Creating headroom for digital innovation
Digital innovation is fast becoming the key to success in the financial services industry. Firms are racing one another with investments in mobile apps, big data, analytics and back-office automation to win customers, grow profits and manage risk. As a result, the demand for digital is looming large in their tech budgets. How are successful firms stepping up to the task?
According to McKinsey, an option favoured by high-capability players is “to create spending headroom within the IT budget by cutting costs”. In recent research of European financial institutions, McKinsey found the banks that demonstrate cost control, sourcing maturity and standardisation spend 41 per cent less on day-to-day IT operations than firms that do not, providing significantly more headroom for digital investments.
Transparency helps shift money and resources to support growth and innovation. Digital is just one of many competing demands for IT budgets and resources. Regulatory compliance, technology debt, and an expected increase in mergers and acquisitions are competing with digital for scarce resources.
There are many optimisation opportunities, but a data-driven approach is needed to find and execute them. To do this, many firms rely on a proven approach to transparency called technology business management (TBM).
TBM arms chief information officers, their teams and their line-of-business partners with facts about their infrastructures, labour, applications, services, projects, and more. With TBM, these leaders make better, faster decisions to optimise costs, quality and capacity.
The benefits of this transparency can be enormous. Not only does it help IT leaders optimise the services they supply, but transparency also proves essential to demand management. According to another McKinsey study, a demand-led approach centred on consumption reporting and cost transparency typically improves infrastructure efficiency by 15 to 20 per cent over two to three years and provides an immediate improvement of 10 to 15 per cent for new investments.
Consider the experience of Nationwide Building Society, the largest building society in the world, which has recently invested heavily in digital innovation. According to group services director Debra Bailey, TBM has given her team insight into the supply and demand levers that underpin Nationwide’s core services. It has also supplied “a set of data and analytics upon which to make some key business decisions around how we invest in the future, as well as how we drive efficiencies in the way we run things today” .
With TBM, Nationwide expects to drive $12 million in cost-savings in just 12 months from fact-based decisions around software licensing, supplier-side management and other areas.
TBM SHIFTS CONVERSATION TO VALUE
Many optimisations rely on changing the IT-business conversation to value. In a recent report entitled, Apply Technology Business Management to Shift from Tech Cost to a Tech Value Conversation, Forrester emphasises this point: “Technology business management is the adoption of tools and processes to shift the management of technology costs to technology value, enabling and supporting the acceleration of the business technology agenda.”
Apptio provides a modern transparency and analytics engine that doesn’t depend on perfect data
At Nationwide, Ms Bailey recognised the need to change the conversation to manage demand. “We had to change the nature of the conversations with the business. We are a growing business that can’t grow its cost base. We have to find ways to offset growth in volume, in transactions… as well as inflation and project cost,” she says.
Avoid dead-end approaches to transparency
IT financial transparency is nothing new, but for decades it was ahead of its time. Past attempts were impeded by the lack of packaged solutions, bespoke cost models which failed to include consumption data, and tools which depended on near-perfect data.
Times have changed. As the leading provider of TBM software, Apptio provides a packaged cost transparency solution that is purpose-built for today’s complex IT environments. Apptio’s software marries corporate financial data with IT operational data to reveal the total cost of ownership and consumption of technology.
Apptio creates transparency in the entire spectrum of enterprise IT: legacy and cloud infrastructures, insourced and outsourced services, off-the-shelf and custom-developed applications, security and compliance, and more.
To make transparency easier, Apptio developed the first generally accepted IT cost model – the Apptio TBM Unified Model™ – which is endorsed by the TBM Council, an organisation of more than 1,500 chief information officers, chief technology officers, chief financial officers and other enterprise executives. ATUM™ not only accelerates transparency, it provides the basis for meaningful benchmark comparisons.
Apptio provides a modern transparency and analytics engine that doesn’t depend on perfect data. In fact, Apptio expects bad data. According to Lance Warner, director of IT infrastructure at First American Corporation: “The worse your data is, the more you need Apptio.”
And Apptio is the choice of a wide range of financial services firms, including Bank of America, JPMorgan Chase, Goldman Sachs, First American, Lloyds Banking Group, Royal Bank of Scotland and Nationwide Building Society. Today more than 40 per cent of the Fortune 100 rely on Apptio TBM software.