Like most large enterprises today, Sysco's product and service development teams are adopting Agile and DevOps to build innovative new products and services faster so they can roll them out in small, manageable chunks to end users on a continuous cycle. The benefit to end users is they get faster access to new products and services while being able to absorb improvements to existing products in manageable, bite-sized pieces. This makes everyone's job easier and more efficient.
"Agile is one of the reasons TBM has been successful and important to us," said Wayne Shurts, Sysco's executive vice president and CTO. " We're like a lot of IT shops where there's the run budget and the build budget. For the most part, our development teams were focused on the build part of our budget, which is maybe 25 to 30 percent. The rest goes to run."
As they move to fully embrace Agile, Sysco is moving from a project-centric organization to a product-centric organization. So, now, instead of just focusing on the build costs of a new application or service, Shurts requires his teams to account for the all-in costs, build and run, of the products they are developing.
"That's incredibly important for these teams because now they're engaged in being entrepreneurial. They have to say, 'I don't have $3 million, I have $15 million. How do I make that $15 million go as far as I can? How can I decommission some applications that free up money? How can I do hosting in a different way that saves a million dollars? Can I do licensing differently?'"
Without the cost transparency provided by TBM, this would not be possible.
Overcoming GAAP deficiencies
The challenge with this approach is traditional GAAP accounting methods don’t capture the dynamic reporting that’s required with Agile and DevOps. With TBM, however, Sysco is able to achieve a comprehensive view of development costs while still doing away with the traditional time-keeping approach of accounting for the costs of development.
"Traditional accounting and generally accepted accounting principles aren't exactly flexible at explaining Agile in regulated reporting," said John Kittelson, manager, TBM. "When we get rid of timekeeping, we want our developers to be focused on what they're developing and not what they're spending 10 minutes on.”
“It throws everything [in accounting] for a loop in terms of how to deal with it,” said Leslie Cage, senior director, FP&A. “When you’re moving away from time tracking, how do you capitalize? How do you measure productivity? How do you break out CapEx and OpEx? How do you report labor costs? How do you deal with run versus build?”
“TBM allowed us to isolate a lot of these costs, and break things out in a way that allowed us to actually present a methodology to our Accounting Standards Board. Which, basically, they were very excited to hear and very excited to see.”
TBM also helps Sysco drive cost savings across its IT products and services portfolio. The company reinvests those savings in the innovation and new technologies it needs to enrich its customers’ experiences (an incredibly important benefit given the company’s thin margins). It also delivers technology faster around a coherent digital strategy that supports global operations and reduces the overall business technology budget by 30 percent at the same time.
Adapting TBM taxonomy to embrace Agile development
As Sysco moves to embrace the Agile/DevOps approach, its internal models and methods are changing. This includes evolving TBM itself to accommodate those principles.
"We’re moving from waterfall, non-DevOps teams to product owners, platform owners, and an Agile/DevOps approach," said Ernie Dries, senior director, business technology, TBM. "Instead of planning based on projects, which have definite beginnings and endings, we’re going to be funding initiatives and investing in specific business capabilities. And that means we’re going to change how we do budgeting and forecasting, too. This means moving from Excel spreadsheets to a planning module like the one found in Apptio.”
This also means capturing the details of planning, budgeting, and forecasting in a way that makes sense to product and platform owners in an Agile/DevOps environment.
“Our own internal IT group was thrilled with the ability to have each of those resource tower owners, the people who are really responsible for their segment of the budget, to be able to finally look at their numbers in a meaningful way," he said.
A resource tower in the TBM model is the aggregation of the TCO for IT specific services like compute, application, or storage. Towers can even be created for very specific purposes such as tracking IT spending for devices like ATM machines.
“We've aligned the business capabilities and the business domain so that the capabilities that sit below a particular product we run our business with are all aligned up and down that stack. When the director, the product owner, or one of us have a conversation with the business leader in that area, we're equipped to be able to talk about capabilities, as well as talk about the cause of the build and of the run,” said Dries.
The charter of Sysco Business Technology (BT) is to be 100% Agile and DevOps. Adds Dries, “We will not be bi-modal. We will not be hybrid in the way that we operate. That created some skepticism early on but as the teams are seeing their success stories from blending together infrastructure, security, development, relationship management folks, business analysts, and a working product team, they're beginning to see that this really will work.”
How TBM shines a light on spending
Today, savings come directly from the cost transparency that TBM enables. Dries characterizes this as “a golden opportunity to take technology from being viewed as a black hole where no one understands how and where the dollars are being spent, to a creator of business capabilities with complete cost transparency.”
Dries and fellow TBM staffers achieve this goal by mapping technology costs to business capabilities and outcomes. This allows key stakeholders in both the business and IT to understand these costs down to the dollar.
"It's just a matter of knowing where our money is going," said Shurts, "and then being able to find out, 'Is that the best place to spend? Is there a better way to do that?' That is what has resulted in those savings."
For the last three years, for example, IT has gone into the year with a $30 million budget gap. In other words, their forecasted expenses added up to $30 million more than what the company had given them. Yet, for each of those years, they've hit their numbers.
"We've been able to find and get the savings of that $30 million or $90 million in total if you look at it across those three years. That is a fact," said Shurts. "And that's the OpEx side of it. The total cash side of it is actually more than that."
This was accomplished, in part, by using the tools in Apptio to find idle servers and other under-utilized assets and turn them off. The result is IT's run-rate has gone from 80 percent of their budget to less than 50 percent.
Reinvesting in the future
One of the most powerful and beneficial aspects of TBM is it allows BT and the business to reinvest savings from BT into innovation. So instead of BT having to try to justify spending on the things it needs to provide optimized services to the business, like new compute platforms or storage arrays, it can self-fund those investments.
"While financial transparency has allowed us to reduce our costs, more importantly, for the long-term viability of our business, it's also allowed us to reinvest those dollars into innovation initiatives or modernization initiatives like taking some of our legacy environments and putting them onto the cloud, for example, which makes them, in the long-term, easier to manage and less expensive, and gives us more automation and stability," said Starr Marea Johnson, senior director, IT strategy & Agile/DevOps transformation.
This holds true for business units as well. Because TBM and Apptio provide deep visibility into where technology dollars are actually going, line-of-business CIOs can draw a line from that spend directly to the business benefit (or lack of). Armed with this knowledge and BT's help, they can use tools like chargeback to drive behaviors—like charging more for services and products they want to minimize while charging less for products and services they want people to use.
"When I came to Sysco three and a half years ago, and even for my first couple of years here, there was no talk about e-commerce whatsoever," said Johnson. "Today we are seeing about 40 percent of our local business being transacted via e-commerce solutions. And, more importantly, we're seeing that the customers who are purchasing that way are more profitable."
Changing the conversation
For Dries, who has been with the company since its founding in 1969, the most important benefit of TBM is the ability to break through the old silos of spending and culture that kept BT from becoming the business enabler it is well on its way to becoming today.
"TBM doesn't just become an area within technology that sits isolated all to its own," said Dries. "TBM becomes the fabric of the way we operate every single day. When someone decides that they're going to spend money, the mindset of our individuals needs to be, 'Well, if we're gonna spend the money, it's not my money to spend, where are those dollars going to be directly aligned or allocated to?' That way, we're able to continuously have that constructive conversation with the business."
TBM doesn't just become an area within technology that sits isolated all to its own. TBM becomes the fabric of the way we operate every single day.
Senior Director, Sysco