By moving toward a cohesive and collaborative system, Berkley Technology Services (BTS) enhanced their IT allocation methodology and changed the conversation from cost to value. Implementation of their TBM system helped shape the decision making process by providing transparency into accurate information. Showing the value of IT at a granular level and explaining what services contributed to driving the expenses in each business enabled better analysis and an increased rate of innovation and growth.
W. R. Berkley Corporate Overview
Founded in 1967, W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United States and operates worldwide in two segments of the property casualty insurance business: Insurance and Reinsurance.
Berkley Technology Services is the centralized IT function of W. R. Berkley Corporation’s insurance companies and related operations. With more than fifty operating units in multiple countries, W.R. Berkley Corporation seeks to realize economies of scale by, among other things, centralizing its IT functions and vendor management.
For Berkley Technology Services’ Jeremy Bullock, Vice President of Finance and Controller Kyle Sellner, providing centralized IT for 50+ operating units meant opening 50+ channels for complaints about the lack of clarity and transparency in how BTS allocated IT costs to the businesses.
Sellner explained the triangular challenge BTS faced. “BTS is a standalone company, but at the same time we’re still the IT department of a larger organization—W. R. Berkley Corporation. So we have three pressures: one is controlling what we spend on IT and making sure we spend that money wisely. The second is ensuring every dollar we do spend is fairly and accurately allocated out to the 50+ operating units we service; at the end of the year our expenses and our income have to balance. The final and the largest driver is customer satisfaction. We need to provide accurate, understandable and transparent allocations to all of our operating units.”
IT opacity at the center of the problem
The problem wasn’t new, and BTS had spent some years trying to get spend, allocation and transparency under control. “Eight years ago when I joined BTS, cost analysis and allocation back to the operating units was done largely with spreadsheets,” Bullock recalled. “We had some data, and some of it was good and some wasn’t so good, but spreadsheets were just not getting us to the level of accuracy or clarity we needed.
Sellner picked up the story. “We almost operate like a third-party consulting firm to the operating units. We send them a bill of IT for our IT services, even though we are a related party. Before TBM, we offered little visibility into what we were spending. We couldn’t break down what we charged them for and they definitely had no insight into what they were getting for their money. All that each operating unit saw was a one-and-a-half-page spreadsheet that was formatted as an invoice, without significant detail, without transparency. Let’s say we had a million-dollar invoice for an operating unit. They would have seen that million dollars broken down into at most five categories, but nothing any more detailed than that.”
The heart of the issue was really a lack of transparency. “The tipping point came from the cumulative effects of complaints with the lack of data and transparency in those bills,” said Bullock. “We heard many variations on the same theme that we were just a black hole, charging operating units tons of money without providing any real value. And so we needed a way to address those complaints.”
“Our goal was to move out of that spreadsheet black hole for BTS and for the operating units we served,” said Sellner.
TBM and Apptio brought fast solutions
In early 2015, Jeremy, Kyle and a W.R. Berkley Corporation EVP made the trip to visit with Apptio representatives and spent the better part of the day just going through what other customers were doing with TBM, seeing Apptio in action, and looking at a sandbox. “It didn’t take us a lot of talk to decide to pull the trigger,” Bullock said. “We joined in various workshops and took the 12- week jumpstart fast track route with Apptio.” The results were quick, and immediately satisfying. “We were able to get the model built out and get the language installed in the company enough that we could do our 2016 budget in Apptio, and we’ve been basically live since the first day of 2016.”
Thinking back to that spreadsheet-based, million-dollar invoice that had every cost herded into one of only five cost pools, BTS invoices are much more granular today. Sellner said, “Operating units today get an invoice along with a report from us. That million dollars is now broken down into between 12 and 40 business services, depending on the size of the operating unit and the IT services they consume. They now see all of the IT resources, including the indirect labor and hard and soft costs of each service charge. Those include things like desktop costs for support, refresh time, applications, compute storage network. Their reports include email, their charge for financial systems, and their charge for data center services.”
