In the last couple of years, Cargill has brought all of its IT spend into global IT owned and managed service lines. Global financial data is pulled together to create a service-oriented bill of IT that has shifted conversations with the business to value vs. cost. Now, Apptio IT Planning is helping the team push accountability to business owners, promoting a focus on value creation and innovation instead of the cost of the IT bill. New efforts to plan and forecast in real-time are helping the team evolve from order takers to innovative leaders within the organization.
Cargill Corporate Overview
Cargill is a privately held, multinational corporation. Cargill’s business activities include purchasing, processing, and distributing grain and other agricultural commodities, and the manufacture and sale of livestock feed and ingredients for processed foods and pharmaceuticals. It also operates a large financial services arm, which manages financial risks in the commodity markets for the company.
New insight and visibility allows IT Finance to take lead in strategic planning
Running a billion dollar IT organization without the ability to analyze cost levers, forecast, and plan on a real-time basis is challenging. Just ask Cargill. Up until late 2014, the $107 billion agriculture business giant was doing just that.
The organization struggled to translate IT spending into actionable business terms. “We had a lot of manual processes, lots of spreadsheets,” said James Pleis, Cargill’s IT Finance Lead for Global IT. “And, oftentimes, the results of IT became a finance problem; meaning, we were the ones explaining IT to the business.”
To help navigate a constantly changing business environment, Cargill needed a more analytical point of view and a way to better explain IT results. This would ensure the team was doing everything possible to help maintain a strong position in the world’s ag-business food chain.
“We started looking for an IT financial management tool because we didn’t know our costs very well, not the specifics anyway,” said Jan-Willem Ligthart, Cargill’s TBM Lead in IT Finance. “To move the company forward from a technology standpoint, we knew we needed to do better. We needed better data.”
Cargill did not suffer from a dearth of data. Instead, the problem was an inability to use it efficiently for productive problem solving. “What we saw with TBM and Apptio was the potential to use cost drivers like consumption, asset management data, and CMDB data as inputs to our IT financial planning,” Ligthart explained. “Having a tool, a platform, to standardize all of worldwide operations on was also incredibly attractive.”
Their previous ITFM process hampered their efforts to do more than plan on an annual cycle and it required a small army of consultants. But what really highlighted Cargill’s need for TBM was its strategy to centralize global IT operations and applications under one roof in order to remove redundancies, save money, and improve planning.
Consolidating financials provides better visibility
What really highlighted the need for TBM at Cargill was a new strategy to centralize global IT operations and applications under one roof, an effort designed to remove redundancies, save money, and improve planning. To get a feel for the challenge this represented, it’s important to understand the enormity of Cargill’s operations.
At any one time, 20% of the world’s food is in Cargill’s supply chain. The organization trades commodities, operates a trans-oceanic shipping business, and owns hard assets like mines, plantations, grain elevators, and food processing plants all over the world. Basically, if food is being refined, financed, moved, or produced, Cargill is there.
Reining in and managing spend while simultaneously enhancing the value of technology to this widespread organization required much better visibility into IT spending. By providing this transparency, the company’s IT service managers and business relationship managers (BRMs) are able to more accurately forecast how the business will use IT. In turn, they better manage IT’s overall costs and the value the company gets from its spending.
“We were once many separate IT teams within a very large company,” said CIO Justin Kershaw. “Now we’re all on one financial platform and we’re one global IT team under a single org-structure and philosophy. Now we plan not as separate, isolated IT teams but as a global team.”
Introducing a better bill of IT
The company has always used chargebacks for centralized IT costs, but they were often based on high-level cost allocations (like cost per FTE) that were not granular or actionable by business leaders. With TBM, IT Finance was able to institute a bill of IT that gives IT’s service managers and the company’s 130 business relationship managers (BRMs) more control. Now they can collaborate on service optimization without hindering the business’ ability to execute.
“With the bill of IT, you can quickly see what technology is being used, who is using it, and even where it’s being used,” said Ligthart. “That puts the levers that control IT costs closer to the business.” Those levers come in the form of analysis and decision-making now made by the BRMs.
Ligthart explained, “We made chargeback data available in a very structured manner and then we built some ‘what if’ tools so the BRMs could say, ‘Okay, what if I virtualize 25% of my servers? What if I expand the business with X number of users? What if I change my mobile voice policy?’ When the BRMs play around with the variables, they can quickly see how they can influence costs. So now they can have value-based conversations with their partners.”
