Like most companies, Morgan Stanley has spent the better part of the last decade trying to justify the high cost of IT to the business. But it wasn't until they formally adopted the TBM taxonomy, developed application total cost of ownership (TCO) and cost transparency tools, and implemented Apptio's planning solutions that IT costs really crystallized.
"In terms of our cost transparency, it's a discipline that we've built over the best part of a decade," said Tas Sarwar, Executive Director of Morgan Stanley's TBM Data & Analytics team. "And honestly, it began like everybody else's journey which is, 'I've got this IT spend, and I have no understanding what is in it. It's a black box.'"
Prior to adopting TBM and Apptio, allocating expenses for things like infrastructure back to the business was difficult. Those costs were tagged to a long list of different products, services, and applications. This made the use of information to optimize technology costs difficult. For example, when matching a service to the most affordable infrastructure or when affecting business demand for new technology, Morgan Stanley could not explain to the business how much of their consumption was tied to a given cost pool, like labor, compute, or storage. Also, their allocation methodologies were very complex and, in some cases, outdated.
"It led to a very challenging landscape that we were working in," said Najib Shah, Business Technology Officer (BTO) Finance Lead, who acts as the business relationship manager for the TBM office. "Since TBM, it's been really transformational. We have a set of products and services that we understand. There's a product catalog we can click in to, to understand exactly what makes up those products. We can also see who the product managers are and the costs of those particular cost pools."
Cost optimization starts with demand
Of all of the cost drivers that IT must grapple with, demand is perhaps the most important to manage. Demand for technology, applications, and IT services drives every other IT expense. And, since Morgan Stanley depends on its IT department for all technology, providing business leaders with the insights they need to make better technology choices is key to making TBM work.
"The conversations that we're having now include, 'Well, what's the TCO look like for both internal and external IT? What are the levers that folks can control in terms of their consumption?’” said Shah. "And how can we use the tools that we have in place, namely Apptio, to effectively forecast and project what our spend is going to look like?"
Because Morgan Stanley's TBM office captures infrastructure consumption at the application and project levels, they are better able to ration CapEx according to individual lines of business demand. This, in turn, allows them to convey to line-of-business leaders how much they can spend on servers and storage. It also helps IT explain the TCO impact of those decisions so they can explore alternative, lower-cost solutions. Before TBM, capital investments were treated on a first-come, first-served basis with no proactive strategic planning.
Today, instead of wrangling about costs, conversations are centered on the business value of the technologies under consideration—leading to more trust and honest conversations around infrastructure spending. This empowers the business to prioritize their demands. Morgan Stanley’s TBM office also conducts monthly bill of IT reviews to help the lines of business understand their technology charges, explain opportunities and optimization options, and highlight consumption of each application and service.
"Our internal clients are looking to the TBM team to provide them that level of detail," said Sarwar. "So, it's not just linking costs together. It's lifecycle. Now you're having very good conversations with the business around what the plan looks like, right? It's no longer this gray zone. You now have detailed transparency and insights."
Morgan Stanley's TBM office is also using TBM and Apptio to drive efficiencies in two other areas: workforce and labor optimization (this includes costs associated with where people work and staff augmentation, full-time employees, and outsourcing) and vendor expense management.
The results speak for themselves. Over the last six years, Morgan Stanley's IT finance teams have realized significant multi-year savings from IT's infrastructure bill. Of that total, 43% of savings came from footprint consolidation (e.g., data center program, mainframe optimization, etc.), another 43% came from sourcing and vendor contracts efficiencies, and the rest was attributable to labor workforce efficiencies and assets life-cycle management optimization.
"We've been able to project through demand management in the Apptio toolset anything we want to take out or discontinue going forward," said Shah. "But also, through a series of reporting that we now get from the TBM team, we're also able to drill in on certain applications, look at their consumption of infrastructure, and then work with the team around the options that we have to optimize our footprint."
Using chargeback, the bill of IT, and consumption to drive cloud adoption
Controlling consumption of IT's services is made easier, in most cases, by implementing chargeback. The trick is being able to defend TBM's bill of IT back to the business. With the cost transparency provided by TBM and Apptio, what was once a long, difficult, and inaccurate process, is now open and easily understood by everyone. Cost transparency also has the added benefit of driving behavior. As Morgan Stanley journeys to the cloud, they are using chargeback and a bill of IT to do this in a very specific way.
"When you're dealing with cloud," said Shah, "it straddles the entire organization. So, it's not just a financial conversation. It's making sure that you have representation from every kind of key stakeholder when you're building towards cloud adoption."
Morgan Stanley maintains a private cloud, but they are looking at public cloud and using Apptio and cost as a baseline to understand which workloads are best suited to run on a public cloud. The goal is to provide a bill of IT that doesn't just list public or private cloud as an expense but can support the rationale for where workloads are being run.
"One of the things that differentiates us from many technology business management organizations is something that we did very proactively as we were thinking about how our clients were going to see chargeback," said Anna Gitelman, Managing Director of the TBM team. "They shouldn't necessarily care if costs are coming from public cloud, private cloud, or any kind of an internal, on-prem infrastructure. They want to see the bill that reflects the most optimized infrastructure environment."
To do this, they created a total unit of compute defined by the number of cores and RAM usage as a pricing methodology to obscure the underlying infrastructure. The TBM office, along with Morgan Stanley's infrastructure team, recommends optimized placements based on compute requirements to minimize cost and maximize benefits. Further, the TBM office uses the Business Insights module in Apptio to recommend product pricing to incentivize adoption and project true cost of ownership to the firm.
In the next iteration, the TBM office is working with the business’ cloud working groups and will leverage this compute number along with business insights to model different combinations of infrastructure to optimize it for a given workload. For example, instead of a line item for public cloud in a client bill, the client will see their compute expense as the units of cores and RAM they have consumed.
"We're in the beginning stages of public cloud adoption at this point, and we're exploring what makes the most sense across the board," said Pamela Compton, Program Manager. "So, we're meeting with different groups across the organization and figuring out, from a cost perspective, what scenarios will work for the organization as a whole."
Shifting dollars and priorities from Run to Change
The upside of all of this cost transparency is the ability to move more money from run-the-business (RTB) into change-the-business (CTB) activities. In an industry as fluid as financial services today, keeping pace with customer expectations, both internal and external, is a business imperative. Cloud is just one aspect of this dynamic.
"I think there's a compelling transformation story here," said Shah. "We're operating in a very large-scale environment here in a global investment bank. It's very challenging. It's dynamic. What TBM has managed to do is bring us to a point where we're all operating as part of a mutual partnership.
We're operating in a very large-scale environment here. It's very challenging. It's dynamic. What TBM has managed to do is bring us to a point where we're all operating as part of a mutual partnership. Najib Shah Business Technology Officer (BTO) Finance Lead, Morgan Stanley
“We're going through this in a structured, methodical way. And where we find opportunities, we're actually executing on those opportunities together with the application development and business stakeholder. We continue to reinvest efficiencies derived from RTB/IT optimization into value-adding and transformation CTB initiatives.”
»Read next on Emerge: