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“All levels of leadership throughout our organization are learning to use our TBM solution and how it can help them make better decisions for our business.”
The inaugural winner of this new award, established to recognize perseverance through adversity, went to UPS, who, through its strategic use of TBM navigated numerous external challenges while delivering transformative outcomes:
In 2023, the TBM Council introduced a new ‘Judge’s Choice Award’ to reward perseverance in the pursuit of transformation that transcends the existing categories awarded during the annual conference. While the business was still recovering from COVID restrictions and Chinese lockdowns that had an outsized effect on their business, the UPS organization lead through numerous challenges, including navigating a potential union work stoppage and the increased regularity of extreme weather events impacting operations but not impacting their ability to always deliver to their customers. Through all of this, UPS was able to closely integrate TBM and FinOps practices to drive value across the IT organization:
UPS has a long history of activity-based cost modeling. For over 25 years, the company has been charging back business units for services. Their processes were based on data in Microsoft Access databases, which were fed by Excel spreadsheets. This system became cumbersome as technology advanced and the organization evolved. Queries became obsolete. Staffing in the Technology Finance analytics department was a challenge — resources needed to understand a complex network of queries, macros, reports, and spreadsheets, and it took years for a new person to get up to speed. The model was not only complicated but also lacked supporting detail for defensible charges, providing little information to business unit leaders beyond an application acronym and a dollar amount. These limitations hampered Technology Finance’s ability to support the business with the speed and accuracy the company needed and ushered in the adoption of TBM.
UPS found that the TBM framework and Taxonomy could be easily applied to their existing model and that a TBM system could automate and enhance their home-grown solution. A TBM Advisory Group and Steering Committee are responsible for implementing TBM at UPS. The TBM Advisory Group is made up of the TBM Office, one senior director from each Solution Delivery Group (SDG), and all senior directors of the Technology Services SDG. The TBM Steering Committee is led by the Chief Digital Technology Officer. Each SDG president is also a member. Both groups meet monthly to review progress and to provide strategy and governance over the program.
Led by the TBM Office, UPS created an application service hierarchy using their Apptio-based TBM system. They established clear service offerings that the business consumed, removing technical jargon from the names, and grouped offerings into service categories that aligned to Executive Leadership Team (ELT) functions. Service categories were then mapped either to operations or to non-operations. Other mappings were added to track investment objectives (invest, migrate, tolerate, eliminate) as well as if the app was internal or customer-facing. This allowed all groups to speak the same language and gave business units a clear view of which functional areas were driving the technology investment and Run costs for their area.
The TBM Office now provides monthly updates to the TBM Steering Committee regarding strategy, governance, and OKR performance. Each SDG president also meets monthly with their direct reports. Because the information is considered so valuable to the groups, the TBM Office update is the second item on the agenda of these meetings, reporting on the TBM work that was done that month, what is next on the road map, and success stories.
UPS’s TBM implementation and re-envisioned application service hierarchy has improved cost allocations for network, occupancy, databases, and middleware. These costs are now properly allocated to the applications and services that consume them — something that was difficult to do under the company’s previous process.
This has dramatically improved the accuracy of their application total cost of ownership (TCO). Application TCO (and the associated supporting details) are now being used to evaluate key decisions, such as replatforming, modernization, tech-debt remediation, and rightsizing opportunities, in addition to finding ways to reduce servers and storage. For example, leveraging TBM, the mainframe storage team worked with their largest application group to reduce storage consumption of the application by 85%, saving $840,000 on the company’s most recent storage upgrade.
TBM provides detailed cost allocation and reporting in a language everyone at UPS understands. IT expenses are now better aligned with the business units that consume the services. This increased transparency has created more accurate intercompany chargeback and given business leaders better insight into their actual spend.
Investment mix is one of the most important measurements for UPS. Business results depend on making strategic investments and tracking return on investment (ROI). TBM enables UPS to track how much they spend on Run versus Grow projects and provides insight that helps them reduce Run costs so they can reinvest funds into Grow initiatives to drive more business value.
This capability of TBM is a key enabler of the company’s business strategy. As Bala Subramanian, UPS Chief Digital Technology Officer, often says, “Cannot cut your way to success; need to focus on value creation.”
The company’s public cloud strategy is simple: target applications for the public cloud based on fit for purpose, architecture, and TCO. TBM enables UPS to leverage all available data, including estimated public cloud cost based on sizing, historical trend data, and on-premises costs based on TBM modeled rates. This gives teams key information when evaluating applications for public cloud.
TBM also allows the company to leverage anomaly detection, rightsizing, and reserved instance reporting from Cloudability as part of their TBM system to manage and optimize public cloud spend. This detailed insight is driving team accountability for cloud costs and helping UPS negotiate better contracts. For example, UPS leveraged historical trend reporting from Cloudability to save $11 million on a three-year contract with one vendor.
At UPS, TBM is helping all levels of leadership throughout the organization make better decisions for the business. Business units and functional leaders have a clear understanding of the technology spend they are driving. Corporate Finance has better visibility of technology costs and how they are managed. This is helping the company optimize costs — better yet, it is giving leaders the information they need to invest in strategic projects that will drive the company forward and increase shareholder value.
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