Value conversations lie at the heart of TBM. But these can only take place once cost is no longer the main topic of conversation. This allows both IT and the lines of business at Cargill to focus on the strategic value of technology moving forward.
From transparency to better IT planning
Over the last two years, IT has been actively integrating all of its financials under TBM and rolling out reporting to service owners and BRMs. “Now that there are hundreds of people in the organization using bill of IT and TBM-driven reporting to make decisions, the results have been impressive and immediate,” reported Pleis.
Combined with other efforts like application rationalization and optimizing IT teams, the organization has saved more than $20 million in the past two years.
“Just by making some changes to how we allocate our server costs, we’ve been able to take $5 million of cost out of the company, correcting the prior model that drove wrong behavior around server choices,” Pleis said. “TBM does this by putting tools in the hands of the business so service owners, budget owners, and others can really own, understand, and explain results in business versus finance terms. As people know more of their information, they can act on it and we can make better decisions overall.”
In addition to empowering supply-side IT leaders, TBM helps Cargill shape the demand side for IT as well. This is where the bulk of the cost savings can often be found.
“It changes behavior if people are charged with what they use,” said Pleis. “Our TBM journey was started by finance to demystify IT, to explain to our businesses about the functions we support. We’ve done a lot in the last couple of years to tell that cost story better and, now that we’re talking about value, we’re becoming a key part of Cargill’s strategy.”
Part of that behavioral change is a new focus on really maximizing the value of IT. Rather than spending less but doing less, the team‘s goal is to use the insights and visibility TBM provides into operations to plan IT’s next moves.
“We’ve always had an annual budget process and it’s always been very painful,” said Pleis. “Without good, TBM-based processes in place to manage all of the information and the allocation views, we tied up our BRMs with basic activities around just telling the cost story. With Apptio IT Planning, not only do we become more accurate in what we forecast and what we do, but we can finally answer business questions, like ‘Are we doing the things that we said we were going do?’ We can have more value-based discussions. That’s where the opportunity lies.”
Removing the emotion from decision making
As a family-owned business for over 150 years, Cargill has a strong, family-oriented culture. While this culture is important, the company thrives when it can make decisions based on facts.
“I would say our culture was a challenge for us,” said Kershaw. “We’re very relationship-oriented. Think about a family, right? Quite often, you’re doing things with the best of intentions but they’re not anchored in the numerical analytics that you need. One of the things TBM is helping us do is see the problem in a numerically, analytically-curious way. And that often helps to remove emotion and focus on what it is you’ve really got to solve.”
No longer constrained by a lack of cost transparency, CIO Kershaw feels empowered to help lead the organization forward, instead of merely taking orders in support of a business direction set by others.
“Cargill just rolled out its new global IT strategy,” said Kershaw. “And our strategy is out before the businesses have announced what their strategy is. The first question I got from management was, ‘How can IT be coming out with a strategy before our businesses have offered theirs?’ And my response was, ‘It’s a new day. IT’s in the lead now.’ The business strategies will need to follow our lead, because where we’re going is where the corporation has to go.”
One might assume that this approach would be met with some consternation in the C-suite but this was not the case. It’s quite the opposite, according to Kershaw. “We have the thumbs up from our executive team,” he said. “That’s another outcome from getting better at this. We’re not order-takers anymore. We’re moving into a leadership position.”
Fulfilling a key value: trust
While the cost savings, real-time reporting, and ITFM integration are major milestones and should be seen as such, for Kershaw, TBM is much more personal. It’s about moving IT into the trusted role it needs to play if Cargill is going to remain competitive.
Data is now actively leveraged to inform and enable innovation discussions, supporting new strategies for cloud, digitization, and data center location. “TBM has contributed to shifting these conversations by ensuring analysis is anchored in knowing our numbers and having them be accurate,” said Kershaw.
“Everything we do in global IT is anchored in our four core values: Deliver with Excellence, Commitment to Serve, Continuous Learning, and Trust and Respect. If you don’t have our last one — Trust and Respect — then you just can’t get done what needs to be done. And, business leaders trust and respect people who know their numbers and hit their numbers. TBM really helps us with that.”
“In the past, we weren’t really trusted as a business partner— and we’re a billion dollar business unit,” said Kershaw. “Today, our performance is well ahead of our brand. Our performance is earning us that trust.”