I’m sure we’ve all heard these questions before:
“Why is IT so expensive?”
“What can I do to reduce my technology costs?”
“Is my IT spend aligned with my strategic objectives?”
“Why can’t I get more to spend on innovation that will drive more revenue?”
“Is our technology spend normal?”
At Great-West Life, these pointed questions and our need to answer them in clear, business-centric language defined our need for cost transparency.
Bridging the gap
In the past, our attempt to provide cost transparency to business partners was limited to a chargeback system designed to share mainframe and staff costs across a single corporate entity. But as our business evolved to encompass multiple companies and legal entities, so did the cost reporting needs of both our Information Systems (I.S.) division and business partners.
Essentially, we had a “black box” of IT costs driving a single rate that was applied across our multiple Canadian companies. However, there was no insight into what made up that rate, the true consumption of services, and the levers that the businesses could pull to change their technology spend.
We needed a way to address the added complexity of our business and help drive informed decision making through insights into technology spending. This led us to embark on a journey to revamp our I.S. chargeback model and in turn, enhance the tracking, reporting, and accountability of both resources and expenses.
»Related content: How to successfully implement chargeback and run IT like a business
Putting the customer at the center of every decision
From the beginning, we sought to put our stakeholders and business partners at the center of every decision. With this philosophy as our guiding light, we engaged stakeholders early by establishing steering and working committees that allowed us to hear and incorporate their different views and needs. We were also fortunate to have high levels of engagement from our executive sponsors, who helped drive discussions at the senior management level.
Early on, we reached out to our business partners to determine both current state challenges and future state needs. Our goal was to gain deep insights into the “Voice of the Customer.” Some of the main challenges identified were:
- General – Rate and chargeback processes were not well understood and expense planning focused more on supply than demand, hindering the technology teams’ ability to operate as an effective business partner.
- Accountability – While expense accountability at the account/cost center level was well established, management of capacity was not well correlated to demand on most infrastructure platforms.
- Methodology – Chargeback methodology was not well understood and did not provide insights into Total Cost of Ownership by applications to focus management of I.S. expenses based on business needs leading to limited decision making.
- Granularity – Reports were not detailed enough to facilitate an effective business-focused dialogue.
- Reporting and processes – Significant effort was required to produce reports. Reports often did not meet the needs of showing efficiency and effectiveness for I.S. and were not tailored to specific stakeholder types. Limited integration between systems also created inconsistent reporting.
Aligning to business needs
The insight we gained into the challenges facing our business partners helped establish clear objectives for our future state. We focused on several key goals:
- Enable the business and I.S. with the cost and consumption information required to make informed decisions by deploying a new chargeback model and supporting financial system for I.S.
- Implement a chargeback system, inclusive of technology and processes, which when complete will produce reliable unit costs and service rates; produce charges for IT services in a consistent and transparent way; provide analytical models and reporting to support forecasting net cost increases or decreases to lines of business requesting changes to services; and establish a governance strategy to institutionalize/operationalize the changes.
Choosing the right tools
Based on our initial assessment and objectives, we needed a tool to help us consolidate and ingest the data input files, run the information, calculate the service rates and chargeback amounts, and provide dynamic, timely reporting. We also wanted a tool that could assist and improve our annual budgeting process.
For an interim state of about a year, we ran a proof of concept model designed to demonstrate how charges would change well in advance of implementing a new chargeback system. This was greatly beneficial in helping stakeholders understand what to expect from a new system, build buy-in, and further refine their requirements.
The proof of concept used an SQL database to perform costing and chargeback functions, as well as generate additional spreadsheets and PowerPoints used to conduct quarterly showback presentations with our business consumers and IT tower and service owners. While it was effective in demonstrating the changes that would occur, the tool proved to be time-consuming, inefficient and reactive – it took approximately 2 weeks to run the model and prepare all relevant materials.
Because budgeting was also done manually on spreadsheets, individuals were unable to view their full cost of budgeting until it was rolled up in SAP. This did not allow for enough time to implement any necessary changes.
After an assessment of available alternatives and the proof of concept, it was determined that the best path forward to meet the needs of our business consumer was to adopt Apptio’s TBM apps.
Training makes or breaks your program
Apptio’s TBM tools gave us new power to greatly improve our chargeback model. But training also proved critical. We had to ensure that I.S. leaders, financial staff and business leaders were equipped with the knowledge and skills needed to leverage the power of the TBM solution.
Ahead of our initial rollout, we held training sessions tailored to each stakeholder’s needs related to the TBM solution modules. This was followed by a required refresher training, accompanied by detailed General Navigation and Specific Use Case Navigation Training. Sessions were led by in-house certified TBMA’s who had hands-on knowledge of TBM as well as the solution.
