Hitting a TBM triple for better, more innovative and trusted IT
When CoBank's IT organization adopted TBM and Apptio in third quarter 2017, they had three goals: run IT like a business, free up dollars for innovation, and become a trusted partner to the business. Just 10 months after becoming operational, they are well on their way to achieving all three.
"As we embarked on our TBM journey last year, we did not anticipate the positive impact this new capability would create," said CoBank's CIO, Eileen Baines. "Had we not started this, we would not be in a position to respond to the business, to our customers, and even to our board of directors in terms of what they are looking for from IT—transparency, business strategy enablement, and really having a strong partnership and strategic dialogue with the business."
Like most industries today, technology is changing just about everything in the banking world, from how CoBank interacts with existing customers to how they attract new ones and, as a result, how they run their IT operations. Their customers are no different than customers everywhere: they want products and services delivered where they want, when they want.
"It’s about the customer experience," Baines said. "It’s about digital transformation. But it's also about the pace of change in the marketplace. What our business partners are seeing from our customers is a much more complex business environment. And that's driven by technology, competitive forces, market forces, economic forces—all of those things. To remain nimble, competitive, and relevant, IT has to provide scalable solutions and respond very quickly to changing customer needs and expectations."
To remain nimble, competitive, and relevant, IT has to provide scalable solutions and respond very quickly to changing customer needs and expectations.
Running IT like a business
Regardless of the industry or the speed-of-change, IT needs to justify its budget and to spend wisely on technologies that will move the organization's mission forward. To achieve these two things simultaneously requires cost transparency. Despite forecasting IT spend, organizations often don’t know where the money is actually being spent, which makes it challenging for many to get the ROI they want, and expect, from their IT investments.
Take budget planning. The lack of visibility into actuals can lead to inflated cost estimates and coming in under budget. On the surface, this may sound like a good thing, but in reality, this means millions are parked in IT's budget, doing no work and producing no ROI—not an easy thing for a CIO to explain to a boardroom full of bankers.
"As a financial analyst, I believe that coming in drastically under [budget] is no better than coming in over budget as it reflects poor planning," said Tara Marquis, CoBank's TBM manager. "Prior to adopting ITFMF [Apptio IT Financial Management Foundation], we did not forecast. We had our annual budget approved and then reported monthly variances against an annualized budget which was 6–12 months old. As you can imagine, it was quickly irrelevant and our variance explanations were not as meaningful as they could be.
"What we're seeing with ITFMF is the ability to forecast where we're going to be at the end of the year and to offer up that transparency to our controllers group and our CIO, which lets them make better decisions about what to do with a favorable variance. This is something new, something that we haven't been able to do before."
With Apptio's ITFMF module, cost center owners can easily explain variances and correct errors in cost allocation. For example, $400,000 in IT spending was manually coded incorrectly to an OpEx account. Tracking down that error took significant time. With Apptio, the cost center owner was able to immediately identify the error and move the cost to a CapEx account. This enabled the bank to depreciate the cost over three years rather than taking a $400,000 expense.
Using “run-the-bank” funds to transform
Compared to a $100M IT budget, $400,000 may seem insignificant. But these types of insights add up and are helping to lower IT's overall budget as a percentage of revenue while freeing up much-needed funds for innovation—basically funding “transform-the-bank” innovation with “run-the-bank” dollars.
TBM allows CoBank's IT finance team to put a check mark next to all three of its initial goals: run IT like a business, free up dollars for innovation and become a trusted partner to the business. Any one of these goals is achievable on its own but when you do the first one well, the others will follow. And this makes TBM more than just another accounting tool, it makes TBM a valuable strategic tool.
"Now that I have visibility, I can make more informed recommendations to my business partners like, 'Yes, we should invest,' or, 'Maybe we shouldn't,' or, 'Maybe we wait until next year,'” said Luke Massey, CoBank's vice president of IT. "I have total transparency into everything that hits my cost center from an actuals standpoint. I control how I forecast where I think my spend's going to be. Whether I'm over or under, I can adjust that forecast at any time.
"The simple fact that there's transparency in the spend for my organization is a huge leap forward from where we were. There's no reason that the people who are running the largest budget in the entire organization, IT, shouldn't have transparency into those financials."
There's no reason that the people who are running the largest budget in the entire organization, IT, shouldn't have transparency into those financials.
VP IT, CoBank
12 weeks to go from constrained to visionary
Using technology strategically is the goal of many organizations today. To accomplish this, IT needs not only more transparency into the organization's technology spend, but also data-driven insights to change how the business and IT interact. Without changing the conversation about IT's budget from the cost of technology to the value it brings to the organization, IT can be powerless to describe and defend the ROI of their spend.
"It's about getting to that next level of transparency so we're not talking about the entire IT budget as one lump sum and in one cost center," said Baines. "We are now talking about run-the-bank versus transform-the-bank investments. And, as we talk about business value and business alignment, it's about communicating the business value that our partners expect from run-the-bank and transform-the-bank. If our business partners aren’t getting the value, we now have conversations about how to dial down consumption of run-the-bank to increase allocations to transformational initiatives."
These interactions are driven by the ability of stakeholders to immediately see the same numbers in real-time. At CoBank, gone are the days of searching multiple spreadsheets for data that nobody could agree upon.
"It took just 12 weeks to go from constrained to visionary," said Marquis. "Now we have a single point of collaboration, everybody's looking at the same numbers and we are not building complex budgets in a spreadsheet anymore. They're able to go right into the tool and quickly see what their actuals were for the previous month. We can review spend and open the forecast within days."
TBM provides the foundation for a new services catalog
This new level of cost transparency and visibility is empowering CoBank to rethink IT from the inside-out, instead of the outside-in, and the result is that IT is becoming more business-like and business-friendly. To further this goal, IT is using the insights provided by TBM to develop a new IT service catalog and CMDB.
CoBank is using the TBM taxonomy and the ATUM® model as the foundation for their new IT services catalog. The TBM taxonomy allows IT to develop common, agreed-upon definitions of services, while the ATUM model allows them to accurately map the costs of consumption from the correct cost centers all the way up to the business units consuming the services.
"It's difficult to be business-aligned if you're not able to show how IT spend and IT costs are aligning with business priorities," said Baines. "For us, it’s about running IT like a business and shifting IT to be very business-aligned. My team and I wouldn't have been able to do that without the transparency that Apptio provides."