The Arkansas Division of Information Systems (DIS) is the premier information technology products and solutions provider for the state. It provides telecommunication services including VoIP, connectivity, internet access, and maintains the state network. It also provides mainframe, hosting, backup, disaster recovery along with application hosting and programming services as well as some professional services like database administration and data warehousing.
DIS delivers over $80 million in IT products and solutions to approximately 300 state agencies, boards and commissions, K-12 public schools, business and administrative departments of higher education, cities and counties, and public safety organizations across the state.
As Chief Fiscal Officer of DIS, Amy Buss, oversees the sizable budget and ensures the state maintains a high level of fiduciary responsibility to its taxpayers. Buss is a seasoned fiscal officer with a passion for cost accounting. To her, it’s intriguing and interesting to see how much services, goods really cost. She’s not just about the high-level cost, or the bottom line. She cares about the detail.
Thanks for taking the time to speak with me. I understand that you implemented Apptio’s Cost Transparency and that you’re in the process of doing so with their IT Financial Management Foundation. With respect to your TBM journey, what were the pain points that you were experiencing that led you to look for a solution like Apptio’s?
I joined the agency in December of 2017. I was brought in specifically because of my cost accounting background and to help with the significant under-recovery situation the agency was experiencing. DIS’ funding comes through a chargeback to our customers; we receive no general revenue so what we bill for our services must cover our expenses. We are basically a retail vendor to our customers and our charges impact their budgets. Because of this, our agency needed to run more like a private business rather than a typical state agency where you get appropriation, you spend as much as you can because you don’t want to lose it next year. Also, accounting for a typical state agency was at a higher summary level than what we really needed to adequately charge for our services.
So, I thought I would come right in and clean up our accounting, make some changes, problem solved. Famous last words. I thought I would start with an obvious issue, our administrative overhead rate which was too high but when I started looking at the information and trying to research it, there was no transparency. In looking at our accounting overall and how we charged for our services, it became obvious that we did not have the detail that we needed. It was very difficult to analyze expenses and determine what exactly was in our rates. How can we adjust our rates when we cannot see what is included?
What I mean is that everything was done on a spreadsheet. You literally took a sum of your general ledger accounts and dropped them into cell D8 and then allocated it. And from that, from step one allocation, it was a grand total number. The Excel sheet cell D8 didn’t know who the vendors were, didn’t know if it was people cost or vendor cost. There was absolutely no detail. So, I’m like, “How the heck do you people do your accounting? How do you analyze stuff if there’s no detail?” The reason for the under-recovery had become quite obvious.
It was bad. So, I stepped back and went to the one place where we should have some visibility into our costs, our general ledger accounts. But there were limitations there. We were using the state’s accounting system which is administered by the main financial agency, Department of Finance and Administration (DF&A). They set the general ledger accounts and I found I couldn’t simply add a new general ledger account to create more detail because that created a challenge.
As an example, a lot of our stuff goes into audiovisual equipment. I don’t know how old you are. You may be one of these millennials that don’t know what I’m about talking about, but when I hear audiovisual equipment, I picture the cart coming in with the great big box TV on it. When you’re in school, yay, movie day, right? I don’t think telecommunications or any other IT stuff. But that’s where most of our expenses get dropped, is into this Audio-Visual GL account, so finding a way to dive in deeper and get the detail we needed outside of our accounting system was important.
A new system of reference was necessary so we started looking for IT financial management tools. TBM was not on our radar, we were only looking for an IT financial management tool. I needed to get a system that I could see the detail behind the numbers, including the allocation detail. I didn’t need to see the overhead as a, you know, 7 figure number, I needed to see that it was made up of people, places, things.
When we started looking for an ITFM solution, of course, we talked to sister states, and unfortunately, almost everyone was using spreadsheets. We knew the State of Washington was doing something different at that time. And the tool they were using was called Apptio. We looked at other tools, but Apptio provided the flexibility to break down the detail behind the numbers that I needed.
When we looked at other solutions we would hear “Oh you need a Java programmer, you need this, you need that.” I’m like, “What? I need a tool that is adaptable to me and I can customize.” These other products actually required hiring a programmer and I don’t have that in my budget. I’m a support function to the DIS IT staff and they serve our customers, so taking up an IT position to support the ITFM tool wasn’t going to happen. The fact that the Apptio tool could be administered by mid-level Excel skill was key and I already had that kind of resource on my team.
We did a Proof of Concept (POC) with Apptio that went very well. With that success under our belt, we decided to go ahead and procure and implement the tool. It was during that period that we really started diving into technology business management (TBM). They gave us the TBM book and started talking to us. When we started getting into implementing this and we saw what this taxonomy could offer us, I was impressed and felt we needed to start paying attention. I went through the TBM council training, the executive foundation certification course, and that just really helped increase the knowledge base.
