Alex Guglielmetti is one of the many high-caliber IT Executives who will be facilitating group discussions at NCS Madison’s CIO & CISO Strategy Meeting on January 28, 2020 in Los Angeles, CA.
Alex is the VP Technology Project Portfolio Management for the Walt Disney Company. He will be leading the IT Cost Optimization group discussion. Here is a preview of what he shared with us in a recent interview for his upcoming session.
What are the opportunities for IT Cost Optimization and how do you take advantage of the opportunities in cost-related decisions? What are the challenges and how do you overcome them?
Today the biggest challenge most mid & large organizations are facing is managing their SaaS services efficiently. A Fortune 1000 organization today is managing 200-400 SaaS applications. Each of these applications has a slightly different license model, complex legal agreements and all of them have different consumption reports. This situation makes managing license usage and subsequently cost a very complex, time-consuming task that is almost impossible to centralize.
Software as a Service technology directly impacts the Line of Business budgets. However, in many cases, the person who performs application user-management (app-admin) is not part of the cost conversations or having any exposure to the application budgets. As a consequence, we may encounter a relaxed approach to managing the number of active licenses needed each month. I would guess that at any given time between 10-15% of a corporation’s paid SaaS licenses are underused. On top of that, in many cases these SaaS are procured as direct expenses using employee credit cards, making its cost tracking and management almost impossible at the enterprise level.
Deploying AI tools to scrub the general ledger to actively detect SaaS costs and integrate the tool with user SaaS logins is perhaps one of the biggest opportunities many IT departments can automate to achieve SaaS cost optimizations.
How do you protect your innovation programs in alignment with your organizational IT Cost?
A business should own IT cost of the applications they own and run, acknowledging the cost of run in their own business buckets will create healthy discussion around the value the technology is bringing to their business units. The cost and the risks associated with those technologies are known and then business knows better how much value they are getting out of them.
On the other hand, the cost of implementation of any new technology – that replaces an old stack of applications or adds new business capabilities – should come directly from IT OpEx and CaPex buckets.
Endorsing the cost of new IT solutions to the business units from the get-go is a tough sell, especially when the business executive has full P&L responsibility. Who in their right mind will introduce a project – with a high degree of uncertainty – that may compromise their end of year performance bonuses?
Innovation involves uncertainty (where the future outcome may not follow the course of past events). IT has a mindset that normally knows how to deal better with technical uncertainty and the dreaded “cost overruns” concept associated with innovation. Even the US tax system recognizes this problem by providing a Research and Development Tax break for initiatives that are technological in nature, have technical uncertainty and involve a process of experimentation.
As a consequence, innovation programs should be funded directly by IT budgets. This enables CIOs to work hand to hand with business executives and C Suite to explore and prioritize their technological innovations.
What do you consider the best practice(s) for creating and implementing an IT Cost Optimization strategy?
Following best practices suggested by the TBM council is a good start. Quickly understanding that all IT costs can be summarized in 9 groups will provide financial fundamentals that will help later as the process matures to identify in real-time ‘Applications and Services Costs’, ‘IT spend vs. plan (OpEx & CapEx variance)’, ‘Infrastructure costs’ and the holy grail in IT Costing: ‘% of IT investment on Run, Grow and Transform the business’ and ‘% IT investment by Business initiatives’.
 Internal, External labor, outside services, hardware, Software, Cloud Services, Facilities and Power, telecom, Shared Services and Other
How do you communicate the importance of IT Cost Optimization to business stakeholders?
Due to its relevance in the enterprise P&L, IT costs should be exposed to all involved parties on a monthly basis. I am a believer that each business unit should own the cost of running the applications that support their business. At the business level, the cost discussion is not complete without adding application road maps and goals on how these investments enable employee and business partners to deliver more value to the organization.
Roadmaps will help IT leaders to better understand where to allocate resources such as performing enhancements, learning and experimenting with new tech, replacing old tech, automation and integration efforts.
With the level of automation available today, all those IT Finance numbers can be produced on the fly, so that the energy and focus of IT leadership can be on product roadmaps.
What example(s) can you give of an organization successfully implementing IT Cost Optimization?
An organization I worked for a few years ago deployed a TBM tool. By the time we chose to acquire the solution, the IT department had solid IT numbers delivered by the Finance department and a mature IT Project Portfolio system of records. The objective was to integrate all this data sitting in disconnected systems in one repository.
Some of the real-time data ingested into the TBM tool included:
- Applications and server information from CMDB,
- Projects and IT resources from our Portfolio Management tool,
- Application usage from our SSO solution
- and Budget and Actuals numbers from our Finance ERP
Combining all this data allowed us to discover true IT spend by Business Unit, IT investment in shadow IT vs Corp IT, provide opportunities to conduct vendor rationalization efforts and also provided a greater degree of transparency on how much money was allocated to specific key business partners.
With this, there was immediate and ongoing awareness of costs by all team members, which allowed leadership to spend less time validating numbers and more time talking about IT solution roadmaps.
What is one thing you would like the attendees of your discussion group to leave knowing?
The importance of understanding how to manage cost and opportunity as key components of running an IT shop successfully.
Why have you decided to join us at the 2020 Los Angeles CIO & CISO Strategy Meeting?
I enjoy the network and the opportunity to share with my fellow IT counterparts the common challenges of our organizations.
We have limited seats available for the CIO & CISO Strategy Meeting in Los Angeles. If you are interested in participating in Alex Guglielmetti’s IT Cost Optimization discussion group or any of the other great discussion groups available register here: https://ncsmadison.com/cio-ciso-la/