The company bolsters its TBM capability with Apptio to self-fund establishment of new digital business capabilities, enabling over $30 million in annual operating income (OI) impact.
This company is a leading manufacturer and marketer of access equipment, specialty vehicles, and truck bodies for the primary markets of access equipment, defense, fire & emergency, and municipal, refuse hauling, concrete placement, and airport services. Each product line (or segment) is unique in its manufacturing processes. Therefore, to ensure segments have proper IT focus and representation, each has a vice president of IT within the segment who reports to the chief information officer (CIO).
In addition to IT leadership in each segment, this company has an enterprise shared services group. Services such as infrastructure, cybersecurity, advanced analytics, and digital manufacturing are delivered to all business units across the organization.
The company is considered a market leader across all its business units. But company executives know that past success does not guarantee future results. Emerging technologies, such as advanced analytics and intelligent automation, continue to advance rapidly. To increase its competitive advantage, the company is implementing innovative digital business capabilities across its business units. In order to provide the business with advanced capabilities quickly and efficiently, the IT function began a multi-year transformation.
This meant moving away from a traditional mindset, where the IT function was often viewed as a cost center, to becoming a trusted, strategic, business advisor. To launch this transformation, IT changed to digital technology (DT), ushering in a new branding approach and mantra centered on strategic business partnership. “We realized we needed to transform ourselves before we could help transform the business,” said the senior vice president and chief information officer. “It started by adopting a business mindset and building a better understanding of our technology product and service offerings, and then optimizing based on cost and value.”
Technology Business Management provides the framework for transformation
For the DT organization to operate more like a business, the company needed to alter its structure and provide more insight to enable leaders to make better technology investment decisions. The DT organization historically had a technology-centric mindset instead of a business-investment mindset and lacked a good understanding of true costs and how technology solutions impacted the company’s bottom line.
To address these challenges, the company’s leaders adopted Technology Business Management (TBM). TBM is an IT value framework and mindset that provides best practices for communicating the cost, quality, and business value of IT investments. Leadership knew that to drive digital transformation, they first needed to build a trusted capability in TBM that provided cost and value transparency, but from a business lens.
To do that, the company needed to extract IT financial information from 50 different sources of data, allocate the costs to IT categories, and present the information in business-oriented terms. Initially, the company explored using Microsoft Excel or ServiceNow’s ITFM Module, but according to the director of DT Finance, neither application offered the full capability the leaders were looking for. Which led to a proof-of-concept project with Apptio. “Apptio brought all of the data together in a single pane of glass and gave us more detailed information,” said the director. “And it provided a benchmarking view so we could see how we were doing compared to other companies in similar industries.”
The company began its TBM journey in 2018. The company implemented Apptio and created a TBM office led by a dedicated technology business management analyst (TBMA) and an Apptio configuration specialist. “Part of our TBM initiative is to dive in deep and understand our costs, value, and business consumption at a breakthrough level that creates conviction to improve and optimize,” said the sr. manager of the TBM office.
The TBM team is embedded within the Digital Technology (DT) Strategy team. This helped elevate the strategic priority of the initiative within the organization and increased the team’s effectiveness. Aside from the core members, the TBM Office established an extended team that includes five enterprise service subject matter experts, two finance leaders, two vendor and asset management resources, and a dedicated leader from each business unit. The team meets regularly to review strategic targets, data quality opportunities, and system enhancements.
In addition to the core and extended team, key stakeholders were identified. These included the CIO, segment and function leaders, application owners, and service managers. Regular meetings of this group enable the company to review key financial metrics and budget forecasts, highlight anomalies, and ensure cost and value optimization.
“Establishing a TBM office, restructuring the organization, and implementing Apptio has helped drive empowerment, agility, and accountability across the company,” said the sr. VP and CIO. “And that is enabling us to maximize our potential through technology.”
Better insight and increased efficiency leads to funding new technology initiatives
The company has used Apptio and the TBM framework to shine a light on areas of inefficiency, which has helped the company self-fund new initiatives and drive innovation.
For example, the TBM framework helped the team identify redundancy within the organization. “There were infrastructure teams in each segment and multiple service desks,” said the sr. director of DT strategy & portfolio management. Uncovering this information enabled the company to consolidate four units into one and outsource a large portion of its Service Desk function, which freed up headcount and capital that could be invested in strategic initiatives to grow and transform the business.
Some of that capital was used to fund three new capabilities: Advanced Analytics (AA), Robotic Process Automation (RPA), and Digital Manufacturing (DM). These new capabilities have generated significant business results.
For example, the AA team has built 42 predictive models, resulting in $30 million in annual operating income impact. These models have enabled the company to optimize logistics and to be more strategic in supply chain sourcing. They have also helped the company better serve its customers by transforming product configuration and pricing, suggestive selling models, and demand forecast optimization.
In the area of automation, the company has developed and launched 72 RPA bots for Supply Chain, Finance, Treasury, Sales, and Digital Technology groups and has automated over 65,000 hours of annual back-office tasks. This enhanced productivity has enabled teams to focus more time and energy on higher value and more meaningful work.
From a digital manufacturing perspective, TBM has provided the funding needed to transform the company’s infrastructure and modernize network, voice, storage, and collaboration tools. These technologies form the foundation that enables the company to innovate around digital manufacturing and improve worker safety, product quality, and operational efficiency.
Shifting the budget mix from Run to Grow and Transform
Today, because of the TBM framework and the success of these new digital business capabilities, the Digital Technology group is viewed as a strategic partner to the business, reporting directly to the CEO. As a result, technology spending is now viewed as more of an investment versus a cost.
With cost details in Apptio, the company now has better visibility into how budget dollars are being spent. And it’s easy to distinguish between “run-the-business” expenses and strategic investments that enable business growth and transformation. This resulted in the budget mix between Run, Grow, and Transform becoming a key investment metric. Now, all new projects are required to have value estimates, including expected operating income impact. The team evaluates, approves, and prioritizes projects with projected business value in mind.
This has helped the company shift the budget mix and commit more money toward projects that will transform its operation. “Apptio enables us to set targets and gives us a visual representation of how we are doing against them,” said the sr. director of DT strategy & portfolio management. “This gives us a mechanism to say, ‘Are there ways we can reduce our spend or deliver the solution faster?’”
The TBM team has succeeded; over the past two years, the company has realized a 50% increase in the Growth and Transformation budget from 20% of total spend to 30%.
Looking forward to increased adoption and even more value
As the company continues its TBM journey, the company’s leaders see more value ahead. “We have a solid approach to bring all of the application and service consumption data into Apptio, driving formalized product/owner role guidelines, defensible showback, and a new approach to budget planning,” said the sr. director of DT strategy & portfolio management. “And we are excited to start working with those owners to reduce total cost of ownership (TCO) and eliminate redundancy in the portfolio.” As adoption continues to increase, the team is confident that they will see even better results from its technology investments and continue to provide the business with faster results backed by data-driven decisions.
For more information about ApptioOne, visit apptio.com.