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“Large scale transformations can be daunting. Where do you start? We find the tenets of our transformation approach resonate with clients: Stay aligned to your business strategy. Then, start small, move fast and iterate: ‘crawl, walk, run’.”
IBM Transformation and Operations is using Apptio solutions to drive massive gains in productivity across the enterprise.
For more than a century, IBM has been a global technology innovator, leading advances in AI, automation, and hybrid cloud solutions that help businesses grow. This same commitment to helping clients boost productivity and reinvest in innovation also shapes how IBM manages its own operations. Guided by this principle, IBM’s Transformation and Operations (T&O) group, which encompasses the CIO, Data and Analytics, Procurement, and Real Estate organizations, led an enterprise transformation that resulted in $3.5 billion in productivity gains.
Achieving these results required transforming IBM’s vast technology estate. No small feat considering the T&O organization was supporting more than 250,000 employees in more than 170 countries and approximately 3,000 back-office business applications while working with over 650 vendors.
To begin, IBM embarked on a journey to align IT, Finance, and the business through Technology Business Management (TBM). This required a new mindset within the company and a sharpened focus on the value of technology investments. But getting there meant overcoming some significant challenges.
Aside from the sheer scale and complexity of its technology estate, IBM also had a strong financial ledger culture. The company maintained detailed financial views of IT spending by labor, hardware, and software, but lacked a view an IT leader would recognize. Also, it didn’t have a clear picture of the total cost of enterprise IT services or application solutions supported by the T&O organization.
The CIO organization relied on multiple data sources and tools to have complete visibility on how resources aligned to initiatives, objectives, and key results. The organization pulled ledger data to manually build specific reports, but these were often too narrow and static to meet the needs of finance, IT, and business stakeholders. To drive smarter investments, the CIO needed timely, actionable insights to prioritize high-impact initiatives like application modernization, rather than continuing to fund stranded assets or lower-priority applications.
In addition, the company faced other challenges. While it embraced hybrid cloud, public cloud sprawl was driving up costs and legacy data center costs remained opaque. Vendor spend was growing at double-digit rates, and application owners struggled to rationalize their portfolios without clear cost information.
Using Apptio TBM solutions as the single source of truth for IT costs, even before Apptio became an IBM company, the T&O organization began the transformation process with a focus on progress, not perfection.
“Large scale transformations can be daunting. Where do you start? We find the tenets of our transformation approach resonate with clients: Stay aligned to your business strategy. Then, start small, move fast and iterate: ‘crawl, walk, run’.”
– Joanne Wright, Senior Vice President, IBM Transformation and Operations
From the beginning, IBM’s goal for its enterprise transformation has been to use productivity gains to fuel investments in growth. The company’s approach was to eliminate complexity, simplify processes, automate manual tasks, and then embed AI and automation everywhere it could.
To accomplish this, T&O leaders needed to articulate the value of IT investments to make better decisions. Before they could do that, however, they needed to get better visibility and transparency over costs, so they could align IT spending with business priorities and fully understand the impact on business outcomes. For this, IBM began a journey to improve IT Financial Management (ITFM) by adopting IBM Apptio Costing.
The decision to adopt IBM Apptio came as a result of IBM’s acquisition of Red Hat. Red Hat had been a long-time Apptio user and made a compelling case for the value of the solution. In Red Hat, IBM’s T&O leaders saw a perfect opportunity to use Apptio to prove the value of IBM’s hybrid cloud approach.
“One of the first questions we posed was, ‘Is our investment in Red Hat proving out for how we do hybrid cloud internally for IBM? What was the total cost of ownership in our legacy environment compared to a modernized hybrid cloud environment?’” says Joanne Wright, Senior Vice President, IBM Transformation and Operations. “It was a great example of starting small, moving fast, and providing value.”
After the Red Hat experience, IBM’s T&O leaders used Apptio to evaluate other areas of IT spend and began educating the broader organization on the decisions that need to be made and how TBM supports those decisions.
IBM took several key steps to ensure success of the TBM rollout. The company established top-down executive support, which included standardizing the use of the Apptio TBM suite as one of the three core tools by which the company would run the CIO organization. A TBM practice was formed, made up of members from Finance and the CIO office. A FinOps Hyperscaler Center of Excellence (CoE) was created to focus on cloud spending. And a ‘good, better, best’ roadmap was established, which allowed the company to execute quickly, get feedback, and iteratively improve.
IBM Apptio infused operational data with finance data, surfacing costs to service owners and business units, providing data-driven insight into product and service costing. It gave T&O leaders a TCO view of the company’s IT spend, and aligned IT spending with the IBM business units that benefitted from IT investments. With this information, it didn’t take long for the company to identify significant cost savings during the initial implementation.
