VideoSpinney says IBT does not have the luxury of investing only in technologies that boost efficiency, but must also provide certain capabilities that customers demand. "Our IT budget is driven by several needs: to enhance our technology, deliver better customer service, minimize risk, and provide better functionality," he says.
Therefore, several projects — including an internally developed custodial service and the purchase of an Oracle application suite — weren't made in the name of cost savings, but to improve the quality of the information the finance department uses while also enabling the CFO and line managers to make better decisions. Those benefits, Spinney acknowledges, "are hard to quantify."
To keep spending on track, IBT puts major technology projects through an ROI analysis, one built around conservative assumptions but no set payback period. Once the company sets its IT budget for the year and an executive team (including the president and CEO) approves priorities, finance director Ed Sargavakian, the finance department's designated IT analyst (who reports to Spinney), and Dave Mueller, director of IT finance (who reports to CIO Ted Maroney), develop a detailed work plan.
The plan is then reviewed by the company's decision-makers — the CEO, CFO, CIO, president, and managing director of operations — and implemented by the IT department. From their vantage points in finance and IT, respectively, Sargavakian and Mueller monitor the progress of IT projects. Mueller handles operational issues, while Sargavakian keeps tabs on the budget and forecasts for the year.
At the project level, IBT takes a tack similar to APL's, identifying what problem the company is trying to fix and which solution provides the most benefit. Working from a preliminary project evaluation form, the company's IT development team first decides if it even needs to fund a project or whether the problem can be solved with a manual workaround. "The IT development team works closely with the business unit," says Sargavakian. "The business unit identifies a problem, then the IT group goes through the specs to define the problem and come up with a solution, identifying the deliverables to meet that solution."
The close working relationship between IT and finance acquired an additional dimension earlier this year when finance became responsible for IT procurement. The goal was to leverage finance's expertise in negotiating volume discounts and other deals, but Spinney also recognized that the technologists know best what software and hardware they need to accomplish the company's IT goals.
So for the first month after unifying procurement under finance, finance discussed purchasing priorities with IT. "We don't want our new approach to procurement to result in finance dictating to IT what it should be buying," says Spinney. "We want the technology people saying, 'We need to buy x type of server or x type of software. This is how I need the server configured. Go out and get it for me.'"
The strategy paid off when IBT made a major investment in Oracle software. The company's human-resources, finance, and IT departments pooled their requests and requirements to the procurement office, which Spinney says enabled IBT to gain substantial leverage.
Consolidation helps drive better deals, but so does the current climate. Sargavakian says that in the past 18 months, most vendors have become more amenable to making concessions. He has found, for instance, that they will accept contracts that include clauses that limit the degree to which recurring costs will increase in subsequent years to between 3 percent and 5 percent. He's also been able to get "price holds," which lock in discounts throughout the length of a contract, not just in the first year. "You can get those discounts whether you are spending $1 million or $100,000," says Sargavakian. "At first you get the old 'We can't do that,' then the next thing you know, it's, 'We'll do that and more.'"
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