“Just do it” has worked as a slogan for Nike for 30 years, as both inspiration and admonishment to act now. It's a forceful reminder to roll up our sleeves and do the hard work needed to effect positive change. The sooner we start, the sooner we see an impact.
But many IT teams hear “just do it” differently. Not that IT leaders aren't experts at rolling up sleeves (they are, of course). But this message coming from the C-suite or board often follows a mandate to reduce costs. For a typical IT organization, the urgency is clear but the immediate impact is less positive because inevitably, the level of cost-cutting is proportional to the disruption it causes.
»Related content: How CFOs Can Tackle the Cost Optimization Equation, from Smarter with Gartner
Cost cuts shaped by "just do it" mandates are often applied as a percentage to one or more teams. This results in savings that carry their own costs. The quick turn leaves little time to a) enact a savings plan, b) develop projects dedicated to recovering spend, or c) assess the potential risk to the business.
So, how do you balance urgency with a pragmatic approach to achieving long-term results? You develop the discipline needed to drive meaningful change.
Exelon embraces a disciplined approach to cost optimization
When Exelon merged with Constellation in 2012, the resulting Fortune 100 company included six utilities and one of the largest fleets of power plants in the United States. The IT team knew they needed to be ready to make sacrifices. They also knew they needed a disciplined, data-centric approach to achieve cost optimization and an understanding of TCO across the organization.
“When this merger occurred, there was a deep recognition that the two companies had to be managed in a consistent way in order to get the synergies that our investors were expecting,” said Rick Crowley, Senior Manager, IT Finance. “We were going to have to organize ourselves in ways that could be matched up across the acquired companies.”
Exelon tackled their challenge by embracing new technology business management principles and tools to optimize IT delivery and costs.
You can think of it as a ‘big data’ approach to combining all this information, allowing us to take actions around important things like cost optimizations, application rationalization, financial management, understanding our total cost of ownership across the organization… all these transformational things. Rick Crowley Senior Manager, IT Finance
The end result? Reorganized and retooled, Exelon is on track to save $150M in run-rate savings by the end of the year. Here’s how they’re doing it:
With $31.4 billion in revenue, Exelon consumes a lot of outside services. Tracking multitudes of contractors is tough work so the company reduced that number to just three tier-one managed service contracts. There are multiple phases but the company is on track to achieve a total savings of $100+ million in pre-tax O&M (operations and maintenance).
Getting strategic about cloud
Bender is evaluating a move to IaaS (infrastructure-as-a-service) and knows discipline around decision criteria is key. “This is the kind of problem that we are going to be tackling very directly now that we have the data appearing right in the Apptio model, right next to everybody’s on-premises data, and we are actually able to get a true A/B, scientific study done on this.”
According to Brian Capoferri, Senior Manager, Portfolio Operations, the question they need to answer is, “What is that perfect blend of cloud-based storage, versus data center as a service, versus on-premises? What is that perfect blend that provides an optimal return? That’s the sort of thing we are getting involved in now, in terms of the financial analysis and decision making, to ensure that we are getting the biggest bang for our buck.”
Changing the subject (from hardware to apps & services)
Linking corporate financials to IT portfolios and the services the business sees allowed IT to start charging services directly to the applications and the specific functional areas that consumed them. This made the application the subject of the conversation with the business, rather than the underlying hardware, and provided a strong incentive to map hardware to applications.
The net result is that IT has successfully mapped nearly all of their servers and storage to the applications they support. This has allowed IT to transform itself into a shared services organization, with a reporting structure (from the VPs on down) that is aligned with portfolios. Related rationalization savings total ~$50M.
“We are the largest utility by customer count in the country,” says Bender. “Now the entire back-end IT organization is run as one unit for all of the utilities. I think that’s a fairly unique achievement. Nobody’s ever done anything like that with a utility organization on this scale.”
For more about Exelon’s success with Apptio and TBM, read the full case study here.