Cost transparency to better serve customers

As a leader in the financial services industry, BMO is focused on serving its customers and delivering high business performance by continuing to evolve as a digitally enabled, future-ready bank. This ongoing transformation includes deploying new features and functionalities that will increase digital engagement: grow the number of active mobile users, increase self-service transactions, and deliver personalized, data-driven experiences.

But to accelerate its transformation, the organization needed greater visibility into the cost base of its Technology & Operations (T&O) group. “The ability to analyze, review, and discuss costs with our operating groups to drive business decisions was deemed a key enabler of our digital strategy,” said Vipin Ghelani, Head, Technology Performance Management at BMO.

The company’s previous financial management solution provided limited visibility into the breakdown of IT costs. While this approach effectively tracked high-level expenses, there was an opportunity to improve cost allocation accuracy. Historically, over $3 billion in annual IT costs were distributed across the organization, with more than 50% allocated evenly. “We previously used a ‘peanut butter spread’ approach to allocate costs evenly across the organization,” Ghelani said. “While consistent, it limited visibility into individual group expenses and cost-saving opportunities”.

To address these challenges, BMO implemented IBM Apptio in 2019.

“Before IBM Apptio, our processes operated independently,” Ghelani said. “Costs were tracked in a piecemeal fashion, with separate teams managing tech, infrastructure and other allocations. As a result, we lacked a unified application cost view.”

IBM Apptio® enabled BMO to unify financial and operational data to create a model of IT costs based on a standard taxonomy for cost categorization. This allowed the company to move away from spreadsheets and, utilizing IBM Apptio’s industry-leading allocation rules, they no longer had to rely on assumptions to allocate spending. “Apptio has helped us get all our costs into meaningful cost groupings—applications, end-user devices, processes, etc.—and present the information in one place,” Ghelani said.

This unified view has proven valuable to senior T&O leaders. They use the information from IBM Apptio to explain the makeup of T&O costs to their CEO, CFO, and operating group leaders and show them how their decisions impact their T&O spend. This enables leaders to take action and make informed decisions for cost optimization.

In addition, BMO has used IBM Apptio to show total cost of application ownership and application health. According to Ghelani, they use IBM Apptio to break down their application costs, so they can better understand how much the company spends on Run versus Change, non-strategic applications, incident and patching costs, and detailed component costs for infrastructure and the cloud.

Increased efficiency through labor cost planning
Another major component of IT cost is labor. For BMO, labor costs make up over 65% of the company’s IT spend. Therefore, understanding and tracking the labor mix is crucial to expense management, especially in uncertain economic times. Ghelani said IBM Apptio has helped them calculate unit cost across the various labor types and determine an average unit cost at the T&O level and for each senior leader in T&O. BMO now has OKRs (objectives and key results) for labor, and that enables the organization to ensure it is on target for labor spending.

Optimizing value through Enterprise Business Management (EPM)
IBM Apptio has enabled BMO to create a unified cost model and standard taxonomy for IT costs, establish application total cost of ownership (TCO), increase efficiency through labor cost planning, and improve alignment between teams. The next step, according to Ghelani, was optimizing their back-office processes (mortgage fulfillment, loan fulfillment, cash management, and others) by developing a process TCO use case.

To do that, BMO used IBM Apptio’s Enterprise Business Management (EBM) solution, an analytics platform specifically designed to analyze, optimize, and quantify the value of shared services.

“EBM has allowed us to take what we were doing in spreadsheets, move the data into the platform, and automate the process,” Ghelani said. “Now, we are standardizing our process and product taxonomies and making sure our tagging of costs is consistent across the company.”

More effective cloud optimization
BMO established their FinOps practice in November 2023 after having run a successful pilot initiative and leveraged IBM Cloudability® to gain valuable insights into cloud cost monitoring, and optimization recommendations. Prior to this the analysis was done siloed and at various levels of maturity across without having a unified view.

According to Swapna Samuel, Head of Central Cloud FinOps at BMO, as the company’s cloud footprint grew, it became even more important to manage cloud spend. This included implementing good cloud governance and clear practices, educating people on FinOps, and utilizing the full capability of IBM Cloudability.

Today, BMO has increased direct attribution of cost allocations by 70%. And, Ghelani said, the team can provide granular cost details tied to applications and to operating groups that gives business leaders the right information to make decisions and more options (or levers) to lower/optimize their costs.

The effective monitoring and correlating of the labor mix and cost has made the T&O organization more efficient, Ghelani said. It provides them with flexibility, balancing in-house knowledge with outsourced support, and enables the company to make better decisions on how to adjust the mix for changing business, and market, conditions.

Another benefit of building out the labor cost use case has been alignment between teams, something that was hard to achieve before implementing IBM Apptio. Today, IT, finance, human resources, and strategy teams all agree on a singular methodology to track T&O labor and its associated costs, and that has helped foster better communication and decision making.

“IBM Cloudability helped us optimize,” she said. “It identified our idle instances, non-production resources running 24/7 that shouldn’t be, and key areas to target for optimization. This insight along with other rightsizing recommendations from Cloudability enabled us to take actions that reduced our cloud spend by 17% in the first 12 months and helped us implement standards and best practices for our teams going forward.”

Importantly, this foundational work with Apptio has positioned BMO to adopt emerging AI tools more effectively. With strong governance and clean data sets in place, BMO is prepared to support scalable AI use cases – a growing focus across the industry.

BMO is a leading North American bank that specializes in providing personal and commercial banking, wealth management, and investment services. Founded in 1817, BMO is the eighth largest bank in North America by assets and serves over 13 million customers across the globe.