Typically, when people think of digital transformation, the insurance industry is not the first to come to mind. Be that as it may, the truth is they are rapidly embracing digitalization in order to keep pace with the changing demographics of their customer base. And this is driving accountability within IT to new levels.
"Insurance is beginning to undergo a generational shift," said TMNA Services CIO Bob Pick. "The new generation wants information when they want it, where they want it, on any device. This has really begun to push us into technology digitalization efforts, to help us get faster to market with new products, information, claims responses, quotes, and those sorts of things."
Today, that requires technology. Lots of it. And technology costs money. Lots of it. To support the three distinct business units that make up the company, TMNA Services’ IT, part of a shared services company supporting Tokio Marine North America companies, consumes 67 percent of the combined shared service company's entire budget. This structure also means IT effectively operates like a stand-alone business unit. Until they embraced TBM and Apptio, accounting for all this money in any meaningful way "was just a nightmare in general," said Christina Pastella, Senior IT Finance Manager.
“Our budget cycle ends in August," she continued. "Previously, we found ourselves in January and February through April of the following year still defending our budget and our cost allocations to the companies we serve. Year-over-year, we could not answer basic questions about controlling IT costs and bringing them down. Also, not only do we serve three business units but we were a business unit ourselves, one that didn’t fully understand our own run costs. That was becoming difficult for us.”
From spreadsheets to cost transparency in just 16 weeks
It wasn't for lack of trying. TMNA Service’s IT finance team would diligently pull together data and build allocation models in spreadsheets only to see them unravel due to an unaccounted-for exception, poor data quality, or data entry errors. With TBM and Apptio, that quickly changed. According to TMNA Services, IT finance went from spreadsheets and "gut checks" to full cost transparency in just 16 weeks. They looped in IT planning two weeks later, had end users in the budget 20 days after implementation started, and delivered the 2018 budget a month early. They also had a functional bill of IT rolling out to their business units in just four weeks.
Why so fast?
Everyone wanted change. TBM was the way to do it.
Senior IT Finance Manager, TMNA Services
Fast forward 18 months to today and TMNA Services’ relationship with the business has been transformed. Because of cost transparency that shows the true, all-in costs of what it takes to provide the businesses technology, the business no longer demands that IT defend its budget. Instead, they come asking for help.
"We would try to help businesses understand what was driving their IT costs and there was always push-back: 'It can't possibly cost that much. You need to do something about that and make it cost less.' There was no real correlation to how their demands were driving IT. When we implemented Apptio Cost Transparency, we were able to go back to the group companies and say, 'Look, we're not making this up. We actually put a tool around it and, guess what, it really does cost that much.'
"It changed the conversation into, 'Oh? Well, if it really does cost that much, what can we do to change it?' And that's when we make suggestions like, 'Well, you can bring your application landscape down. You can take care of your fragmented business process. You can do all these different things and then we can take down our cost in support of the lessened demand that you have on IT.' This is a complete 180 from where we were previous to the Apptio CT implementation."
Like most companies that are finally able to link cost to consumption using accurate and agreed-upon data, TMNA Services found a lot of places they could save money quickly and easily.
"As we were going through the process we were finding these orphaned systems that were being kept alive that management didn't know they still had or needed," said Mike Kelly, TMNA Services’ Senior Vice President of Finance, said. "We had the ability to go back to them and say, 'Listen, this little system that is carrying 10 or 20 policies, it's costing you X number of dollars.' And they could decide whether they wanted it, or whether they needed it, or whether they could make an investment and move it somewhere else and get rid of that cost.
"So it enabled us to be more efficient and identify things they could make changes to or make decisions on to affect their own IT cost directly."
TBM enables IT to better support business goals
Because technology is so integral to everything TMNA Services does, IT is already considered part of the business. But, unlike a more traditional business unit with a P&L, pointing to the value of a given technology or service was difficult. Since the introduction of the TBM taxonomy, a Rosetta Stone that allows everyone in the business and IT talk about technology, infrastructure, applications, and services using a common language, it is getting easier for IT to prove its worth.