One strategic decision was to in-source hosting and adopt hybrid cloud. This resulted in a 90% average savings per application modernized to hybrid cloud and generated 30% savings in aggregate on infrastructure costs.
Data from IBM Apptio also helped IBM identify overlapping contracts and redundant capabilities, enabling the company to consolidate vendors and applications. This effort turned what had been a 12% annual growth rate in SaaS and software spend into a 5% reduction in only 12 months.
“Technology Business Management with Apptio gave us the transparency to prove the value of the tools we were bringing in and which vendors and services to prioritize, optimize or eliminate. It gave us a holistic view rather than a straight financial view to rationalize our portfolio, so we knew where to have conversations about tradeoffs. That’s something every company is looking to do,” says Wright.
Like many large enterprises, IBM made sizeable investments in public cloud services for flexibility, cost, supporting AI/Innovation, and operational efficiency. Optimizing those costs, however, was often challenging. At the time the company formed the FinOps Hyperscaler Center of Excellence (CoE), cloud spending was growing 20% to 30% every year, account sprawl was evident, and there was 25% waste in the form of orphaned accounts and overprovisioning.
To overcome these issues, IBM adopted Apptio’s FinOps solution, IBM Cloudability. Cloudability enabled the company to roll up all the spending on cloud accounts across different business units and make recommendations on how to ensure every dollar spent with the hyperscalers was maximized. With a team of only 5 people, IBM used data from Cloudability to reduce cloud waste by 25% in a short amount of time, saving the company $50M.
Cloudability has delivered significant cost savings for IBM and helped shift the mindset of the company’s culture toward greater accountability and ownership of cloud costs. And it provides information quickly, which enables leaders to make faster, more informed decisions.
“IBM Cloudability gives us clear transparency and data we can use to give specific recommendations to teams on actions they can take to achieve objectives,” Wright says.
Key to every organization’s success today is speed. Like many IT organizations, IBM needed a way to focus on the most critical outcomes, instead of working on every request to the IT organization. The company’s operational process, however, followed a pattern of working on a few large, strategic projects and a lot of less visible work spread across the organization.
Strategic Portfolio Management (SPM) using IBM Targetprocess enables IBM to concentrate resources where they will deliver the best return. It enables the CIO to know what their workforce is working on, align work with outcomes, and ensure those initiatives are the right ones to achieve the desired results.
“SPM for us is all aspects of IT across the enterprise and the ‘human glue’ that it takes,” says Wright. “It enables us to understand perhaps the most important measurement for any transformation: am I focused on the right things to drive the most value for the organization?”
Going forward, now that its hybrid cloud transformation is complete, IBM’s focus is on delivering productivity with AI. SPM will be essential as the company evaluates and prioritizes AI use cases to understand the magnitude of investments required and get organizational alignment and transparency around ownership.
By adopting Apptio solutions, IBM has established TBM as the common discipline for improving business outcomes, overarching ITFM, FinOps, and SPM. The company is now driving continuous cost optimization through a transparent single source of truth, leveraging data-driven transparency to drive a culture of accountability across the IT and engineering teams, and fostering closer collaboration with Finance about how funds are being used (Showback vs. Chargeback vs. Direct Buy) by each business unit.
Apptio gives IBM and its clients clear visibility into the total cost of IT, enabling smarter funding decisions—such as where to reduce spend so the company can further invest in AI. It also helps leaders track investments and measure their impact, using a disciplined approach that ensures resources are used effectively.
“Apptio is the hub for our digital business operations,” Wright says.
For the next phase of IBM’s enterprise transformation, Apptio will be used to bring the same data-driven discipline used for Technology Business Management to the broader enterprise through Enterprise Business Management (EBM). While TBM helped IBM define the value of its IT initiatives, EBM provides a more comprehensive view—encompassing both the technology and non-technology elements needed to run each business function or workflow. With this insight, teams can identify opportunities to dramatically accelerate productivity and improve outcomes across the organization.
For other companies embarking on a transformation journey, Wright has this advice:
“Start small, iterate and grow. Focus on progress not perfection. Be specific on the questions you want to be able to answer through TBM. You may think of this in terms of the specific decisions you want to be able to make or the use case. For us, that started with being able to compare the difference in application cost on hybrid cloud versus our traditional models.
“Bring your teams with you on the journey. Provide TBM education and help teams understand the impact their roles have on achieving results.
Organizational change management (OCM) is an important function within the TBM program. Assigning dedicated staff to manage OCM was a critical success factor for us. Because it’s not enough to just implement changes. To be successful, you need to help your teams understand what’s changing and why, and what they need to do differently going forward.”
To explore how the IBM solutions featured in this story can support your transformation journey, contact your IBM account representative or IBM Business Partner.