We attended the government track of the certification course and were there with other federal and state government agencies. So, the examples that were discussed all pertained to us and made things click with the TBM methodologies. We are just starting to really get deep into TBM, but what we’re seeing out of it already is giving us a level of insight that we could not get with just our GLs and our vendor information.
When you were comparing solutions in terms of functionalities and features, what were the must-haves for you and what were the nice-to-haves?
The must-have was a drill-down capability. I wanted to be able to have a dashboard or summary, that when I saw a figure that piqued my interest, I could drill down into that detail. I did not want to have to see a number and then go to 15 other reports to get the detail and download stuff. The nice-to-have was on-the-fly reporting. I just want to change this around and put this column here, and that column there and, or create an ad hoc report on the fly. We ended up getting those two things.
You serve a complex matrix of different kinds of customers it seems, and I imagine that they all have different requirements. Has this helped you create transparency through all your different customer models?
Yes, I will say as far as the complexity of our services, we offer a plethora of services. We are federally regulated on how we can chargeback, so that is uniformed. To your point of every customer’s kind of different, you know, we have 3,000 rates to services we actually sell. This just blew my mind when I walked in. But the biggest as far as transparency to our customers, some of the biggest challenges we had with them, especially when they said our rates were too high, was that they didn’t know what they were paying for. They didn’t know what was included in the rate and neither did we. Because again, once it passed that level one allocation, you lost all your detail.
That said, the numbers were always right. We started with 75 million at the beginning of the process and ended with 75 million at the end of the allocation process.
How do you feel about where your organization is currently with its TBM planning?
We’re still in the infancy stages. We have what we call our legacy cost model in the tool. And it runs very well. We’re just now starting to get into the technology business management part of it and seeing what that can reveal for us. One of the things we’re really wanting to explore with TBM is the cost-effectiveness of projects and making sure that we’re investing our IT dollars in projects that are, not necessarily up and coming, but up and coming and continuing, not sunsetting projects.
Expanding our project section is one that we have slated to get done by the end of the year so that we can see the cost of projects and we can make sure that cost is being allocated and spent on projects that are at least continuing. We ran into one situation where we had expenses coming through on projects that were sunsetting which is not maintaining a fiduciary responsibility toward taxpayer dollars. We’re in the beginning stages and we’re seeing some very interesting things. Now it’s just getting all that information, digesting it and knowing what to do with it.
Where do you see yourself taking TBM for DIS in the future?
We would like TBM to completely replace our legacy cost model and let that be our cost accounting method. Right now, we do activity-based costing and TBM is a type of activity-based costing but is a little more disciplined in the taxonomy. We would like to be able to compare to other States with the benchmarking.
Ultimately, we would love to be able to show enough cost-effectiveness, cost efficiencies, cost improvements to our sister agencies that we can roll this out to statewide IT spend. That’s probably more than a year from now, but that’s what we would like to see so that when the state is spending IT dollars, then the state is categorizing it in the same way. Having the same conversations, having that common language for benchmarking so that we can help other agencies, “Hey, you know, it’s costing you $10 per user per month and this agency is doing it for eight, what are you all doing differently?”
Right. No standardization.
No standardization at all. If I want to call it a server and put in Audio Visual Equipment, and you want to call it a server and put it in Data Processing Equipment, you have been able to do whatever you wanted in the past and that needs to change.
So I would imagine some of this is about being able to scale too.
Yes. When we first started looking into TBM and Apptio, we heard the story of GSA, which is a federal agency. One of their divisions said, “Hey look at this new taxonomy and look at this tool,” and they were challenged to implement it within their division. Then they rolled it out into the rest of the agencies within GSA. Now it’s federally mandated that all federal agencies have to use TBM to report their IT spending. So, the scalability of both the taxonomy and the tool is huge.
Even if we don’t end up like the State of Washington, where all agencies that spend over $100,000 have to use TBM, even if we don’t do all agencies, even if we just get some of our big customers that have big IT spend, like Department of Human Services or DF&A to use it, we can start seeing the effectiveness which goes back to our fiduciary responsibility with taxpayer revenue.
That’s great. What haven’t we covered that you’d like included in the conversation?
We were hesitant, we were in that spot and the last thing we wanted was another tedious cost accounting methodology dropped on top of our head. TBM enhances what we already do. Some of the concern was maintaining two systems and two cost accounting methods but that is not the case and again, TBM simply enhances what we do. Hopefully, it’ll replace it completely, but even if it never replaces it, it fine tunes what we do in our current cost model. It’s not an either-or, it doesn’t have to be an either-or.
Also, even in the early stages of implementing TBM, we’re seeing positive results and getting good data and information that we can act on. So, the way the taxonomy is built, you don’t have to be a top-level expert before you can start seeing benefit from it. Don’t worry about those top levels of business units. Start down here in cost pools and IT towers and get this right, then it kind of grows.