How to get more out of the IT budget - learnings from Amadeus and JLT

Profile picture for user pwainewright By Phil Wainewright March 10, 2019
Summary:
As all businesses ramp up spending on digital technology, Amadeus and JLT share lessons learned on how to manage costs and get more out of the IT budget

Businessman hand holding pen pointing at financial paperwork © Worawee Meepian - Shutterstock

Growing complexity is making it more and more difficult to track and manage IT budgets and spending. When everything is connected and many resources are shared, it's a massive task to allocate a meaningful share of costs to each function or project. Many enterprises are therefore turning to technology to get a better sense of the IT costs associated with each aspect of their business. Several dozen gathered at the Apptio European User Conference last week in London to exchange their experiences.

Among them were two organizations at different stages of adoption. Insurance broker Jardine Lloyd Thompson (JLT) has recently started using Apptio to provide more cost transparency to application owners in the business. Stephen Currie, IT Financial Controller, shared some lessons learned from its experiences. In contrast, global travel booking technology platform Amadeus — the European rival to America's Sabre — is already adept at using Apptio to forecast future IT infrastructure spend based on business demand.

At Amadeus, innovation outpaces IT spend

Guillermo Cuadrado, Senior Technical Manager at Amadeus Data Processing says that the €5 billion-a-year ($5.7bn) business is now able to calculate the IT cost attributable to each passenger or booking going through Amadeus, which means those metrics can be shown in the profit-and-loss statements for each business unit. That's invaluable for measuring the success of each new initiative as Amadeus delivers more features that airlines, hotel groups, insurance companies and other customers can include in their digital offerings to travelers.

In recent years, travelers have come to expect more and more sophistication from online booking systems, such as calendar views that show different ticket prices depending on when they travel. Behind the scenes, many of those systems run on technology built and operated by Amadeus, which is on course to process close to 700 million bookings for around 2 billion passenger journeys this year. But while the range of products Amadeus offers its customers is rising by an average 34% every year, all of that innovation is funded out of less than a 2% annual increase in running costs.

Transparency into costs is helping the business work with IT to accommodate goals for growth out of savings that can be made elsewhere in the IT budget, as Cuadrado explains:

I believe we should be talking about business metrics, not about IT metrics ... then we can talk with the business about expectations of more funding. If certain people insist on growing at 34%, we would say, OK, we cannot afford this growth, we cannot absorb it — let's talk about how we can fund these extra services.

Moving beyond 'spreadsheet hell' at JLT

JLT is at a much earlier stage of implementing Apptio — further delayed by its impending acquisition by larger rival Marsh & McLennan (MMC) in a £4.3 billion ($5.6bn) deal. Nevertheless, Currie was able to share some useful lessons learned from its progress to date. Some of those lessons predate its work with Apptio, after an initial attempt to quantify application TCO (total cost of ownership) had ended up in "spreadsheet hell," he says:

It just took so long and by the time you've done it the data's out of date, you can't easily update it — it's a one-time view ...

We needed a tool, we needed something that would work for us properly.

That early exercise did have one important benefit, however. It meant that the IT team began to understand the components that they would need to measure, and started recording application data in the general ledger and the CMDB database of IT assets. That meant that when they came to start working with Apptio, they already had a year's worth of solid data to get up to speed with. It was therefore possible to show some results early on, rather than having to do a lot of work before there was any data to analyze. So Currie recommends getting started on that as early as possible:

While you're thinking about what tool you might need to start looking at some of these issues, just start recording some of this in the GL, looking at the CMDB. It will all pay dividends in the long run.

The best approach with a broad tool like Apptio is to start with a narrow remit rather than trying to do lots of different things at once, he says. Also, don't aim for perfection before sharing it with business owners:

As an accountant, I'm not used to saying this. It doesn't have to be 100% right before you issue it to people ... Explain to people, fine, it's not 100% right yet, but this is really going to give you some insights — and I need you to help us complete that.

Getting support from around the business and communicating what the benefits will be is essential, he adds:

You've got to be able to get yourself around the organization and get support from the operations and the business because they are the guys that understand the detail of the infrastructure. ... And engage the CIO early on. That was key to us. I think if we hadn't done that it would have been a lot more difficult.

This is an initiative that needs to be properly resourced and requires collaborative support from across the organization, Currie concludes. But the objective at JLT is much the same IT budget insight as Amadeus has achieved:

Where we really want to get to is something that our group CIO is absolutely firm on — it will become the lens through which our IT business decisions are made.

My take

Businesses of all kinds need digital agility to survive — but their organizations have become reliant on IT in a piecemeal fashion over many years. This means that very few have any idea of what they're spending on their digital infrastructure, even as they continue to expand it in every direction.

As the experiences above show, it's hard work to get a proper handle on costs in a way that makes sense for planning an IT budget in the context of business goals. But the example of Amadeus shows the potential rewards — real growth in innovation to drive the business, without paying a huge penalty in mushrooming IT running costs.