IT Benchmarking: Balance Service Capacity and Capability Against Costs and Agility

Corporate overview

This study features a US consumer goods company that employs 9,000 people and generates approximately $4 billion in revenue annually.

Executive summary

A consumer goods company struggled with the manual drawn-out process of benchmarking with a third-party. Through the power of on-demand SaaS benchmarking with Apptio, they eliminated the hours of preparation and validation of traditional benchmarking processes and reclaimed that valuable time to take action on their benchmarking findings. The IT Planning group found that the automation of Apptio IT Benchmarking and assurance of an apples-to-apples comparison with ATUM®-based benchmarks, transformed their process. Benchmarking now drives important conversations within the business and has empowered them in negotiation with outside vendors, changing the conversation from cost to strategy.

IT benchmarking helps identify strategic business opportunities

The value of benchmarking was clear to the company’s senior manager for IT Planning. He understood that comparing IT costs and performance against internal and external benchmarks was essential for not only measuring performance, but also for balancing IT service capacity and capability against costs and agility.

However, after investing six months and more than 240 hours into a benchmarking initiative, he started to feel like he was treading water, rather than benefiting from results. “The third-party system we were using had lots of complexity around definitions, how to capture data, how to put data into the right format,” he recalled. “On top of that, there was round after round of internal reviews and reviews with the provider. All-in-all, the experience was time-consuming and cumbersome.”

Just as his frustration was peaking, he attended the Technology Business Management (TBM) Conference, where he heard about Apptio IT Benchmarking and the Apptio TBM Unified Model® (ATUM®)—Apptio’s industry-standard IT cost model. He learned that with these applications, IT costs are calculated at the IT tower (compute, storage, network, etc.) and sub-tower (server, online/offline storage, LAN/WAN, etc.) and presented across a standard set of cost pools (hardware, software, internal labor, external labor, etc.). Peer benchmarks are self-selected by the user from an extensive database according to size, geography, industry, and volume and actuals can be brought directly into the benchmarking application from Apptio Cost Transparency. These same benchmarks can be imported into Cost Transparency, providing views of ongoing costs against the selected peer organizations.

He wasn’t disappointed. The company’s IT Planning group had Apptio IT Benchmarking and Apptio Cost Transparency configured within a month. Even better, when they checked Apptio against their third-party data benchmarks, the results were similar. “The fact the results were the same gave us great confidence in our data,” the senior manager said.

Why was the IT Planning group at the company pursuing a benchmarking initiative in the first place? There were three main reasons. First, management had requested it; they wanted to know how the company’s IT spend compared to others. Second, IT Planning wanted to validate its processes. Lastly, IT Planning wanted to become more proactive; the group wanted to better understand—and be able to better explain—IT costs per unit and how those compared to selected peers.

“The benchmarking results make it easy to have an informed decision about strategy,” the senior manager explained. “Once we have that information, we can go back to a vendor and negotiate better rates. We can go through and show them exactly what we’ve found and why we’re changing our strategy. That changes the whole conversation. It makes the conversation about strategy, not cost.”

In another case, when the Apptio IT Benchmarking application generated a detail report from the end-user tower, it showed that unit costs for service desks were extremely high versus the benchmark.

“Our benchmarking results are leading to valuable conversations with business units, and we’ve initiated monthly internal meetings to address issues like this,” he said. “The benchmarks are updated every six months, so we can see what’s out of alignment and break it down per unit. Then, we can talk to people responsible for variances or ‘positives’ or ‘negatives’ in cost pools and work on a solution. It’s important for management, business units and IT to share a comprehensive, integrated view of how IT service capacity and capability balance against costs and agility.”

“Benchmarking is all about identifying opportunities,” he explained. “With Apptio, we were able to assign total cost of ownership to get to per unit spend and
then an apples-to-apples comparison. We did it by resource towers of compute, networking storage, and by IT resource sub-towers within compute. Using the subcategories gives you trends and exposure. It tells you where you have risks and where you have opportunities.”

“The benchmarking results make it easy to have an informed decision about strategy. Once we have that information, we can go back to a vendor and negotiate better rates. We can go through and show them exactly what we’ve found and why we’re changing our strategy. That changes the whole conversation. It makes the conversation about strategy, not cost.”

In one example, Apptio IT Benchmarking and ATUM revealed that the company was paying more than market rate for infrastructure services from an outsourced vendor. That kind of information is powerful when negotiating vendor contracts. In fact, the senior manager sees strategic sourcing at market rates as the next phase of benchmarking, and he’d like new contracts to include a way to renegotiate semiannually if market prices change by 10% either direction.

“ATUM is key. It’s a way to consistently look at things so the team understands cost per unit for compute standpoint, storage standpoint, network standpoint, and so on,” the senior manager for IT Planning concluded. “That’s because no one metric is going to tell the whole story. You need to understand spend levels and business models and be sure you’re making apples-to-apples comparisons. IT markets are increasingly competitive, and companies have to make better decisions about their IT spend. That’s why you need benchmarking.”