Upon completion of those initial sessions, surveys were conducted to gauge their effectiveness and improve them going forward. Subsequent “Ask your TBMA” sessions were conducted for all stakeholders. I.S. Financial Management employees were also designated as IT Financial Management Consultants and were assigned to IT tower and service owners to provide a more hands-on, centralized approach.
We also implemented a robust framework for engaging and sharing information with stakeholders, including:
- a centralized mailbox to handle questions, training requests, new service or tower development, solution issues, and reporting enhancement requests.
- a communications portal that housed all information related to our new costing and chargeback framework, including budget and BAU training materials, governance use cases, framework information, points of contact, and FAQs.
- a business relationship management office to act as the liaison between the I.S. service owners and business partners, using a common language to understand IT costs and consumption and allowing for enhanced insights to cost drivers, levers, and choices.
The ongoing power of stakeholder engagement
Our detailed framework for stakeholder communication and engagement not only allowed us to develop a TBM solution that met business needs, but also to continue adapting and evolving the model after launch.
Our training sessions have been successful thanks to a commitment to continuously evolve our program and communicate with our stakeholders. Training sessions were recorded for online accessibility, and we continue to conduct an annual refresher training ahead of the kick-off our budget season. We also continue to hold open question forums and utilize our centralized mailbox to gain feedback and guide future development.
Additionally, as part of our monthly communications, we include any new or enhanced reporting that has been developed, accompanied with instructions on how to use it. The Business Relationship Management Office has also grown to include product specialists. This allows us to take a more detailed focus on specific services being delivered.
We continue to have highly engaged stakeholders who have embraced the TBM solution and are actively using this information to make strategic business decisions about how a service is provided or consumed. Today, we speak about our I.S. services as more than just a commodity—we focus on ensuring business value is obtained and demonstrating clear, actionable opportunities for improvement.
Empowering IT to deliver business value
With the implementation of Apptio’s TBM tools, our I.S. service owners are better equipped to manage both their services and the relationship with business consumers. We’ve seen improvements in how we:
- Manage the business side of their services. Our governance model provides service owners the ownership of rate development and adjustment as required to deliver their services. Service rates and measured units of consumption are developed and approved by our service owners.
- Manage service costs (total and per unit). Service owners sponsor all work within their domain and are responsible for the lifecycle of their services. This provides them the ability to manage their costs, which drive service rates.
- Shape demand and consumption. Service owners help shape demand and consumption through service enhancements and development of new services to meet upcoming demand, and they leverage opportunities to adjust and modify rates to help manage consumption. An example of this practice is our database domain’s ability to modify service rates to ensure architectures do not bend based on costs alone but rather on architectures best suited for an application.
- Measure quality and value. Service owners measure quality and value over time and we are currently evolving our practices to be fully functional at this capability.
Development of our Business Relationship Management office has allowed for an increasingly open dialogue between service owners and their business partners about service quality, including enhancements, features, and problem resolution. Our team also:
- Developed a repository for service catalogs to describe our services in business-friendly terms including costs, features, service expectations, cost buildup and rate changes year-over-year, levers that can be pulled by consumers to reduce consumption or cost, and fulfillment information.
- Led discussions with business units on cost and service opportunities, including application turndown, in-year and next-year cost savings, new service development for an augmented database solution, and mainframe cost comparison of internal charges to a cloud-based solution.
- Worked with service owners and business units on augmentation to allow for cost modeling of applications based on what-if scenarios including consumption changes and stranded costs.
Our ability to evolve our systems and offer new reports based on stakeholder feedback is encouraging from both an engagement perspective and the enhanced value the business receives. It is allowing us to see information that was never readily available before and to use that information to make better decisions.
Tips and tricks to engage your stakeholders
- Recognize your stakeholders as key players in the TBM journey and get their feedback early. Understand their different needs and tailor your solution to fit.
- Demonstrate the benefits and build buy-in with stakeholders before launching. Stakeholders may not always be happy with the changes in their costs; however, it is critical to have their buy-in on the principles and what success looks like well ahead of providing them with a different Bill of IT.
- Identify change champions on both the technology and business partner side of the equation.
- Do not underestimate the importance of hands-on training.
- Communication is key. Tell them, show them, tell them again, and then remind them as time goes on.
- Demonstrate your original starting point and showcase your evolution throughout the TBM journey.
- Be as transparent as possible.
- Leverage executive sponsorship to champion TBM at the senior management table.
- Establish a TBM office that brings together both financial and technical individuals, as both are required to be successful.
- Do not underestimate the planning that is required for institutionalizing process changes.
As Assistant Manager in Information Management Systems at Great-West Life, Kelly Copp leads development and delivery of training for stakeholder groups in Canada, the US, and Europe (among many other things). She also just received her Elite TBMA certification so don't be shy about giving her a shout out below. Woot woot!
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