from an investment perspective,” Rink said. “We have architects embedded in all our modernization projects and synergy proposals.”

To bring together enterprise architecture, E.ON implemented LeanIX, a SaaS solution for enterprise architecture and cloud governance. According to Rink, “We implemented LeanIX as our central application for architecture management. And we are harmonizing all of our other IT management tools on a global basis, so we have a single tool and a single source of truth. Now, we have an integrated view of what exists in the new E.ON world, and we can start implementing a common EA (enterprise architecture) model.”

Apptio provides the cost engine for E.ON’s Enterprise Architecture platform. Apptio works with LeanIX, exchanging critical data between the platforms to enable accurate cost calculations and reporting, which helps E.ON make informed architectural decisions.

To learn more about how Apptio can help your organization improve IT cost transparency and establish a taxonomy that will help you allocate costs and better manage your IT spend, visit apptio.com.

To learn more about LeanIX’s solution for Enterprise Architecture, visit leanix.net.

Additional Resources

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The ATUM Poster

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FinOps: A New Approach to Cloud Financial Management

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The Complete Guide to Building a Successful Agile Team

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