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BI & Analytics for Technology Business Management: A Spotlight Q&A with Dave Wilt of Apptio

Originally published July 9, 2012

This BeyeNETWORK spotlight features Ron Powell's interview with Dave Wilt, Director of Products at Apptio. Ron and Dave discuss how business intelligence and analytics help IT departments identify where to save money and improve performance.

BeyeNETWORK Spotlights focus on news, events and products in the business intelligence ecosystem that are poised to have a significant impact on the industry as a whole; on the enterprises that rely on business intelligence, analytics, performance management, data warehousing and/or data governance products to understand and act on the vital information that can be gleaned from their data; or on the providers of these mission-critical products.

Presented as Q&A-style articles, these interviews conducted by the BeyeNETWORK present the behind-the-scene view that you won’t read in press releases.

Dave, Apptio is not a typical business intelligence (BI) company. You have data management and self-service analytics but you also do activity-based modeling and best practices for IT. Can you provide a basic overview of Apptio for our audience?

Dave Wilt: Apptio was founded to solve a very specific problem. Unlike a lot of cases in which somebody has a great idea for a new technology and then has to find the right market or use for it, we knew exactly what problem we wanted to solve. It actually started with our CEO, Sunny Gupta, and conversations he was having with CIOs about their largest challenges. It became very clear that they'd been struggling for years to do fundamental things that would be normal inside of most business units but very difficult for IT. For example, these conversations revealed that companies were having difficulty managing the business of IT and answering questions about how money is being spent.

As a percentage of a company’s overall budget, the money spent on IT ranges from 3% at the low end up to 10% or 11% in industries like financial services. It's a tremendous expense, yet most companies are not able to say with great confidence or precision where IT money goes from a business perspective. They may know how much they spend on servers or how much they spend with a particular vendor, but they can’t confidently show how much they spend on automating the order-to-cash process or how much they spend on helping the sales force be effective.

That is very difficult for them because of the huge amount of spend on indirect costs such as infrastructure and labor to support it, and how infrastructure and labor map to applications and services for the business is very complicated. The math and allocation modeling behind it can be very complicated. So Apptio was founded very specifically to solve this problem, and we brought four key capabilities to bear that ultimately resulted in a very unique technology solution.

One of the key capabilities is adaptive data management. We work with raw data from many different sources that our customers already have – from their GL systems in finance, to the configuration management database (CMDB), and asset management system and dozens of sources like that. We pull that together and transform the data. Apptio TBM uses an inference engine to automatically find correlations between different datasets. Correlated data is then presented to the next layer of our solution, which is the activity-based modeling engine. We provide a visual activity-based modeling experience, supported by rules-based automation with the ability to support multiple models. For example, we can model utilization in one place, cost in another, and bring it all together for compound metrics.

We also provide self-service analytics. We have capabilities like data discovery, and ad hoc reporting to explore the data. Finally, and most importantly, we provide out-of-the-box content with IT best practices built-in. It's an application that is ready out of the box to do things like help understand the cost of an IT service and do what-if analysis on the savings possible with virtualization or cloud and other IT-specific decisions.

Dave, you previously stated that Apptio helps companies manage their business demands for IT by providing transparency. It all sounds a bit like economic theory. How do you put that into practice?

Dave Wilt: One of the challenges that IT has is that its costs are largely driven by the business. The business has a strong appetite, which has been growing exponentially, to use information technology. More than ever before, IT is a key enabler of new business opportunities or automating business process, but the business hasn't had a clear understanding of the cost impact of what they're asking for from IT. What tends to happen is the cost of supporting the accumulated projects, applications, and infrastructure that the business has asked for just gets piled on higher and higher. Often nothing ever comes off the stack and that IT is stuck with very high operating costs without being able to show the business where they might moderate what they're asking for based on cost. Because they can't tell the business the unit cost to support a user on one application versus another, the business really has no visibility to choose a more cost-effective option, or to use cost to prioritize what provides the most business impact for the IT dollar. Part of what Apptio does is provide the cost transparency and available choices so business leaders know what it would cost to provide what they're asking for, identify some of the choices that could help moderate that cost, and potentially shift that investment to areas with greater business value. If you think about any market, transparency is critical to its functioning. That transparency has been broken for business technology, and it is Apptio's mission to help create that transparency so that the supply and demand between the business and IT can be brought into balance.

