One of the many challenges facing IT is managing OpEx spending bloated by last year's unfunded mandates – projects that were never adequately funded beyond the development stage. At Cox Enterprises, this familiar problem was the starting point for real change.
One of the many challenges facing IT is managing OpEx spending bloated by last year's unfunded mandates – projects that were never adequately funded beyond the development stage. Because of the way the IT develops its budgets (usually in isolation and based on last year's numbers), it has poor (if any) visibility into the actual day-to-day costs of running a new application or service. This, in turn, limits IT's ability to properly plan in advance for those costs and adjust its budget request accordingly for the coming year.
This was a familiar problem at Cox Enterprises, the multi-billion dollar home to such recognizable brands as Cox Cable, AutoTrader and Kelley Blue Book. “When it came to project planning, the business knew their up-front CapEx investment but not the long tail of OpEx the project would generate,” said Lisa Stalter, Senior Director of IT Planning and Governance.
These all-too-common situations force IT to get creative with existing budgets in order to keep last year's must-have projects up and running. This problem is made worse because the business often demands gold-plated levels of hardware, storage, networking, and support – even if they are not really needed. But, when IT is viewed as free (i.e., no chargeback, showback, or bill of IT) and the new application or service directly impacts a line of business owner's P&L statement, they are going to ask for the moon and expect to get it.
Giving business owners information about the cost of the different options they are requesting lets them assess for themselves whether the value is worth the cost. These conversations around cost-for-performance and the tradeoffs required to maximize both value and costs are a natural outgrowth of TBM. They also allow IT to plan better because the cost allocation data around technology is finally clear for everyone to see.
“If they have no idea what it costs, business owners naturally stick with the technologies they know," said Stalter. "Now they can see the cost of different service options. For example, what their non-standard e-mail system will cost them versus how much they’d save by switching to the shared service from corporate.”
To drive a better balance between supply and demand, Stalter combined chargeback with a service-based approach to planning. This is where the Cox group of companies come together once a year to refresh their five-year plans in which project approval, scoping and funding decisions incorporate estimates for their impact on total expected service cost.
Because the business units can map projects to application service costs they can finally see the actual year-over-year impact on OpEx spending from all the factors that are not part of the project development roadmap, like support, disaster recovery, compute, storage and depreciation.
Stalter’s TBM office also helps the business plan using historical actuals to come up with straightforward weighting factors of planned infrastructure capital to ongoing operational cost. This holistic, service-oriented project planning “takes away some of the wish-listing that we might have had historically. It really focuses the business on what they need to have, versus what they might want to have.”
Read the full case study to learn more about how Cox Automotive transformed their IT business using Apptio TBM.