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How Maritz IT Cut Costs and Delivered Competitive IT Services

 

“If you feel that you don’t have the time or the business case for TBM, the fact is, you’re running your organization like a business. You might just be running it like a bad business.”

Gerry Imhoff
CIO

Executive summary

By deploying Apptio and changing their approach to the customer, Maritz CIO Gerry Imhoff and team shifted the perception of IT as “just a cost center” to that of a trusted partner. In the process, IT became a preferred provider of centralized services, such as hosting and end user infrastructure, enterprise applications, information security and project management, to a decentralized ecosystem controlled by individual business units. The cost transparency enabled by Apptio helped reduce IT’s budget by 40%, empowering business unit owners to not only see how their consumption drove IT’s costs but also to do something about it.

Maritz corporate overview

Maritz is a business services company that offers its solutions to a range of automotive, financial services, hospitality, technology, telecommunications, and retail companies. These solutions include motivation, global event planning and logistics, loyalty, market research, learning solutions, incentive initiatives, rewards and recognition, and other programs.

A few years ago, CIO Gerry Imhoff found himself and his IT organization on the edge of a cliff. Senior management had just directed him to expand a partial charge back policy to fully recover costs for labor, storage, compute resources, network access, and more. This effectively doubled IT costs to the business units while keeping service levels the same. Simultaneously, they also instructed Imhoff to cut 40% of his budget.

Not unexpectedly, the businesses complained—loudly. The fully allocated costs were too high and they had little say in IT’s decisions or its decision-making process. The company’s management responded by decentralizing IT decision-making, effectively allowing the business units to control their own IT decisions and costs.

“We were asked to embrace as much decentralization as possible of our corporate IT services to enable accountability and autonomy in the businesses,” said Imhoff. “At the same time, we were directed to reduce the IT budget by $18 million.”


Connecting cost to consumption

In order to reduce spending and provide IT services that could compete with outside vendors, Imhoff had to show the business units how they could control their own costs instead of relying on IT to do it for them—clearly an arrangement that had not been working.

“We tried to do it ourselves using spreadsheets,” said Imhoff. “We had thousands and thousands of rows of data, everything from inventories and contracts to staffing and labor data. And while the detail was there, it would take us days to get data out of the system. It was incredibly difficult to model different scenarios and explain them to all the different groups of people with whom we talked.”

The need to cut through this noise and bring real transparency to IT’s spending is what finally led Imhoff and his team to adopt TBM.

“The biggest reason we implemented TBM was to stay viable as a service provider,” Imhoff continued. “We had the right ideas. But it was TBM that gave us the foundation and the blueprint to make something happen with those concepts. Utilizing Apptio and the TBM process enabled us to determine true cost drivers so when businesses increase or decrease consumption, they directly influence their costs.”

Using TBM to support the decentralization strategy yielded surprising results: Giving the vice presidents of Finance and Technology in each of the business units access to Apptio Cost Transparency changed the dynamic between IT and the business, exposing true cost drivers that enabled business owners to influence their costs. Offering fully transparent services also helped IT compete effectively against third party service providers while improving trust in the organization. As a result, IT achieved its mandate, enabling reinvestment of some $20M of savings back into the business, self-funding over $4M in infrastructure and cyber security upgrades, and becoming a preferred provider of centralized services in a decentralized environment—all in the span of a few years.

“Cut $18 million? We did it,” said Imhoff. “TBM helped us find that balance between what to centralize and decentralize in order to meet that goal. Here’s an example: Business units don’t see cost, they see price and consumption. So when we were looking at getting rid of our mainframe, it became very apparent to one business unit in particular that if they were the last man standing—because the other two business units who were consumers of the mainframe were actively getting off of it—the mainframe was essentially going to triple in cost for them. If they were the only consumer, they’d get hit with 100% of that cost. And that significantly incentivized them to re-platform.”


Unlocking value

Regardless of goal—transitioning IT to a trusted service provider, cutting costs, connecting IT spending to business outcomes— successful TBM programs depend on a partnership between IT, finance, and line of business stakeholders. This certainly held true at Maritz, where key players from each of these groups were central to the success of the TBM team.