Dave, the ability to break out the IT costs across the entire business is invaluable. It could help the entire business reduce costs, eliminate redundancy and prioritize spend.

Dave Wilt: That's right. A big issue is the credibility of that information and how actionable it is. IT has certainly tried to solve this problem before with spreadsheets and generic BI platforms, but the complexity of the financial modeling underneath it means that they tend to default to simpler allocation methods like even cost spread, sometimes called a peanut butter spread. For example, if a data center is incurring a million dollars in costs and there are ten applications run in that data center, you simply divide the million dollars by ten, and take the $100,000 and apportion it to each business unit that owns an application. You can very quickly do that math and provide that information to the business, but the business doesn't have confidence in it and doesn't find it actionable. The trick is getting down to a level of granularity and also incorporating utilization data, not only about who in the business is using an application but also what storage, servers, power, and other resources are being used by that application or those services. That's where the information becomes actionable and believable to the business.

Is that why you've incorporated BI as a critical component of your solution, especially data discovery?

Dave Wilt: That's exactly right. What we find is that the value of a solution like this is very dependent on its ability to shape behavior and to produce confident decisions. The confidence that people have in the data and their understanding of that data is critical to realizing value. For example, if the business doesn't understand why something cost what it costs or what they're doing to drive that cost, they're less likely to make a change. But if we can very clearly say that because they demanded five nines of reliability, a hot backup, the fastest access storage, and dedicated servers, the cost per user is $7,000 a month,  but if they were to choose different options, that cost could go down to as low as $1,000 a month. We give them the levers. It is the business intelligence and the analytics behind our platform that allows business leaders in real time to do what-ifs on their own bill. They can choose different options in the user interface and immediately see what their bill from IT would look like if they had chosen different options. The ability to play with the data, explore it, and model it really gives the business an understanding and confidence to make a different decision.

Can you give us some specific examples of the types of decisions you enable IT leaders to make on a daily basis?

Dave Wilt: We look at IT as a supply chain so it starts with something being designed and built like an application. Resources are brought in from suppliers, whether it’s tools, servers, or labor to build it. Then that application or service is run in operations, and ultimately the business consumes it. All along, those four key phases – Plan, Supply, Run and Demand – are decisions that affect the cost and value that the business is getting from technology. For example, within the Plan phase, it would be information such as what it would cost to build a certain application so that it runs on Linux versus running on Windows, and then providing that information up front in the design process. Oftentimes, the costs are baked into the services at the time of design.

Next, when you go to the Supply phase, Apptio can help provide analysis on whether something should be built in house, or if a cloud service should be used, or which vendor should be chosen. If they’re negotiating a contract with an outsourcer, they can look at analysis on what they’re spending with them to help get a better deal. Next, in the Run phase, decisions are made about the kind of infrastructure something will be deployed on based in part on the cost. After things are running, they need to understand resource utilization, identifying areas of redundancy, underuse,  or overuse to drive high return on assets balanced against capacity to support business demand. All the budget owners in Operations can use an Apptio view to help keep themselves on a budget from the point of view of their domain, such as servers or storage or network. That's all within the Run phase.

In the Demand phase, we want to give the business unit leader facts to help them make choices. Is it worth keeping two of the same kind of application going when retiring one could save the company $10 million? Is it worth $300,000 a year to insist that IT give us our own dedicated server hardware for this application versus using virtual servers in a shared infrastructure?

All across that supply chain, we're providing information that almost on a daily basis can affect the overall cost, quality, and value that the business is getting from IT.

Overarching all of that is a whole set of strategy questions. The Office of the CIO looks at things like how much they are spending on running the business, versus growing or transforming the business. What are the cost dimensions to the architectural standards they are considering? Should they build a new data center? These are big decisions that require rigorous business cases and what-if analysis. Those are the big stakes in the ground that affect those day-to-day decisions. It all needs to fit together from a financial, quality, and value perspective.

Well, if you look at most large enterprises today, 60% to 80% of their costs are already being spent on what they're doing today, and they only have a very limited budget to do additional things. It seems to me that by utilizing your software, they would be able to reduce their maintenance load so they can do more strategic things for the business. Is that what some of your customers have experienced?

Dave Wilt: Absolutely. For example, one of the key initiatives at Cisco and for the CIO there, Rebecca Jacoby, was to drive efficiency through transparency and move that into “change the business” spend, and to have the right levers and controls through Apptio to see and understand where that money was being spent and where there are the opportunities to shift. Ultimately, that has allowed her to move $300 million in spending from their “run the business” to “change the business.”

