Client's challenge
The new CFO of IT at a large health plan provider set out to determine how to get the most value from his current IT investments, which totaled over $1 billion. PwC Advisory was asked to provide an independent analysis of the organization's IT expenditures and identify opportunities to improve efficiency and reduce costs.
PricewaterhouseCoopers advisory solution
First, the PricewaterhouseCoopers (PwC) Advisory team conducted an IT Total Spend Analysis™ (TSA™) to gather spending data for IT and categorize it by expense type and functional area. This analysis was used to help quantify IT spending and rate it according to impact on business objectives and risk. We then compared the data to available industry benchmarks to determine where gaps existed.
With the largest expenditure categories identified, the team then analyzed the organization structure and processes behind each of these expense categories—telecom, asset management, external service providers, software and hardware maintenance and staff expenditure. Reports generated from the TSA provided a quantitative analysis indicating that spending in these categories could be reduced.
For example, the investigation of expenditures on external service providers showed that a robust, centralized vendormanagement function did not exist. Acquisition and ongoing management of external service providers occurred independently across the organization, with no visibility into the total amount being spent.
This fragmented approach was indicative of a lack of strategic planning regarding sourcing. Consequently, the organization could not fully leverage its buying power or effectively measure the performance of its service providers. Such gaps increased costs and limited the operational return on the investment in external services.
Impact on client's business
The IT Total Spend Analysis showed that the external service provider category was the expenditure area with the greatest savings potential: 10 to 25% of current spending. Overall, the potential savings across five expenditure areas was 7 to 12% of the total IT budget. Our team provided the CFO of IT a prioritized plan to drive IT-expenditure process improvements throughout all investment areas. This plan will enable the IT function to reduce IT business risk exposure and better leverage IT investments, resources and assets.
