The business services division is responsible for IT infrastructure including PCs, networks, storage, hosting, and cell phones delivered to business units at the $14.3 billion company. Most companies bill business units for tech services, but Cummins is now detailing its bills to the most precise level possible, to usage by individual users.
This detail gives business unit customers a clear view into the actual cost of deploying and maintaining their services, but it also invites scrutiny of the bill for those services.
"All of a sudden everybody is an expert on what that cost ought to be," said Rutan. A user, for instance, may want to know just why that PC cost a lot more than the one now on sale at Best Buy. (The bill is not just for the hardware, but for all services and support that are part of it, explains Rutan.)
But this method has also given customers new control over their costs. Every decision they make, such as getting rid of unnecessary software licenses, paying attention to storage growth, and even canceling a cell phone, can help the budget.
When the recession hit his industry late last year and business units were forced to cut, the beauty of the shared services approach was apparent to the business units. "It made their entire cost variable," said Rutan, and that, in turn, gave his division opportunities to help cut those cost.
The need to get a better handle on IT cost is helping vendors that sell tools to manage IT services. Despite the recession, Forrester Research estimates that the broader market of business management services will exceed $800 million this year, representing an annual growth rate of 27%.
The market is being helped by the growing adoption of service management practices, such as those in the the IT Infrastructure Library (ITIL) [Whitepaper]. Cummins is using software from one of the vendors in this market, Digital Fuel Technologies , a privately held company, to monitor and bill its usage.
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The big project next year will be rolling out 40,000 new PCs running Windows 7. Cumins, based in Columbus, Ind., takes a "big bang" approach to PC upgrades. It did a companywide upgrade in 2003 and in again 2006. It had planned to upgrade this year but put it off until 2010 because of the economy and concerns about Vista.
Cummins collects 400,000 records each month that calculates service demand and prices. In the first year of usage management, billing to business units was reduced by about $12 million, out of a total of about $300 million. Billing fell another $10 million the following year and company is on track for a similar reduction this year.
Reduced billings to business units means that IT services must absorb some costs once paid by the business unit. "My ability to make cost go away is not perfect," said Rutan, but he said he tries. Software license reductions, and aggressive storage management to help reduce its steady growth, are all part of the strategy.
"Going backward in storage is never realistic," he said. "So what we are doing is trying to slow the growth."
Software usage is monitored; if a user hasn't opened a particular title in three months, "we just uninstall it for them automatically," said Rutan. "We call that usage management."
The upshot, said Rutan, is greater focus in the business units on the cost of IT. "I think it's made people much more aware of their consumption and how their behavior drives costs that previously was hidden from them."