Prior to implementing Apptio and TBM, HERE Technology struggled to link IT spending to business outcomes. Now, though the implementation of Apptio Cost Transparency and Cloudability, all that has changed.
For most organizations today, IT spend is still a black box. Money goes in but, due to the complexity of connecting a particular technology to a certain business benefit, measuring the value of what comes out is difficult, if not impossible.
Up until 2016, this was the challenge facing HERE Technologies, as well. Like many IT organizations, HERE IT was tracking its IT spend using assumption-based models built in Excel. Data quality and reporting was poor and inconsistent, leading to inaccurate forecasts and large unexplainable variances.
As a leading global provider of location and mapping technology to some of the world's most recognizable automotive and location-services brands, the time and money HERE IT spends on application development and product support is crucial to the company's continued success. Understanding how this money translated into bottom-line dollars proved elusive.
"By 2016, it was clear we did not have a good way to allocate our cost and track our TCO [total cost of ownership] for products," said Bala Kini, a senior business planning manager who leads HERE's TBM office. "Initially, it was an Excel based; very customized and cumbersome model to maintain. It was impossible. Our first attempt at using Apptio was to just transfer this Excel model. It was a good proof of concept. It helped us understand the limitations and what kind of data we needed to earn the credibility of our business partners."
As a global cooperation, HERE faces additional challenges tracking and allocating vendor spend across geographically dispersed regions and divisions. The ability to prevent overlap, uneven pricing, and sunset unneeded contacts can save millions while freeing up much needed capital for innovation.
“Because of the data insights that we gained from Apptio, we can identify vendor spend and make sure it’s categorized right," said Kini. "It was an entire workflow cleanup, right from creating a purchase requisition all the way to invoicing. It became a one stop shop to help us identify what the vendor spend is across various services and across various teams.”
Legacy gives way to innovation
Founded in the 1980s, HERE IT supports many legacy applications and platforms that are nearing the end of their usefulness. As IT moves to embrace digital transformation, understanding which applications are mission critical, important, somewhat useful, or need decommissioning is essential to cutting costs in order to shift that spend to newer, more productive and flexible technology. Successful application rationalization is another way HERE is leveraging their TBM capacity to stay competitive in today’s digital landscape.
"It has been an eye-opener to understand what the total cost of ownership is to run these legacy apps, match it against revenue and see if it's still economically viable to be running these," said Kini. "This effort has triggered application rationalization efforts to optimize costs and also optimize the range of platforms in which our services are offered. "
By leveraging the insights provided by TBM, Kini and her team were able to provide technology spending reports to each department that accurately reflected the true cost of the technology they consumed. The clarity these reports provided finally began to alleviate the ambiguity around IT's numbers, while providing better oversight of HERE’s IT spend. This allowed line of business managers and the C-suite to focus on future business outcomes rather than past spending.
"Earlier on, when it was … just a model with large assumptions, our numbers did not earn us the credibility with our customers," said Kini. "Now that we have a standardized process and they can look at historical numbers as well as current and everything is documented and the allocation method is well defined, we have the credibility and it just happens like magic month after month."
HERE first rolled out Apptio’s Cost Transparency and Cloudability modules in 2016 with the intention of solidifying the organization and workability of their IT data. Doing so gave them the insights they needed to begin linking costs to the business units, services, and applications that were driving them. Infrastructure usage, application development hours, services consumed, and many other metrics are now being traced from their respective cost centers all the way through IT to the end users and consumers driving those costs. They also developed highly-accurate unit costing for things like Tier 1 storage and cloud compute cycles that would power IT finance's showback model.
"We were a small team of three dedicated people in the TBM office and our first deliverable came in an aggressive time frame of five months," said Kohsheen Sapru, a lead TBM implementer. "And once we did that, that was when business started realizing that there is a lot of potential in what we are doing because, until now, we had all assumption-based data. Once we started bringing in consumption data …that brought more visibility and more transparency into how we showback our cost to the business."
A few bumps in the road
It was not all smooth sailing, of course. The data sets Kini and Sapru started out with were unorganized, unruly, and needed to be refined. So they worked with the business units to understand what metrics mattered to them, where that data would come from, and how to improve its accuracy and timeliness. The end result is 95 percent of their Apptio reports are customized for each business unit, the benefits of which have a large ripple effect.
"Data is a problem to start with, as in the case with most of the companies," said Sapru. "But then the key is to not give up because highlighting the gaps in the data makes the service owners accountable to fix those gaps. And then the end user starts realizing the potential that a TBM can provide. And that's where the power came in. We added value, getting IT, the corporate finance [people] and the business speaking the right language. That was a big win for us."
Breaking down barriers
TBM helped HERE re-imagine IT by becoming the driving force for interdepartmental transformation. IT, Finance, and the boardroom are now aligning their previously separate focus, working closely together, and speaking a common language.
Another big win for HERE IT was being able to get their P&L reporting for product lines updated quickly after switching to the International Financial Reporting Standards (IFRS). Using Apptio and TBM, they have segmented direct and indirect cost from shared components and, using IFRS tags, rolled those costs up into P&Ls for each product. This shifts costs from IT to the respective business units.
"In terms of the customers, our biggest win came from when we started delivering the IFRS compliant P&L reports because that was a case where they could look at the products and then make those informed decisions about the return on investment on those products, whether to invest more in those products or sunset those products," said Sapru.
Other wins include:
- Reducing business unit technology spend by 16 percent in the first nine months
- Reducing vendor spend by 15 percent
- Correcting $20M of previously mis-allocated vendor spend
- Decreasing unmapped product costs from 20 percent in 2018 to just seven percent in 2019
- Allocating 100 percent of storage costs to products (up from 30 percent in 2017)
- Re-categorizing cloud spend through infrastructure
- Using infrastructure reports to decrease data center footprint as they transition to cloud
- Understanding and clarifying unit costs for storage
- Assisting finance with budgets and forecasts
A data-driven future
Despite their numerous accomplishments to date, Kini and her team are just getting started. In additional to continuing with their application rationalization work, continuing to improve their data, and shifting spending from running-the-business to growing-the-business, their next venture will be to create an IT service catalog with pricing that is based on real-world data, not assumptions. This will help them transition from showback to chargeback.
"The TBM insights that we have gained from this effort, from this journey, include optimizing and correcting our workflow: from purchase requisitions all the way to invoicing to make sure expenses and vendor spend as captured correctly, as well as invoiced correctly, said Kini.
"In addition to that, the big win across the board has been facilitating accurate P&L reporting. This has also been a big one with our customers and business units since they are able to see why the numbers are what they are, they see their consumption data, they're able to see their application portfolio, which they directly manage and control and they can understand what drives their costs from our organization. Application rationalization efforts have been triggered thanks to this effort. And we are also looking to enhance our future strategies to decide in house versus outsource. [TBM has] provided us a very stable and strong foundation for this entire journey."