Cost transparency fuels digital transformation at Ferguson
Like most businesses today, Ferguson is working hard to embrace digital transformation without making the expensive mistakes of the past. Most IT folks and business executives remember too well the early days of enterprise software when big, monolithic applications touted great benefits but, just as often as not, failed to live up to the hype. These are not mistakes anyone in business or IT wants to make again.
Instead, the business-technology decision makers at Ferguson today are relying on data. This is not the rear-view mirror data most business intelligence solutions produce, but data that is actionable in real-time and allows them to project limitless "what-if" scenarios well into the future so they can understand the actual all-in costs of things like moving workloads and storage to the cloud.
"When I was asked to come over [from the UK] and help start the IT strategy, I had a whole bunch of questions around cost," said David Rippon, Ferguson's head of Group IT Finance. "And instead of the usual, 'We don't have that data', or 'Give us six months, nine months, then come back,' what I got was instant data out of the TBM team.
"Those numbers have gone a long way to defining what we do within the IT strategy, and will become so important moving forward. But for me, last year, that was the real first exposure I had to Apptio, and that was really powerful for me just to get clarity, to get answers, and to get good data."
Today, Ferguson is at a strategic pivot. The CEO and CIO have just introduced a new technology strategy for the organization that is going to lean heavily on cloud, modernize their ERP environment, and overhaul supply chain and order management systems for starters. The cost transparency TBM provides is helping IT meet these demands by changing the conversation from what technology costs and why to the outcomes the business wants to achieve.
"The technology objectives are the business objectives," said Carla Short, Ferguson's Senior Manager, TBM. "There are no longer any IT projects. There are business projects. So, this whole technology initiative is a business initiative, a business imperative.
"Technology is being looked at as a necessity. It's what's going to make the difference from a business perspective in terms of how we generate market share and how we improve revenue. How do we get to be a $25 billion company without technology, without IT? There's no other way to really get there."
How do we get to be a $25 billion company without technology, without IT? There's no other way to really get there.
Senior Manager, TBM, Ferguson
Funding transform with dollars from grow
To help fund this new strategy, Ferguson's TBM team is using Apptio to drive conversations with the business around things like project management, vendor management, and green-lighting (or not) new business requests for technology. Without the financial insights and cost transparency data Apptio provides, these conversations, as difficult as they are to have today, would have been nearly impossible in the past.
"We've always driven savings from run," said Rippon, "but it's based on somebody having a guess, somebody having a gut feel, or the business requiring us to lower our number. This year, because of TBM, we've been able to do it in more detail. It's still going to be challenging, but the data behind the number that we come up with is so much better."
In the 12 months since they introduced the TBM model and Apptio, the Ferguson IT team has identified $12M in savings from the 2019 IT budget to help fund business transformation, which represents a 10 percent reduction in costs.
"So, looking at that from a 50,000' level and how that trickles down, we're really shifting the mix from run, grow, and transform," Rippon said. "However, we've really squeezed a lot out of our grow, and pushing a lot of that into transforming the business, because all of these new initiatives will transform how we're going to be doing business over the next three-year roadmap."
With TBM and Apptio pointing the way with solid data and analytics around costs and allocations, this shift in run, grow, and transform mix is possible.
"TBM is where the rubber meets the road," said Short. "By using Apptio, we're able to look at how we've been performing on transform, we're able to look at our applications and see where the burden is, we're able to see what may need to be retired and things like that. We know where our TCO is."
Funding a cloud-first strategy
Part of Ferguson's strategy is adopting a "cloud-first" strategy when it comes to applications and infrastructure. Apptio allows them to effectively plan for the transition of costs from the CapEx side of the ledger to OpEx side so they can make informed decisions based on the all-in costs of cloud hosting on AWS or Azure, for example, vs. standing up a private cloud in a managed data center or for consuming browser-based productivity apps from the cloud.
"If we’re going from a CapEx environment to an OpEx environment, then we can easily do the comparisons," said Short. "If we're going to bring in a SaaS model, then we clearly know what our ROI is. We can understand the benefit of switching by looking in Apptio because now we know what the infrastructure costs are and we know what the human resource costs are."
As for all those business unit requests for new services, it may be a while.
"With our new strategic initiative and what we want to focus on, we have to get the business to stop asking for everything under the sun," said Short. "And so, as a company, we made a strategic decision to only focus on the new strategic direction for the company. Only those things that fit within the scope of the new strategic direction of the company will get approved."
Cost transparency can cut both ways. Line of business leaders are now using Apptio data to build strategically-aligned business cases for the technology and services they either want, or want to keep. Ferguson's Enterprise Information Management director, for example, recently used Apptio data to create a monthly estimate of all-in costs for operating platforms so they could compare those costs against moving to the cloud in 2019. Traditionally, he would have had to use whatever number the infrastructure people gave him for planning. This year, Apptio gave him the ability to objectively obtain that information on his own.
Changing the conversation
One of the most important benefits TBM is bringing to Ferguson is the ability to change the conversation from cost to value. Because of cost transparency, line of business leaders can finally see what their all-in costs are for a given technology, application, or service. This visibility into all the costs of providing a service or application—infrastructure, support, networking, compute, device, storage, licensing costs, etc.—lets them, often for the first time, answer the question, "Why does IT costs so much?" This dynamic is alive and well at Ferguson.
"With TBM and Apptio, instead of an accountant sending monthly spreadsheets with the actuals, the budget and the variance data, now everyone can go in into Apptio any day of the month and pull the data, and they can pull the historical data," said Natalia Guley, a finance manager in Ferguson's TBM office.
"There's no more spreadsheets. We have great tables and charts, and there's a drill-through functionality where you can view journal line details. Now, everything’s on one screen and it's easy to navigate. It was all about transparency, so we gave access to everyone, so everyone can build around data. And that definitely started some conversations around the numbers, which was good."
"TBM has changed the conversation around financials into actuals," said Rippon, "and enabled us to make data-driven decisions. The financial transparency has been a big win for us."
TBM has changed the conversation around financials into actuals and enabled us to make data-driven decisions. The financial transparency has been a big win for us.
Head of Group IT Finance, Ferguson