Client's challenge
A major healthcare organization relied upon a centralized IT department that supported a number of largely autonomous business units. IT expenses were charged back to the individual businesses through a complicated back-end allocation process involving multiple methods employed across over 700 cost centers. After business unit managers complained that IT costs were too high and that the internal invoice they paid monthly provided no visibility into IT expenses, the CFO of IT initiated a new costing methodology project designed to increase the transparency of IT expenses. When its implementation ran into delays, the CFO of IT asked PwC to validate the costing methodology, identify project-related risks and develop remediation strategies.
PricewaterhouseCoopers Advisory solution
PricewaterhouseCoopers (PwC) Advisory began by benchmarking the new costing approach against leading IT costing methodologies. This involved identifying the strengths and weakness of existing IT financial operations, examining the planned charge-back methodology and assessing the project organization and processes. The review included interviews with IT management and business unit IT leaders.
PwC Advisory summarized the results of the analysis with a balanced scorecard that ranked project management success and the level of business support for key implementation requirements. The scorecard revealed mixed results, particularly with respect to change management issues relating to training, ownership and support infrastructure. PwC also identified data quality as an issue, thanks to the company's multiple systems, numerous points of data entry and uncertainty about who held responsibility for data management. The company also lacked a plan for creating a sustainable organization to support the new cost reporting system.
The PwC team then developed remediation strategies to address the gaps between the existing state of the costing methodology project and the optimal delivery plan. To resolve data quality issues, PwC recommended that the IT department establish a process for the continual monitoring, measurement, reporting and resolution of issues—as well as a procedure for communicating these activities to key stakeholders. To address the change management issues, a communications plan was developed and implemented. Finally, with PwC's guidance, the IT department adopted a plan for the organizational structure, staffing, policies and procedures required to support the new cost structure.
Impact on client's business
The CFO of IT accepted the recommended strategies and asked PwC Advisory to begin helping his teams implement them immediately. As a result, the costing methodology project was revitalized and assigned a new realistic "go live" production date. With the foundations of IT financial transparency in place, the IT organization and the business units were able to conduct fact-based discussions on IT investments. Pleased with the new communications approach and cost structure, business unit executives found themselves in a much better position to manage their division's IT expenditures.