"TBM allows us to speak about technology as a business," said Pick. "And when you're talking about technology as a business to business people, they immediately feel much more comfortable than when you're talking about IT as this separate thing; that's very difficult for them to penetrate from a terminology perspective or the concepts we use.
"We don't view ourselves as separate from the business. We simply are the technical part of the business. At the end of the day, it's all business. It's all about revenue. It's all about expenses, and it's all about making sure we deliver great customer service."
At the end of the day, it's all business. It's all about revenue. It's all about expenses, and it's all about making sure we deliver great customer service.
CIO, TMNA Services
Better planning leads to better business outcomes
A big part of achieving these IT goals comes from improved planning, forecasting, and variance analysis. TMNA Services’ IT planning happens once a year. But with Apptio's IT Planning module, budget owners can track variances on a monthly basis as well as reconfigure their budgets on their own based on that month's data. In the past, this wasn't so easy to do.
"We were dumping a ton of data into a spreadsheet and hoping that it didn't break," said Pastella. "With IT Planning, we have the capability to tag it to systems and to refine our allocation models based off of actual consumption that we're seeing on the [Apptio] Cost Transparency side."
Tracking forecasts to actuals every month is allowing IT to better align its resources with the needs of the business. Not only are they able to shut down zombie systems, show the business how its consumption drives IT's budget, and prove that technology isn’t free just because the company owns it, TMNA Services can now respond quickly when the business needs something new.
TBM and Apptio are also used by the division vice presidents to keep tabs on their technology spending. When they need something new, they have the ability to go into Apptio and move budget around to get it.
"Where I see the greatest benefit," said Pick, "is our VPs and AVPs can be in Apptio every day, checking on something, knowing that they've got money to spend or that they're running short, and making their decisions for their group management right then and there."
Using Apptio to better manage project expenses
Although it’s still early days, TMNA Services is also using Apptio's Project Financial Planning (PFP) module to get a handle on their project costs. Until very recently, project managers were trying to account for spending in their project portfolio management system (PPM). But it wasn't working "so project managers would just abandon their financials," said Pastella. "They would just kind of downplay the financials, which would lead to 'Here, I'm closing out my project and, oh, by the way, I've realized that I overspent my project by $25,000. What do I do now?'"
Now, IT finance uses Apptio to manage project finances separate from the PPM system. And project managers can still see their actuals and use Apptio to do endless what-if scenario planning.
"Since [project managers] are able to take the financials out, knowing that the resource plans are the same between the PFP and PPM systems, they can now do that scenario modeling using Apptio to say 'What's gonna happen if I need another 100 hours? What is it gonna look like if I need to increase my non-labor spend?' And they're very quickly able to model out a change request and see the variances between their plans. They can create four different versions with four different scenarios and see where everything gets hot and cold and make those change request decisions even more quickly," said Pastella.
From tactics to strategy, IT is leading the way
The ability to use reliable, defensible data from within Cost Transparency to drive planning and provide the business with a choice when it comes to technology, gives the business a seat at the IT table. Once they become involved at that level, where tradeoffs between cost and functionality are being discussed using common terms that everyone understands, they are essentially taking control of their technology futures.
"As we're doing transformational projects and bringing in new systems, what does that mean for existing systems?" said Kevin McNally, TMNA Services’ IT's enterprise architect. "What does it mean if we don't make difficult choices? I think that's driving the strategic conversations and decisions that we weren't able to ever have before Apptio and the TBM methodology."
For CIO Pick, becoming strategic is all about accountability. As TMNA Services continues the global expansion it began 15 years ago, ensuring that every technology dollar spent is a dollar earned is extremely important.
"Now, almost 50 percent of gross and net revenue comes from outside of Japan," he said. "That's an incredibly fast pace of globalization. Globalization is driving the need to measure, to understand and ensure that we're achieving business value, technical value, investment value, those sorts of things.
"And when we looked at IT in particular, we recognized a couple years ago that we really needed to get the right tooling in place to ensure that our investments in product, hardware, and people are really providing the value we need. And TBM as a methodology and Apptio as a product have given us the insights and helped us get the footholds we need to achieve those global goals."