From Cost Containment to Meaningful Optimization of IT Spend at First American

“If you’re not doing [TBM] today, you really need to start. Without complete transparency of the IT budget, and the ability to be able to explain it to business leaders, you’re going to be in trouble.”

Larry Godec
Senior Vice President and CIO

Executive summary

First American’s use of TBM started as a quest for IT cost transparency. Today, the organization’s IT strategy has moved from cost containment to meaningful optimization of IT spend. This has enabled the company to shift funds to initiatives that improve the customer experience and support market share growth.

Corporate overview

First American is a leading provider of title insurance and settlement services to the real estate and mortgage industries. First American and its affiliated companies also provide title plant management services, title and other real property records and images, valuation products and services, home warranty products, property and casualty insurance, and banking, trust and investment advisory services. With revenues of $3.8 billion in 2011, the company offers its products and services directly and through its agents and partners in all 50 states and abroad.

Challenge

For Larry Godec, Senior Vice President and CIO of First American Financial, the challenges associated with the company’s expanding technology assets were increasingly troublesome. For starters, Godec, who oversees the strategic architecture, business process management, applications development, data center operations, infrastructure and core technologies that support First American, knew the firm’s IT portfolio was beginning to swell with redundant systems. But, because he couldn’t precisely identify which applications were unnecessary, he couldn’t eliminate them. He couldn’t calculate their total cost. And he certainly couldn’t determine the lost opportunities costs related to them.

As you might expect, all these unknowns made defending the IT budget particularly problematic. “It was very difficult for my CEO and CFO to understand why we spent all the money we did on IT,” Godec recalled.

Realizing he needed to find answers, Godec started probing total costs, peeling back layers to uncover transparency in the company’s cost model. Unfortunately, that process only exposed deeper issues. “It became apparent that we also needed to embark on a true portfolio project management and demand management initiative, so we could really get our arms not only around the cost but also around the resources,” Godec said.

Solution

Apptio’s TBM solution has helped First American understand its true IT costs and performance, based on dimensions the company needs to manage (i.e., services, technologies, projects, assets, suppliers, consumers, etc.). As Godec describes it, now the decision-makers at First American can weigh options by looking through the same “pane of glass,” and service owners can know the total cost of providing their services and how much of that cost is driven by each line of business. Recent improvements to management of the company’s FAST transaction system underscore his point.

“FAST is First American’s core title and escrow system run worldwide on one single database instance,” Godec said. “It was very difficult to explain the cost of FAST to each division and division presidents, but Apptio has really helped me break down the cost by division and show them the value on the core system.”

As this example shows, Apptio’s TBM solution enables Godec to run IT like a business and explain the IT budget in business terms.

Benefit

Since implementing Apptio’s TBM solution, First American has uncovered more than 100 legacy applications. In addition, Godec and his team have started several different infrastructure optimization initiatives, and they are now driving toward eliminating almost 10 percent of First American’s total infrastructure costs.

“Our plan is to take those dollars and move them towards change-the-business initiatives,” he said. “So now when we meet with business leaders, we can have the great conversations around not only how much are we spending in the areas, but how we may want to shift priorities on projects or potentially even shut projects down for higher priority initiatives.”

To sum it up, the biggest benefit of using the Apptio TBM solution is that now First American has “complete and total transparency of IT costs,” Godec said. That transparency then reveals ways to reduce costs so that budget can be shifted from run-the-business projects to change-the-business projects.

Moreover, that transparency is now being shared with First American’s business partners so together, they can collaborate on cost-and-quality tradeoffs.

“Our business partners must understand what they are consuming, how much it costs, and what choices they have to better balance cost, performance, risk and other qualities.”

– Larry Godec, SVP and CIO

And finally, First American is working to help its business partners be transparent. The company wants to anticipate business demand and translate those expectations into its technology plans, including budgets and procurement schedules, so real business value can be derived from annual planning cycles.

What advice would Godec give to other CIOs about Apptio and TBM solutions? “I’d say if you’re not doing it today, you really need to start,” he concluded. “Without complete transparency of the IT budget, and the ability to be able to explain it to business leaders, you’re going to be in trouble.”

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