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“With our old legacy system, there wasn’t clarity. There wasn’t a single source of truth. If we were over budget, we didn’t know where the problem was—was it in Desktop, Strategy, Architecture, or some other area? Now, we can see where the overage is, what component within that area is causing the problem, and then take action.”
With changes coming to the education sector, a global leader in education services needed more control over IT costs and investments to offset the effect of new legislative policies. These new mandates cap student enrollment of international students, limiting top-line revenue growth at the company and elevating the need for cost optimization and efficiency to protect profit margins. By implementing IBM Apptio Costing Essentials and IBM Apptio Planning Standard, the company replaced its spreadsheet-based IT Financial Management (ITFM) process with an automated, modern solution that enabled them to:
The global education sector is changing. New legislative policies are introducing student caps on enrollment, particularly in Australia, Canada, and the UK, reducing the number of international students accepted at institutions of higher learning.
Education organizations are now facing a new financial reality. With student enrollments capped, top-line revenue growth is limited, making cost reduction efforts more important than ever to increase profitability.
IT costs make up a large portion of this global leader’s operating expenses. Optimizing investments for value, reducing run-the-business (RTB) spend, and shifting costs to growth initiatives, therefore, are essential for the company to succeed under these stressful market conditions.
The company’s existing ITFM process, however, was based on multiple complex spreadsheets and offered limited capability. This created a time-consuming, tedious process. Data accuracy was always in question. Teams spent countless hours working and reworking numbers and ultimately could not provide visibility to individual business unit costs or budgets. Without visibility, the organization did not fully understand cost drivers, struggled to enforce accountability for spending because it lacked traceability of costs, and did not have insightful, fact-based data to make informed decisions.
“Everything was placed into one business unit (or cost center), and no one really knew what their budgets were or what their costs were,” said the senior operations and commercial manager at the company. “It was all a bit chaotic.”
To address this challenge, the company kicked off a multi-faceted project to improve ITFM. This included implementing Apptio Costing Essentials (ACE) and Apptio Planning Standard to replace its spreadsheet-driven process and to serve as the basis—or source of truth—for the company’s IT financial information.
IBM Apptio enabled the company to centralize IT financial information into a structured system, eliminating the need for handling multiple, error-prone spreadsheets. This not only simplified the overall ITFM process but also improved data accuracy, visibility, and transparency via a single pane of glass.
With greater visibility, costs are more transparent and easier to track. Instead of all costs flowing to one large cost center, there are now seven cost centers, one for every major IT area. Cost center owners can now see their individual costs and budgets, and spend metrics are more defensible, resulting in more accountability for spend across the organization. In addition, the company can now better understand drivers of cost and identify potential opportunities for lowering them.
“The main thing for us was getting visibility,” said the technology systems manager at the company. “With our old legacy system, there wasn’t clarity. There wasn’t a single source of truth. If we were over budget, we didn’t know where the problem was—was it in Desktop, Strategy, Architecture, or some other area? Now, we can see where the overage is, what component within that area is causing the problem, and then take action.”
One downside to the company’s legacy process was the difficulty in managing vendor spending. Without good visibility, the finance team had to do their best to manually create budgets and track spend.
“A lot of the chaos in our old process was on the vendor side,” the senior operations manager said. “For example, I remember one of our finance people had two or three spreadsheets open, jumping between them. If she found a vendor without a budget, she would just lump them into a pool. Unraveling all of that later took hours—it was just wasted time.”
By centralizing information and eliminating spreadsheets, the company now can better manage its vendor costs. Spend by vendor is tracked and managed in Apptio, and at any time, the company can report on where money is being spent with a breakdown by product and licenses. And they can view spend more than 90 days into the future, as opposed to less than 30 days under their old system. This single, granular view of cost data helps the company rationalize vendors, better arms them for contract negotiations, and enables them to identify savings opportunities.
“After we implemented Apptio, we quickly found where we had purchased the same product from two or three different vendors,” the senior operations manager said. “We saw where people were buying outside of the process. From a contract perspective, we were able to eliminate unnecessary autorenewals. For example, we could see the number of licenses we purchased and the renewal date, so we could then go to the owners and verify if they were being used. I know in one situation where we saved $30,000 instantly just by looking at it.”
Under the company’s previous process, people had to wait on the finance team for information. Cost center owners couldn’t get a view of their spend until almost 30 days after month-end close. By that time, it was too late to do anything about it, and they had to try to fix spending the next month – playing a continual game of catch-up.
Apptio’s self-service capability resolved this issue. Owners now can access their financial information whenever they want. This gives them an opportunity to investigate costs early and remediate potential problems before they manifest into larger issues. Greater visibility along with self-service has helped the company better manage business as usual (BAU ) and project-based costs, ultimately lowering budget variances.
“We have a more proactive way of doing things now,” the technology systems manager said. “Having data available during the month enables us to fix things when we see an issue, like if someone miscoded an invoice or something. We’re not always having to go back and correct problems the following month.”
Another key capability of Apptio is the solution’s ability to provide insight for making spending decisions. The company now has a better understanding of cost drivers and RTB spend, further enabling the organization to evaluate where money is being spent and shift spending toward grow-the-business (GTB) and change-the-business (CTB) initiatives in the future. This is critical in helping the company become even more proactive as it faces systemic change in the education sector.
According to the senior operations manager, Apptio has been at the center of the company’s shift toward a better IT Financial Management system. By bringing transparency to costs, people no longer can take issue with spend metrics, or claim ignorance, because the numbers are backed by data and are available to them at any time. This has increased collaboration with the business and strengthened the relationship with IT. As a result, the company has seen more accountability for spending across the organization, and this has allowed the company to get ahead of the game with IT costs.
At the outset of the ITFM project, the company’s objective was “to provide technology leaders information to manage the cost of technology by adopting Apptio solutions, documenting processes, and formalizing accountabilities so that the company’s technology spend and investments are optimized for value,” which includes shifting costs toward growth initiatives.
The company is well on its way to achieving its objective. The organization has laid the foundation by implementing Apptio Costing Essentials and Apptio Planning Standard, increasing cost visibility and transparency, and gaining accountability across the organization. The next step is to further refine allocations and achieve more granular visibility to enterprise-wide application total cost of ownership, so the company can make even more informed decisions about technology spending and adapt to shifting industry trends easier and faster.
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