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.

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.

2. client shift spending and resources
from legacy to strategic applications
and adopt an ROI-based decision
process for all new IT projects.
The incoming CIO gained a clear
picture of global IT spend, application
total cost of ownership and the
associated industry benchmarks.This
model enabled the client to understand
and optimize their IT spend.
WGroup also compared the client’s
IT spend to prevailing industry
market rates.This gave the client an
estimate for potential savings and
improvements through renegotiation.
Results
WGroup provided a comprehensive
IT spend and cost model to the
client.The analysis identified that IT
spend was not aligned with strategic
applications and programs. WGroup
identified numerous opportunities
for productivity improvements, and
made recommendations to reduce
costs while focusing IT efforts
towards strategic business initiatives.
Some of these recommendations
included negotiating lower rates
with the existing outsourcing
provider, consolidating server
administration functions, eliminating
and consolidating IT management
tools, and completing an application
portfolio rationalization effort.
WGroup recommended that the
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About WGroup
Founded in 1995, WGroup is a boutique 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.
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