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A prescription for saving money case study


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Using market-based comparisons to drive transformation planning for a private healthcare hospital system. Are your technology costs in line with what best-practice outsourcing providers would charge for similar work? This is a case study showing how a market assessment led to a transformational roadmap - and the chance for a hospital system to save millions of dollars.

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A prescription for saving money case study

  1. 1. A Prescription for Saving Money Drive Your Business Case study Using market-based comparisons to drive transformation planning for a private healthcare hospital system
  2. 2. The client, a leading charitable healthcare system with over 70,000 employees operating in the western United States, was seeking an organizational technical assessment. The new CTO believed that the company was suffering from technical debt and a lack of standards that was creating issues with productivity, cost, and service delivery. Over the course of business development, the hospital system had grown significantly, affiliating with 12+ hospital organizations over the last 10 years. The affiliation process allows for the newly joined entity to keep much of its infrastructure, people, and practice to assure consistency in service delivery. 1OPPORTUNITY 2
  3. 3. The company’s current practices would then be compared to those provided by best in class outsourcers to measure their cost-effectiveness. This would provide the opportunity for the company to optimize its IT infrastructure, improve productivity, and reduce costs. 3 The client contacted WGroup to help it assess its current use of technology, possible technical debt, and its effect on the enterprise. To achieve some synergy, the technical engineering functions were most often consolidating volume of work without adding staff. This, compounded with the drag along effect of no standards, caused productivity squeezes and service-delivery issues.
  4. 4. 2APPROACH WGroup focused on getting the cost and work breakdown structure aligned with common outsourcing work structures. 4 This enabled us to develop an apples-to-apples comparison between the client’s costs and what best-practice outsourcing providers would charge for similar work. We worked both on unit costing and productivity for staffing, with a first engagement focused on infrastructure, engineering functions, servers, storage, database, network, and telecom. A secondary engagement focused on service desk and deskside support.
  5. 5. We interviewed and regularly met with the CTO, engineering leadership, and a number of the performers in functional areas. We reviewed the staff levels, cost basis, inventories of assets, logs of tickets, project and problems, processes, and work breakdown structure for each group’s activities. This provided a comprehensive view of the costs and effectiveness of systems and processes within the company, allowing us to make a complete analysis. 5
  6. 6. This market-based comparison allowed WGroup to identify problem areas and determine a best-fit approach to transformation planning. The analysis revealed that the client’s productivity (units per engineer) was close to best in class for support work. However, we also found that their costs were 15 to 25% higher on a unit-cost basis. This was due to two factors. All the client’s staff were local, senior technicians who assigned all the routine and lower level work to senior techs. They did not have or effectively utilize junior technicians and support organizations, like the NOC (Network Operating Center). This meant that their labor costs were significantly higher than necessary. We also found that the lack of standards in operating environments, account management, domain structure, and group policies led to duplicate work to accomplish tasks in multiple environments. 6
  7. 7. 3INSIGHTS + ADVICE Although the client’s employees were performing at a very high level given the environment, strategy, investments being made, and the lack of standardization, improvement in each of these areas could significantly increase the efficiency and cost-effectiveness of IT operations. The company was not optimally allocating its employees to areas best matched to their skill level, and repeated acquisitions led to a major lack of standardization among systems. 7
  8. 8. The client had several employee allocation issues that were leading to increased costs and inefficiency. High-level personnel were regularly responding to routine tasks, such as resetting passwords and recovering databases. 8 This wasted valuable resources on tasks better suited to junior staff. Additionally, they were not making effective use of automated tools to perform routine tasks. They relied heavily on scripting from the engineers for everything from monitoring to recovery tasks, taking engineering time to custom develop and support these scripts. Although the client knew they had significant technical debt, we found that this was only responsible for a portion of their loss in productivity. Because the client had acquired several smaller companies and left many of their systems and processes intact, there was little standardization across the enterprise. This lack of standards caused redundant efforts to implement a single change in multiple domains. This drastically reduced productivity, matching the effects of technical debt.
  9. 9. WGroup found that productivity could be increased 3 to 4% by building out and empowering the NOC and shifting routine work to more junior staff.
  10. 10. We recommended that the company reassign its senior staff to roles where their expertise could be put to better use and that they take on additional junior staff to provide the low-level support roles. Driving standards to improve consistency across the organization would improve productivity by 5 to 7%, while investment and deployment of contemporary technologies like cloud orchestration and automated-response technologies could provide another 5 to 7% relief. 10
  11. 11. 4RESULTS 11 The lowest hanging fruit of the recommendations was the shift of lower level tasks to junior staff. Building out the NOC, providing the monitoring tool sets needed, and creating the knowledge base articles needed would take six to nine months. Standardization efforts focusing on standard configurations for packaged software acquisition was an additional high-priority item. Standardization of the environment was a longer-term issue but would drive both responsiveness and cost benefits.
  12. 12. It was recommended that the client delay staffing reductions until after the technical debt issue was resolved in approximately 2.5 to 3 years. Downsizing in the near term and then hiring surge capacity to handle a server operating system upgrade would have cost the client $4 to $5 million more than retaining in-house, knowledgeable staff until after the upgrade was complete. 12
  13. 13. With the recommendations implemented, the client could reduce its costs significantly. The opportunity for cost savings was about $25 million per year on a $151 million per year baseline, or about a 16.5% reduction in operating costs. These initiatives are still underway. The client is already seeing significant positive results and is on track to realize the full cost-savings potential.
  14. 14. Founded in 2004, WGroup is a management consulting firm that provides Strategy, Management and Execution Services to optimize business performance, minimize cost and create value. Our consultants have years of experience both as industry executives and trusted advisors to help clients think through complicated and pressing challenges to drive their business forward. Visit us at or give us a call at 610-854-2700 to learn how we can help you. 150 N Radnor Chester Road • Radnor, PA 19087 610-854-2700 • ©2015–2016 WGroup