Macquarie Group restructures its IT chargeback

Macquarie Group has overhauled the chargeback model used for technology services and labour to stop IT constraining innovation across its worldwide operations.

Associate director Ashley Cox said last week that the group had adopted technology business management (TBM), an operational methodology created by vendor Apptio that has been run by a not-for-profit council since 2012.

Cox said that Macquarie Group applied TBM to its technology division in the first instance, and is likely to expand it to other shared services within the group.

Technology was seen as ripe for change because the group’s businesses had lost faith in how much they were being charged to consume central IT services.

“[We had] feedback from the businesses that technology costs lacked transparency, predictability and levers to influence them, and financial conversations that were all about negotiation rather than demonstrating value to the businesses,” Cox said.

Macquarie Group relied on “entrepreneurs” out in its various businesses to come up with great ideas.

“We have 300 businesses, powered by enabling entrepreneurs to generate ideas within each business and be accountable for outcomes,” Cox said.

IT costs were a typical - but also unstable - input into business-led projects because Macquarie’s previous chargeback model meant that prices were reviewed and changed every month.

“Before TBM, every month we would potentially adjust the prices for technology services and labour,” Cox said.

The fluctuations caused problems for the business as well as the group’s technology and finance functions.

“Whilst critical to our success, the diversity of our organisation adds complexity to cost allocations, and all of our businesses are focused on managing their cost base including technology chargeback,” Cox said.

“Shifts in the $1 billion that we invest annually in technology matters to the 300 businesses.”

Macquarie Group decided to switch to the TBM model, powered by Apptio software. It ran the transformation in “four agile releases over one year” - between April 2016 and April 2017.

“We delivered value incrementally to stakeholders including finance by automating and standardising processes, technology by simplifying service allocations and prices, and the business from transparency of cost drivers and levers,” Cox said.

TBM practices have now been in place for “19 successful month-ends and counting,” he added.

Cox said the project had senior executive commitment, including sufficient investment to embed the methodology.

On a practical level, businesses can now see what they spend on technology via dashboard reports.

“With this insight, business and application owners can choose to optimise based on their needs or market conditions,” Cox said.

“The underlying consumption model is fully traceable and defensible to source.”

The group has also adopted stable prices for IT services. “The result is a robust technology forecast that provides the business with confidence to invest in change, innovation or other revenue-generating programs,” Cox said.

All of that improved the quality of conversations that technology had with business users.

“TBM at Macquarie boosts the level of accountability for the business owners and empowers them with control,” Cox said.

“Our partnering conversations have shifted from costs and allocations to levers and working in partnership to influence demand and keep costs down.”

Technology uses the system to answer questions and “find savings for reinvestment in business-aligned initiatives”.

It also benefits from “improved data quality, which has resulted in more equitable technology service prices”.

“The technology division has freed up funds for new investments in change and innovation,” Cox said.

“Feedback overall has been very very positive.”