Cost-effective doesn't necessarily equate to easy. That may have been the inadvertent lesson Con-way Inc.'s finance technicians learned when the company decided to outsource IT services.
"One of the things we found beneficial from outsourcing [is that] we could start over, to some degree, defining what types of data we collect," said Chris Levitt, chief financial officer of IT for the $5.3 billion freight transportation and logistics services company, headquartered in Ann Arbor, Mich. "It was a great idea, until we started getting all of that data."
While outsourcing its IT services gave Con-way a certain amount of freedom, it also presented new challenges. Levitt and a handful of IT finance and management accounting members who work on these issues became middlemen. They were tasked with both keeping track of who was using what and figuring out how the company can cut costs while continuing to grow and innovate.
It was a difficult position to be in, especially as the service providers began churning out and handing over more data than Con-way knew what to do with. The initial chaos left the team to wonder how much data and IT the company was actually using compared to what it was paying for. But there was a secondary problem. The team needed to communicate how IT is consumed in a way the business could understand. That kind of information delivered in a consumable way can help get all employees on the same page and change the dynamic of the conversation.
To get to the bottom of questions like those, they had to start looking at information technology differently: They needed to figure out its true total cost of ownership (TCO); they needed to run their IT program like a business.
"At Con-way, we've become a governance team," Levitt said. "We wanted to know how we were consuming IT."
Better visibility needed
Determining Con-way's IT consumption was not without its challenges. Levitt and his team had to figure out how to standardize the data intake and calculate the return on investment (ROI) for the products their vendors provide. But they also had to scrutinize how their vendors were charging them.
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Ahead of an invoice, service providers send a monthly snapshot of the freight company's infrastructure usage. The reports were difficult to contest because when Con-way decided to outsource, it chose a best-of-breed approach, which spread the IT program out over several vendors. Today, Con-way outsources 26 IT product categories within its infrastructure services catalog. Six different vendors provide things like servers, laptops and printers as well as Windows, Unix and Linux software.
That made it harder to pin down who was using what, and Con-way had to trust it was being charged appropriately. Within Levitt's department, which bases much of its work on data, trust alone felt too flimsy.
"One of the first questions that came to me was, Do we have confidence what they're charging us for across the infrastructure? That the server counts are right? That the storage is right?" he said.
Levitt and his team couldn't say for sure, nor did they have good visibility into how the company's data assets were being managed. So they decided -- for all intents and purposes -- to see how Con-way consumed those services by building a window. They began looking closely at software providers like Blazent, which offers a golden record asset point solution to keep tabs on a company's data assets; Digital Fuel, an IT financial management software provider; and Apptio Inc., which provides a technology business management product to help manage IT services.
Breaking the paradigm
"We started looking away from a point solution because, as an IT finance organization, we recognized that existing enterprise accounting structures were not sufficient for running IT like a business," Levitt said.
The enterprise accounting system could provide a chargeback to the business but, Levitt said, it often failed to match the reality of how IT was consuming resources and how the business was consuming IT. Con-way needed a tool that could break out of the old paradigm and provide better cost visibility, chargeback visibility and a clear line of sight into IT economic services, including benchmarking. Levitt also wanted to have the data flow into their financial system already aligned with their accounting processes to maintain a certain consistency from month to month.
The team eventually selected the Bellevue, Wash.-based Apptio and its budgeting and reporting Software as a Service (SaaS) application IT Service Costing.
"Every other part of the business has its own ERP [enterprise resource planning] capability that integrates multiple functions, processes and information," Levitt said. "Just like the transformation the business went through with ERP systems, converting spreadsheets, updating processes, deconstructing and reconstructing, viewing the business through a new lens -- that's what Apptio is doing for IT."
The tool has helped Levitt and his team provide data to their IT power leads -- members of the IT team who operate like business relationship managers and provide insight into what a business unit is consuming. The process has helped the finance IT organization and the business speak the same language by drawing clearer, more detailed lines from the infrastructure and application services to the business.
Since rolling out the Apptio application, "there's been a lot of diplomacy between IT and accounting," Levitt said.
This was first published in December 2012