18% reduction in capital IT spend and 8% reduction in IT operating spend for FTSE 250 company
Tribal Group had kicked off a programme of business changes to improve efficiency and effectiveness, underpin more profitable growth, and improve quality of delivery. A key part of the programme was aimed at reducing corporate IT costs but that particular workstream had run into difficulties.
A small team of consultants, led by Steve Bannister, was called in at short notice to take over and turn around a failing workstream which had the objective of identifying and delivering cost reductions in the Tribal Group corporate IT service.
The overall corporate transformation programme had tough performance improvement targets and aggressive time frames. For example, at the point of picking up the failing IT work stream, the definition and agreement of the planned cost reductions had to be achieved within one month. Tribal Group therefore brought in Steve Bannister to establish the team and deliver the project with deadlines unchanged.
Key problems and challenges
The IT cost reduction work stream had been up and running for several months. The original team had attempted to apply an activity based costing approach. However, the approach had not worked, not enough focus had been put on project delivery and none of the key stakeholders had been engaged properly.
The first important step was to engage with the key stakeholders – the Group Chief Operating Officer (COO), the key business users of IT from each of the Tribal business units and the head of Corporate IT. None of the performance improvements would be possible without their buy-in. The next critical step was to implement a rigorous and proven performance improvement methodology and drive the delivery of this methodology using a disciplined project management approach.
The critical elements of the approach included establishing a clear baseline of current IT costs, both capital (CAPEX) and operating (OPEX); developing a wide range of opportunities and options, using brainstorming techniques and workshops with the key stakeholders; creating a simple model identifying the supply and demand levers for IT; and developing clear business cases for each of the selected options.
These options were then mapped out into a clear delivery plan, with a range of quick wins up-front and a set of integrated IT performance improvement projects to be delivered over the remainder of the financial year.
The fast turnaround and rigorous methodology led to a programme of performance improvement initiatives that delivered significant savings. And this was against a corporate ICT budget that was already at the low end for the sector – 2% of turnover. The identified cost saving opportunities led to 18% CAPEX and 8% OPEX IT cost reductions.
“The team did a very impressive job of gripping the failing ICT cost reduction project. They applied a very rigorous, methodical approach and worked very effectively with the business users and head of corporate ICT to develop a pragmatic cost reduction programme. I and the Tribal Board were very pleased with the outcomes which included a significant reduction in both capital and operating costs.”
Andy Field, Chief Operating Officer