Granular IT Transparency for Improved Cost Control, Better Control Options, and Higher Added Value

Logistics company Hermes Group serves as the internal transport service provider for the Otto Group, but they also service many other major customers, such as Amazon and Zalando.  In 2019, with over 15,000 employees, Hermes transported 928 million parcels worldwide and generated 3.5 billion euros in sales.  In total, the company operates around 40,000 parcel shops across Europe.

The Challenge:

In 2016, the company’s IT department faced the task of trying to achieve greater visibility into their IT costs.  The goal was to control costs and realign the priorities of IT according to area of business in order to demonstrate their value to the company.  It was their belief that IT should no longer be perceived as a cost center, but as a profit center that makes important independent contributions to the company’s overall value.

The Solution:

The solution for Hermes’ IT challenge was clear:  Introduce a Technology Business Management (TBM) framework, a structure used for decision making that defines tools, processes, data, and people needed to manage the business of technology.

“Technology Business Management (TBM) was made for IT and is in principle a business model for how IT can be operated efficiently and effectively.”

                                                               Lars-Oliver Lange

With the TBM implementation, Hermes was pursuing three clearly defined, overarching goals.  In addition to greater cost transparency for the finance department, they were aiming to accelerate innovation cycles within IT, as well as increase the visibility of the value added by IT throughout all business areas.  By the end of the TBM adaptation, there were four positive outcomes:  IT transparency, digital transformation, attracting new IT talent, and data governance.

Hermes – TBM Journey:

Thanks to TBM, the Hermes IT department was able to significantly strengthen its role within the company and increase its value within all targeted business areas.  With its newfound transparency, the IT department was able to document its contribution to the company’s overall value and redefine its position within the company through a complete business portfolio alignment of all technology investments.

Transparent IT:

Transparent IT should promote the understanding of IT costs throughout all areas of business so that companies have a better understanding of the IT costs incurred and the reasoning behind the expenses.

“The TBM Cost Pools enable account mapping from the finance side.  A granularity of around 7-9 cost pools gives all parties involved more information about how IT allocates the budget they are given each year.”

Lars-Oliver Lange

As a trustworthy internal consultant for all areas of business, IT can now use external control impulses, in addition to a precise mapping of the IT department’s costs to business aimed at casual allocation, pushing the value concept to the forefront.

Digital Transformation:

The goal of accelerated innovation through IT goes hand-in-hand with a successful digital transformation that enables Hermes to introduce new technologies and agile working methods into their existing IT product world; however, some legacy systems had to continue to be operated and eventually transferred to a new and more secure environment.

Attracting New IT Talent:

Companies that are successful at implementing and innovating modern IT tend to attract high-level employees.  With the establishment of a strong, yet agile team structure that can also work remotely not only accelerates efficiency, but also prevents loss of productivity, as witnessed during the COVID-19 crisis.

Data Governance, Security, and Privacy:

As we have seen in recent history, regulatory requirements can have a massive impact on agility and innovation.  That is why every product is developed from the perspective of “privacy by design”, meaning that from the outset, all aspects of data governance, data protection, and security are considered.

Conclusion:

Through its TBM implementation, Hermes gained essential insights into its IT department, drastically changing the way in which the various stakeholders work and communicate with one another.

Achievement 1: Thanks to the level of clarity provided through Apptio reports, it was now a simple process to identify initiatives with lower priority or performance and reallocate those funds to investments with higher priority and opportunity.

Achievement 2:  IT now deliberates with specialist departments over which application should be transferred to which cloud against the backdrop of optimal efficiency and stability, and they can directly compare the cost efficiency of different scenarios and providers.

Achievement 3: Hermes IT used to use case studies to justify their costs with the different departments.  With Apptio, a depreciation forecast for project and budget planning allowed Hermes to see how IT costs will develop in certain areas of business over time.  This enables the IT department to synchronize the software development’s timeline with the finance department, allowing for a cohesive and precise planning process.

“The bottom line is that introducing TBM requires constant change and improvement in processes and data sources.  You constantly learn about your IT and your business, and you are able to make continuous improvements and generate cost savings.” 

Lars-Oliver Lange

Apptio’s TBM framework provides companies with the tools they need to accurately quantify IT contributions and assess the quality of their business portfolio investments. If your company is ready to enhance its IT department and enable innovation, turn to Apptio for the best in IT development. Contact us to learn more.