A diversified global manufacturing company was experiencing increasing IT spend and needed assistance to understand if their spend was in line with their S&P 500 peers. The company was in the process of hiring a new CIO, and the current COO wanted to understand, historically, where IT was spending the bulk of their budget, and if this was within best practice. The company was also interested in WGroup’s evaluation of the existing outsourced infrastructure contract. In this case study, WGroup worked with the COO and incoming CIO to identify, categorize and optimize IT spend across the enterprise resulting in greater value of reduced IT spend.
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IT spend & cost modeling
1. Opportunity
A diversified global manufacturing
company was experiencing increasing
IT spend and needed assistance to
understand if their spend was in
line with their S&P 500 peers.The
company was in the process of hiring
a new CIO, and the current COO
wanted to understand, historically,
where IT was spending the bulk
of their budget, and if this was
within best practice.The company
was also interested in WGroup’s
evaluation of the existing outsourced
infrastructure contract. Beyond
simple benchmarking, the company’s
management team was looking for
insights around peer IT spend, value
of IT spend, and an assessment of
current service provider rates.
At the on-set of the project, the
client seemed to have a grasp of
total IT spend, but by the end of
the project, WGroup had identified
an incremental 25% of “shadow IT
spend.” Shadow IT spend is used to
describe hidden costs in the business
outside of simple IT budget line items,
and in the case of this manufacturing
company, it included duplicate spend
on infrastructure, excess server
capacity, and spend to maintain
multiple infrastructure management
tools. WGroup also found minimal
consolidation across the enterprise
and discovered that the client was
spending a disproportionate amount
on legacy applications at the expense
of underfunding strategic applications
such as the client’s ERP system.
Approach
Working collaboratively with IT
leadership, WGroup took a multi-
phased fact-based approach. The
first phase included aggregating and
analyzing both top-down and bottom-
up IT spend. In the second phase
WGroup normalized job functions
and assessed all IT roles. In the third
phase, WGroup cataloged applications
to understand function and stakeholder
groups. Finally, WGroup surveyed IT
and line of business managers to better
understand how much effort spent
was being spent to use and maintain
various applications, and also which
applications were used most often.
Insights and Advice
WGroup developed a detailed
financial and resource model to
show IT spend by tower, application
and business unit. The cost model
leveraged actual expenses, not
budget forecasts.To ensure accuracy,
WGroup does not recommend using
budget data for financial modeling.
Drive Your Business
IT Spend & Cost Modeling
WGroup Builds Reliable Cost Model to Identify
and Eliminate Shadow IT Spend
Manufacturing | IT Cost Analysis
1
WGroup worked
with the COO and
incoming CIO to identify,
categorize and optimize IT
spend across the enterprise
resulting in greater value
of reduced IT spend.