Pearson is using TBM and Apptio to bring financial clarity and insight to its cloud billing so the company can kick its digital transformation strategy into high gear.
For the last 150 years, Pearson has been at the forefront of helping people learn. With operations in 70 countries, Pearson's 35,000 employees serve over 75 million learners from kindergarteners learning their ABCs to professionals engaging in ongoing development and training. Meeting the needs of such a diverse group of learners requires a lot of flexibility in how the company architects and provides its services. That is why Pearson has gone all-in on cloud and digital transformation.
"Digital is impacting every part of the organization," said Sunil Anand, director of Pearson's TBM office. "And, specifically within technology, it's having profound impacts. It's really driving simplification in the way in which we build and run technology. It's driving a common platform strategy where we're moving to single ERP instances, single CRM, a single content and authoring platform … we're moving to software-as-a-service, infrastructure-as-a-service, platform-as-a-service, network-as-a-service. And it's really driving our cloud-first strategy."
Pearson has three core strategic priorities: grow market share through digital transformation; invest in structural growth opportunities; and simplify the organization so they can reduce costs, become more efficient, and increase scalability and the speed of innovation.
"We're driving a digital-first approach and that's really driving our innovation and also our product investment," said Anand. "A great example of that is our global learning platform, which really showcases our ability to deliver highly-personalized experiences across all of our products and services."
Like most companies of Pearson's size, cloud has become a go-to resource for expanding their technology footprint without investing millions of dollars in infrastructure, applications, and the people they would need to run and maintain it. And, like most companies that receive large cloud bills every month, they were at a loss to decipher them.
This was undermining the very reason for going to the cloud in the first place, which was cost savings and business agility. Without the ability to link their cloud cost to the business units and services that were driving them, Pearson's IT department could not see how cloud spending in one area could impact another. This was leading to an all-too-familiar credibility gap with the business.
"Our spend in the cloud has been growing exponentially," said Anand. "Our finance and accounting process is extremely complex. The business lacked transparency. We had huge inaccuracies and we really didn't have a tool set that could help us drive cloud cost optimization. And that was one of our biggest issues."
When Pearson started with TBM and Apptio in 2017, understanding the costs of running over 3,000 applications and systems was difficult. Spreadsheets weren't cutting it so they began to search for a tool with which they could automate the process. That is when they came across Apptio.
"Apptio [Cloudability] is really driving cloud cost transparency across the business," said Anand. "It's enabling the business to make key decisions in driving optimization. And that didn't exist before. We've also been able to improve the type of conversation we have with the business. Now we're having a much more sensible optimization-focused conversation with the business rather than getting beaten up because we can't explain AWS costs. So we've really taken a massive stride forward."
One of the main challenges with cloud billing is a lack of detail regarding who is driving consumption. Lines of business owners were receiving bills with just a single number on them. With no visibility into costs, business and service owners were more than skeptical when it came to the amounts they owed.
"So what we've done … is basically take the accounting solution from a spreadsheet that was not detailed at all and move that into Apptio," said Andrew Sheridan, one Pearson's TBM leads. "We did run across some very technical challenges in that, more specifically around our reserved instances and our internal products that we also re-charge out to our business."
Of those two, the biggest challenge was reserved instances (RIs). Pearson doesn't capitalize the cost directly from AWS. They account for the discount that AWS gives for buying RIs (RIs are term contracts to purchase a set amount of cloud over a given period of time. In exchange, AWS gives customers a steep discount.). Support charges are also part of those RIs. So, instead of getting one cost from Amazon, they had to take several costs, put them together, and then create an adjustment every month to the final cost.
Work was also done on RI conversions to ensure that the correct value of the RI was transferred from period to period instead of using the gross value supplied by their cloud provider. Because there is no cost when an RI is converted and no audit trail, this was no simple task. Assumptions had to be built into CCM to show which RIs finished and started within the same period and the cost calculated for each.
"So being able to implement those through Apptio [Cloudability] instead of on a spreadsheet has meant that the business, they still get the number each month, but they are actually able to see the detail behind that number—what products are driving that charges, what environments driving that charges, what applications are driving those charges—instead of just one number that they were receiving previously," said Sheridan.
They also have combined Apptio's Cost Transparency and CCM modules to develop what they believe is the world's first cloud RI balance sheet and P&L value calculator. This has had a major impact on overall spend: reducing month-on-month costs by a median of 7.5 percent.
"That's a huge achievement," said Anand. "We fully automated our accounting process and that's reduced cost and created huge amount of efficiency in the speed and accuracy of our AWS accounting."
A balance sheet position is now also possible at the end of each month which can be reconciled back to the financial ledger along with reports driving the journals posted by finance each month. The alignment this creates between business and finance drives costs down and efficiency up. And everyone has a single reliable source of data that matches their monthly numbers.
These insights also have completely changed the conversation with the business. Instead of arguing over numbers and data, line of business owners can now see how their demands for technology, both past and present, are driving IT's costs.
"You know, it's definitely fostered a much stronger working relationship because everybody has the same level of transparency, granularity," said Sheridan. "So, by implementing this solution, it has fundamentally changed the conversation that we're now having with the business … to drive cost optimization."
Moving forward, Anand is excited about the possibilities TBM and Apptio will afford Pearson. With the ability to finally clearly see and articulate the cost of cloud, their digital transformation efforts can kick into high-gear, helping them serve more learners than ever before.
"Pearson is the world's learning company," said Anand. "We have a very straightforward and simple mission and that is to help people make progress in their lives through learning. For Pearson, digital transformation is our number one strategic priority. You know, it informs everything we're doing across the business and certainly in technology.
"And through Apptio and the power of insights, it's really helping us achieve one of our biggest ambitions in cloud. And that is to become top quartile in the way in which we run and manage our cloud environments."