Prior to TBM, cost transparency was elusive. With a $4B annual IT budget and monthly reporting requirements to Congress, IT at the VA is always under pressure to prove the value of technology. With TBM, doing that is easier than ever.
With over 280,000 employees, 9.1M military veterans receiving services, 167 hospitals, 1,400 community care centers, 53,000 VA-licensed healthcare providers in all 50 states, and an annual budget of $200B, the VA is, by any measure, a massive, sprawling organization. And, like most organizations of this size, understanding where its $4B in annual IT spending was going and the benefits the VA was getting in return, was elusive.
"Cost transparency has always been a challenge for us," said Willis Gaddis, CFO for the Office of IT. “Even though we have a robust financial system, we still have a difficult time understanding exactly where the IT dollars are being spent."
As with most IT organizations trying to get a handle on costs, Gaddis and his team relied on spreadsheets to track spending. They also employed activity-based costing (ABC) in an attempt to link IT costs to the services they were providing to veterans and the cost pools and general ledger entries accounting used to track their spending.
But this only went so far. ABC is primarily used in manufacturing where unit costs are easier to define, measure, and then assign to a final product. IT, on the other hand, doesn't really produce anything tangible; it’s hard to touch a bit or byte. Further shading the issue, the infrastructure and networking IT supports is shared by different services, business units, and applications. This makes assigning a unit of cost to a specific service, application, or business unit difficult.
To make ABC work, they developed a model to track and assign costs but, given the size of the VA, Gaddis' team did not have the personnel or automation to keep the cost-tracking spreadsheets current.
"When you build a model, you see where there are holes," said Gaddis. "You see the things that you have not even thought about capturing. Otherwise, it would not give you the total cost of ownership. If I want to have a discussion with my customer I need to be able to tell them what is the TCO, what is the total cost of ownership for this particular product."
To change this dynamic, Gaddis went in search of a tool to automate the process. That is when he discovered Technology Business Management (TBM). Shortly thereafter, in 2018, the US Office of Management and Budget (OMB) mandated that TBM be used government-wide by 2022 to track and manage IT costs. That put the VA well ahead of the game. Because of their head start, they are now being looked to as a mentor for other agencies as they begin their TBM journey.
Show me the data
With the adoption of TBM, it was time for Gaddis' team to begin feeding their tools solid and reliable data. This proved to be harder than expected. Because they had already gone through the ABC exercise, Gaddis knew that accurate data about cost and consumption was the key to making TBM a success.
"And even though with ABC, you would think you would have some good idea of our costs already, it's still nothing like the TBM taxonomy, which will align the costs from the pool to the tower to the services all up to the [service]," he said. "We started the [TBM] models somewhere around late summer of 2018 and we very quickly got to the point where we were aligning [IT spending] to cost pools. Because that's basically the general ledger, you're aligning those things directly to those based on a code. So we were able to do that easy."
But to make the model actionable they needed operational data. Without accurate operations data you cannot accurately account for costs based on the consumption of infrastructure like servers, storage, cloud, network, etc. or the applications and IT services that infrastructure supports. Initially, this data proved hard to get. But one of the benefits of TBM is it gives users a roadmap to find and improve the quality of the data they need.
"[TBM] showed that we had a challenge on how we captured data. the lack of data in some cases. but because you had a model that was complete, your able to say, 'Well, I need to go after this data here.' And so we had to mature the processes to go after those data sources. And we've got a good, robust collaboration among the data owners and us. And they want just as much as we do."
Just like flying a helicopter
As a former Army helicopter pilot, Gaddis used process-intensive training to devise the plan that would make TBM successful. It starts with the usual suspects: people, process, and technology. But, in the VA's case, they were working backward. They had the technology, some of the processes for collecting data in place, the model they would follow to allocate spend and increase transparency. Now, they just needed the people.
"I used to fly helicopters in the army and I like checklists," said Gaddis. "And so I went about TBM the way I do all my missions: strategic mission planning. People, processes, data, and technology. So we created a TBM office and I got some high-powered people that understood TBM. Their job is to focus on getting TBM right, socialize it, make sure everybody understands what it is, and come up with a change management process for it.
When developing the data-capture processes to feed their analysis and reporting engines they looked at the various categories in TBM and asked a basic, but hard to answer, question, "What do I need to do to be able to get that information?" That jump-started conversations with their customers about how they could pull data in order to create a constant flow of information.
And these conversations served as the foundation for improved relations between IT and service owners.
"Optimizing TBM and using the TBM taxonomy is like a roadmap to get after the business of doing IT and make it truly a business," said Gaddis. "I understand the needs of the customer, I understand what it costs to the customer. If we can make some decisions or discussion about the cost, we can adjust those things become more innovative, make it better so we can give you more."
So far so good
In just the space of 18 months or so, TBM has racked up quite a few wins for the VA. They have:
- Rolled out an executive dashboard for IT leaders to easily view and manage key financial, operational, and business
- Developed a concrete approach to data improvement based on the value of the data to the decisions made
- Automated a chargeback process that allows business customers to easily view and understand their consumption and charges for infrastructure and services … and have conversations about how they can modify consumption to drive down cost
- Increased their credibility with the OMB and Congress (whom they must report to every month regarding their spending)
- Variance to actuals now track at one percent of budget throughout the year
TBM has also been instrumental in enabling their move to cloud. Like many organizations, cloud is proving to be an attractive alternative to on-prem owned and managed IT for the VA. They are embracing cloud as part of their digital transformation journey and they are leveraging TBM to make better decisions about what applications and infrastructure should be kept in-house and which to move to the cloud.
"Prior to TBM, we could not do that," he said. "Now we can sit down and say, 'Hey, this is what it costs you now. If we were to make these adjustments … that will help us to reduce the cost and give you more on this side [of the equation]. That's a powerful discussion you can have with your customers."
By using TBM to track cloud costs they have put in place a plan to reduce developer cloud instances and figured that their cloud tagging strategy was not being followed. Now, upwards of 90 percent of AWS tagging and about 50 percent of Azure tagging is accurate.
It's all about the vets
Even though managing costs is important, what really matters to Gaddis is that veterans get the services they need. If technology can help with that, then it is up to his office to make sure the money being spent to do this work actually benefits those who need it.
"TBM has made us more strategic," he said. "We're looking at things that we never looked at before. We're creating very clear roadmaps to get to the point we want to be, where we truly understand the total cost of ownership. And we're building plans and processes, collaborating together to move down his path.
"We're making TBM a household name within the VA. We're trying to make sure everybody understands the importance of TBM and go after the same goal of having the most accurate costing to give us the ability to pivot as necessary to provide more services for the veterans."