“For the past few years, we’ve really pushed our IT organization to be a business in support of our other businesses. The concept of technology business management has worked effectively for us. The team of people who have made this happen have been great, and the response from internal business partners has been really strong. I’d say it’s been a big success.”

-Steve Maritz, CEO


“As far as our businesses go, they’re seeing the value of having Apptio and being transparent with our charges, to the point that they’re allowing us to take their client information and build out solutions for them,” said Jeff Smith, Business Systems Analyst. “It shows a lot of trust between the two organizations that they’re allowing us to do those things for them.”

Because TBM includes both a financial and a technology approach, it brings the business and IT together around a common language. Apptio allows the business to see the total cost of their technology consumption and it allows IT to see which technologies enable the business outcomes both sides want and which just cost money.

“In the past, when we asked IT for ‘what-if’ analysis, we had to do everything in Excel. This narrowly focused us on the impact of one service, maybe two services together,” said Smith. “But now that we’ve got it in Apptio and we can bring that information into our model, we actually see the complete impact of what a decision might look like. So, if we’re looking at a change in infrastructure, we can see how that impacts our application group and, in turn, how they have to turn around and recover that from their customers.”

From the business’ perspective, they can use Apptio and TBM to see how to reduce their consumption without impacting the quality of the service they deliver to their customers.

“One of our business units, Maritz CX, our research business, was able to save over half a million dollars this year by completely focusing on consumption,” said Imhoff. “Because we use Apptio to expose all of their consumption data—whether it be users or servers or what have you—they were able to dig in and find underutilized or un-utilized technology and services they were being charged for but no longer needed.”


Embracing change

Because the businesses no longer see IT as “just a cost center” but a provider of cost-competitive core technology, Apptio and TBM have forever altered the business/IT relationship. A big reason for this is the transparency TBM enables. “It allows IT organizations to remove uncertainty by shifting from variable- to fixed-cost pricing for their services,” said Imhoff.

“We’ve been asked about learnings or advice that we could give others contemplating TBM,” Imhoff continued. “One of the things that’s made us very successful is our rates are fixed. When we establish our bill for the year, the business units know exactly what they’re going to spend on technology. Now our businesses draw a straight line between their consumption and their cost. Prior to implementing TBM, that was just impossible.”

When costs are unknown, business units tend to look externally for the services they needed like project management, a core competency of IT.

“Previously, when we were charging the business hour by hour, all they saw was the dollar amount and they were saying, ‘Oh, we don’t need this. We’re good’,” said Kim Clark, VP, Project Management Office. “Sometimes they would be halfway through an implementation and things would be going wrong and then they would ask me to assign a PM to try to salvage the effort.”

That doesn’t happen anymore.

“The thing that’s really changed over the past couple years with our approach is that we’re no longer just those technical geeks that say: ‘We’ve decided to upgrade to Windows 10 and you have no say about it’,” said Imhoff. “We have very much become a sales and marketing organization. We’ve made it a point to encourage (and actually expect) everyone in the Maritz IT Services organization to learn about the business, to have relationships with the business. Even though we were embracing TBM before it was called TBM, we were seen as a cost center, we were seen as inflexible. To stay viable as an organization—and that doesn’t mean just self-preservation— we have to make sure we have the trust of our business partners. That’s what’s made all the difference.”

Maritz CEO, Steve Maritz, weighed in. “The approach that Gerry and the IT team have taken is about really listening to customers, being proactive with solutions, understanding the reality of alternatives that are out there, and recognizing the need to either adopt, adapt, or create something that’s competitive. That starts with a mindset that this is achievable. And I’m really proud of the whole team for adopting that mindset, accepting the challenge, and then making it happen.”

“We literally are to the point now, where we are seen as much more than an IT organization within Maritz,” adds Imhoff. “We have business leaders coming to us saying, ‘We have seen the dramatic change in your organization and your organization’s approach and we’ve seen you make really tough decisions. We need to do the very same thing in our business. Will you help us understand how you did it, because we need to do the same thing?’ For an IT organization to be sought out for those types of things, I don’t see that happening in many places. TBM—managing our technology organization like a business—is the reason.”

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