To align IT capabilities to Unilever’s strategy for growth and efficiency, IT has moved from a centralized investment model to a customer-centric approach underpinned by technology platforms and TBM financial data. This has enabled the organization to quickly right scale IT costs, develop accurate chargeback models, cut the number of services it supports by half, and align spending more closely with industry benchmarks. Also enabled to focus on key platforms, Unilever is planning to grow and be more efficient by removing legacy systems.
Unilever corporate overview
Unilever is one of the world’s best-known consumer goods companies with over 400 leading brands. Every day, 2.5 billion people use its products. The company sells products in more than 190 countries and employs 169,000 people. Unilever’s purpose is to make sustainable living commonplace. They believe this is the best way to create long-term, sustainable value for stakeholders, customers, and consumers.
To know Unilever is to know its brands: Lipton, Dove, Knorr, Wall’s, Hellmann’s, Domestos…and about 395 others that span the globe. Unilever is a consumer packaged goods company with operations in 90 countries (and sales in 100 more), 2016 revenues of €52.7 billion, 169,000 employees, and 2.5 billion customers, approximately one out of every three people on the planet.
Like many organizations that turn to technology business management (TBM) and Apptio to lift the veil on IT spending, managing the technology infrastructure at Unilever to support such a massively far-flung organization is, to say the least, a challenge. Because the company does business in so many parts of the globe, the organization manages itself by grouping together countries into what it calls “clusters.” Technology costs are managed centrally by Unilever’s technology, data, and service function and then allocated to the clusters via a turnover-based algorithm.
But this centralized system was inefficient and did not fully recover the costs of providing IT to the MCOs (multi-country organizations), as it was impossible to relate costs by service/application. To remedy this situation, Unilever turned to TBM.
“We saw the need for a transformation in the way we manage IT at Unilever, and there are several aspects to it,” said Gopalan Natarajan, CFO, Global Business Services. “One is to make sure that our IT capabilities are much more closely aligned to the Unilever strategy of growth and driving efficiencies. The second is to drive greater transparency and accountability for IT costs and benefits across the whole organization. That’s where TBM really came into play, in terms of driving an end-to-end concept on how we manage costs, how we manage benefits, and how we drive accountability in the organization for IT costs. And, finally, to reduce costs to the benchmark of 1.8% of revenues from 2.2% to help the company attain its goal of 20% margins by 2020.”
For Unilever, TBM and Apptio checked all of these boxes.
Cost transparency underpins a new business model for IT
“It was very clear that we were carrying a huge legacy cost in terms of amortizations on existing investments, and that the business was increasingly seeing IT as a burdensome cost base,” said Natarajan. “We had to do two or three things simultaneously to get into a better space.”
The first thing Natarajan and his team did was to start working on the business model. ”When the IT organization was set up, it was a very centralized organization. And, over time, the different organizational units we call clusters started seeing this as an unconstrained ‘central’ pool of funds, as they did not see the costs directly in their P&L. The business model needed to change so the recipients of the service could see the cost of IT, the benefit of IT, and be fully accountable for IT.”
“We ran a pilot in India last year and ended up recovering almost €15 million,” continued Natarajan. “This is hard cash coming in—money in the bank— and this was only possible because Apptio gave us the exact details of what it cost to provide various mobile services.”
New model places technology platform, as well as internal customers, center stage
In order to re-architect its business model so that every country and function could be billed accurately for their technology consumption, IT embraced a technology platform-based approach to delivering shared services, instead of the previous, project-based way of doing business.
Platforms are an integrated set of globally standard technologies that span the company’s digital products and information systems that support a key business function; for example, sales. By putting platforms at the heart of their agenda, IT can rapidly create and roll out business solutions while reducing total cost of ownership (TCO), decreasing complexity, increase scalability, and speed up innovation and digitalization.
“TBM gives our operations in each country clear transparency of their platform expenditure across the IT landscape, understanding how shared resources affect their specific applications and services,” said José Silva, VP, IT Shared Services. “By unlocking and being able to present the true value and costs of the solutions to the business in business language, we will ensure they have the solutions to drive growth both globally and locally while reducing run cost and increasing the capacity for innovation.”
Moving away from a financial view of IT costs (infrastructure costs, application, service desk, etc.) to managing those costs from a business perspective was a huge cultural shift for both IT and the MCOs it served. Even with this challenge, the ROI of that shift has been quick and substantial.
“If you look back to 2015, almost 80% of our IT cost was, frankly, a black box,” said Natarajan. “We didn’t know exactly what those costs were going towards, in terms of the final cost of the service or an application. What Apptio and TBM drove is a much sharper understanding of costs at an application level and at a service level. So, we went from 20% to now almost 80% of the costs being completely identifiable to either an application or a service.