Could you give us some other customer examples of how Apptio is being used to gain insights?

Dave Wilt: eBay was able to match the consumption of resources by country to result in millions of dollars in tax savings through depreciation rules by country. One customer in the financial services space was able to use what we call a Bill of IT, which provides transparency to the business on what technology they are consuming at what cost. They used that granular view to persuade the business to migrate off an older Novell NetWare-based application onto a newer one with a more efficient, modern infrastructure. They’d been trying to tell the business for years that this new option was more cost-effective, but the business users were comfortable with the familiarity of the old app. It was only after the business leaders saw that it was a $10 million hit to the bottom line of the company that the business had the motivation to move. In another case, there's a large aerospace company that was able to identify $27 million in capital expense deferral by finding additional capacity instead of buying a bunch of new servers and other hardware. These are all examples of the importance of fact-based analysis in generating confidence to make a decision.

In an earlier discussion that we had, a company actually found out that they were running certain noncritical applications on tier 1 storage. Could you elaborate on that?

Dave Wilt: Sure! Data discovert is one of the things that we've launched in our spring release that is a real milestone for both Apptio and the discipline of technology business management (TBM). If you’re familiar with slicers in Excel, it's that kind of experience. There are basically buttons that not only dynamically filter the data but then based on what other buttons are lit up for other data dimensions, you can see where there are underlying data relationships to explore further. When we were beta testing this capability with the financial services firm on the East Coast, they wanted to understand their cost of storage. They were just going to poke around to see what they could find. One of the choices was for production applications, versus development applications, versus retired applications. Retired, in this case, meant these were applications that have to be kept accessible for compliance purposes for history, but they weren’t being used in production.

On another dimension, they were measuring what kind of storage was attached to different applications. For example, Tier 5 storage would be archival, something that's kept on tape and is very inexpensive, all the way up to Tier 1, which is extremely high-performance, fast access storage that is very expensive. When they selected the button for retired apps, the button for Tier 1 storage was lit up. That didn't make any sense to them. They assumed there was something wrong with Apptio. Then they assumed something was wrong with the data. Only when they dug further did they realize that they did indeed have Tier 1 storage attached to retired apps. Millions of dollars were being spent unnecessarily on high-performance storage for apps that didn't need it. That is a case where the insight was discovered; it wasn’t looked for. So when we talk about data discovery, one of the advantages is customers can easily find insights like this without knowing exactly what they're looking for.

From a deployment perspective, how easy is it to deploy Apptio? How long does it take?

Dave Wilt: We have customers who can see value from the information in Apptio in as little as weeks. Ultimately, it's a journey that they're on. Technology Business Management is new a discipline and a muscle that they haven’t all exercised as much as others. We say they’re “spiraling” into accuracy. They may start with some high-level models that give them some insight on where to go further. For example, they may do a high-level model that says that compared to a certain benchmark their storage looks out of whack. Then they decide to do a deeper dive on a subsequent month on storage by implementing our storage accelerator. It gives them more granular data, modeling, and reports on storage. As they continue on that journey, customers see new value as they move on. But generally speaking, our customers are able to get to value much faster than they've ever been able to before because of the fact that we start off consuming raw data and because we have accelerators that take them all the way from the data acquisition process, through modeling, and through reporting. With more than 100 customer deployments, we have been able to incorporate more best practices out of the box.

Dave, it's been a pleasure talking to you about Apptio and the ability for both the business and IT to get a handle on their IT costs across the board.

  • Ron PowellRon Powell
    Ron is an independent analyst, consultant and editorial expert with extensive knowledge and experience in business intelligence, big data, analytics and data warehousing. Currently president of Powell Interactive Media, which specializes in consulting and podcast services, he is also Executive Producer of The World Transformed Fast Forward series. In 2004, Ron founded the BeyeNETWORK, which was acquired by Tech Target in 2010.  Prior to the founding of the BeyeNETWORK, Ron was cofounder, publisher and editorial director of DM Review (now Information Management). He maintains an expert channel and blog on the BeyeNETWORK and may be contacted by email at rpowell@powellinteractivemedia.com. 

    More articles and Ron's blog can be found in his BeyeNETWORK expert channel.

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