A leading charitable healthcare system sought an assessment of their technology use due to issues stemming from technical debt and lack of standards, which contributed to inefficiencies and higher costs. The consulting firm, wgroup, concluded that productivity could be significantly improved by realigning staffing, building out support functions, and standardizing processes. With recommended changes, the healthcare system could potentially save about $25 million annually, representing a 16.5% reduction in operating costs.

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. 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
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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.
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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. 2APPROACH
WGroup focused on getting the cost and work breakdown
structure aligned with common outsourcing work structures.
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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. 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.
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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.
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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.
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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.
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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. 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. 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.
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11. 4RESULTS
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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. 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.
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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. 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 www.thinkwgroup.com or give us a call at
610-854-2700 to learn how we can help you.
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