“We are now in a position to deliver a bill to all countries for the consumption of the services and to work with the business in relation to the value IT delivers.”
Better data leads to better outcomes
For all companies, amassing accurate IT spending data to achieve such a positive swing between mapped and unmapped costs is difficult. Unilever solved a big part of this problem by improving the accuracy of their configuration management database (CMDB).
“We had a CMDB but it wasn’t as accurate as we needed it to be,” said Silva. “So, we started to clean it up. It took a lot of learning. We used automation tools to accelerate the discovery of servers and databases and for all the infrastructure information. At the end, we closed the cycle by mapping all of that information into Apptio and into the platforms so we have a good view of not only investments, but also how everything is related.”
Prior to this effort, only about 30% of IT infrastructure costs were traceable back to the business unit or service that consumed them. Using TBM as the foundation of their efforts, Unilever has managed some very positive changes:
- 30% increase in server-to-services relationships
- A 22% increase in their database discovery efforts
- Over 95% of their servers are now discovered
- Total cost of ownership (TCO) visibility into more than 70% of their services
“The single biggest thing from my perspective is around change management,” said Michael Whittaker, Director of Transformation. “The CMDB data is at the heart of our operation. It feeds the way we log incidents. It feeds how we charge for consumption using Apptio. It feeds information around life-cycle management to keep the environment current. Articulating the value of having accurate data to people that consume it has been key to making the transformation to TBM successful. As part of that, there are views around how we are shifting to software-as-a-service, how we are moving things into the cloud, and what that means from a technical point of view. So, it’s quite comprehensive.”
Another upside for the MCOs (as well as individual functions within those MCOs, like Marketing) is they can now view their technology choices from a TCO perspective that ties back to business outcomes. Based on those insights, they are able to make smarter technology purchasing and technology end-of-life decisions.
“That was another big change for us,” said Silva. “Before this role, I was in Marketing and the way we governed was much more around looking at innovations for the future. We’re always looking at our portfolio, looking out one or two years. We never did look at the total cost of ownership.
“What Apptio enabled us to do is to put that conversation on the table, with functions, clusters, and the platforms. That was a key enabler in order to make decisions that are much more balanced, because now you have the chance to look at the impacts of the choices you are making.”
Transparency leads to project focus and optimized services
This balanced, data-based approach and the move to a platformfocus for delivering shared services has enabled enterprise IT to reduce the number of those services by half, from 4,000 pre-TBM to 2,000 today.
“Before TBM, most of our decisions were made based on different sources of data—if the data was even available,” said Silva. “Now we are challenging everybody to use a single version of the truth. And that key change was enabled by the platforms and Apptio.”
All of this cost data is also allowing Unilever to better manage the total number of technology projects in queue, as well as the business value of those projects. In pre-Apptio years, this just wasn’t possible. Before TBM, Unilever spent nearly half it’s IT spend on 650 projects per year. Now, they are spending half of that on far fewer projects.
“If you look back at 2015, we had a situation where the project landscape was fragmented, and governance was weak,” said Natarajan. The question for us was ‘How do we drive IT to the right destination where costs are lower, the priorities are right, and people recognize what they are paying for?’ So, a completely different paradigm was necessary, which is where the new IT governance model with transparency was absolutely necessary to bring all the stakeholders to the table to make the right choices.”
Cost transparency enables move to cloud
Moving corporate-owned and housed technologies to the cloud is a discussion being had today in boardrooms and c-suites worldwide. These deliberations no longer focus on whether or not cloud is a reliable technology but, rather, the business value of such a move. In some instances, cloud is not the best choice. But in many others, it is. Figuring out which is which requires good data about TCO vs. business outcomes and that is precisely what Unilever is doing with TBM.
“Apptio is crucial to managing our migration to cloud. Our strategy in the past relied on internal data centers,” said Silva. “We still own two big data centers but we are now looking to write those off as well, saving about €50 million. We started that program two months ago and the only way to accelerate that was based on the data from Apptio.”
TBM upends the old order to position
Unilever for the future Even though large companies are hard to change, when change comes, it can come fast. That is the case with Unilever. Prior to TBM, it had limited visibility into a large percentage of the IT spend. Today, the company has full oversight and knows who is initiating spend, what it buys, and who benefits. And the results are nothing short of transformational.
“I don’t think you can lose the fact that it’s not just about building transparency,” said Whitaker. “TBM is the vehicle that is fundamentally changing the way we work, our culture, and the way that we operate as an IT organization.”