How have those 50+ operating units responded? “I’ve gotten a lot of positive feedback.” Bullock answered. “Some of our operating units respond to their invoices with ‘This new information is awesome; I can see I’m spending this much on desktop, this much on data center, this much on policy underwriting systems.’
“This clarity and completeness is bringing in new business to BTS. “After seeing the relative cost of desktop support, one of our largest operating units is switching to us instead of doing it themselves.They have better insight into how much it actually costs and how much cheaper we can do it because we are centralized,”
–Jeremy Bullock, EVP & CFO, Vice President of Finance, Berkley Technology Services
TBM has also helped with not only improving transparency, but also shaping the choices that the operating units make. Sellner said, “We had a new operating unit request a quote for a new property and casualty insurance policy system. They chose to go with our in-house system as opposed to another third-party application because of the cost that we were able to provide them and because of the completeness of that quote.” Because operating units can see the true cost of all services provided by BTS, they can make more informed choices between both internal and external options.
Lessons learned on the TBM journey
Starting with what they had
Like many IT leaders, BTS thought they needed perfect data and information in order to be transparent with their business partners. BTS learned that this is not the case. The initial spreadsheet efforts, while incomplete, had enough data to get BTS started with TBM. “The data was rudimentary, and it didn’t get us all the way where we wanted to go, but it was enough to start thinking about better ways to determine and communicate why we charged operating units what we charged them,” Bullock said. “The TBM model we use today was helped by the work that we were doing and the data, flawed as it was, we had already identified.”
Ultimately, building a TBM model and reporting with the data on hand will create an invaluable feedback loop that leads to better data and more actionable insights. But the real lesson BTS can share is to start with the data you have.
Always be thinking next steps
TBM is a journey of continuous improvement. Most IT leaders and finance partners start with building a foundation of transparency that helps justify budgets, perform benchmarking, and make big, important decisions with business partners. Over time, they focus on different areas of IT supply, such as infrastructure towers or applications, with more granular information.
BTS is already moving toward next steps. Bullock said, “We’re going down the path of activity-based costing with Apptio and TBM as well as getting a better handle on total cost of ownership. And so I know that we’ve had a number of operating units that are looking at BTS costs and seeing the total cost of ownership, the cost to implement, and then all of the production support that goes into it after the fact. Today, with transparency and allocation under control, we’re steering our work going forward at cost optimization.”
TBM empowers the right conversations about value. But this only happens when IT leaders and finance partners use the reports from their TBM system to sit down with business partners and talk about investment levels, choices of consumption, and ways to bring down costs.
Central to success is keeping a continual communication channel open between IT and those that use its services. “We recently started a quarterly verification process with the operating units. I recently did a “Lunch and Learn” – a low intensity internal informational session - to explain why it’s important,” Sellner said. “I took the business units through Apptio and all the information that we provide our operating units and why it’s important from an allocation perspective and from a cost optimization perspective.”
“I received a ton of compliments on Kyle’s presentation, with a lot of people saying, ‘It’s nice to know that we’re not doing stuff just because somebody is telling us to, that there’s actual meaning behind the work,’” added Bullock.
A TBM transformation
Better cost identification. More optimized spend. Clearer communication of costs and allocations to the operating units.
These are all indicators of the transformational nature of TBM to business relationships. “TBM has allowed us to run BTS as a business better than before, because we are reporting our costs as a business,” Sellner said. “Whereas we used to have a technology software charge, or a technology infrastructure charge, now we report our costs at the business service level. That’s something our operating units can understand. By speaking the same language as they do, we’re now able to look at ourselves as a standalone business rather than just an IT shop.”
TBM is a change of mindset for most enterprises that employ it. It’s about changing the language, creating a culture of accountability, and empowering key people to make decisions that improve the bottom line and shift resources to innovation and growth. TBM means transformation.