Enterprise IT Spend Visibility

Executive Summary

Industry: Healthcare
Sub-Sector: Provider Services
Annual Revenue: $2B+

A mid-market, physician-led healthcare provider experienced rapid growth through acquisitions and divestitures but had not fully integrated operations, prompting the need for a multi-year enterprise transformation. As financial performance declined, a minority activist investor installed new leadership, including a CFO who set a mandate to reduce SG&A expenses by 15%. Waypoint Business Advisory was engaged to perform a zero-based, forensic analysis of enterprise IT spend to support the CFO and CIO in achieving targeted reductions. Waypoint’s insights and execution delivered significant IT cost efficiencies and contributed to a 27% reduction in IT's SG&A expenses

A physician - led healthcare provider pursued an aggressive acquisition strategy over a 5 year period, followed by a major enterprise-wide transformation program. This transformation included divesting two underperforming divisions to generate cash, pay down debt, and refocus on core service lines

Situation

Complication

Three consecutive years of heavy transformation spend and accumulated technical debt "ballooned" SG&A, particularly in the IT organization where annual spend rose to $135M with little transparency into where the money was going. As financial performance slipped, an activist investor installed new leadership, including the CFO, to restore profitability.

The CFO mandated a 15% SG&A reduction across the company, with heavy emphasis on IT to help improve EBTIDA. To do this, the organization needed a full, enterprise view of technology spend with clear alignment of IT costs supporting revenue-generating clinical practices vs. back-office functions

Resolution

Waypoint led a forensic analysis of $135M of IT spend, utilizing a zero-based methodology to segment spend into % supporting revenue generation (clinical) vs. back-office functions. To assist the executive team with decision making, spend was broken down across 4 dimensions (people, software, infrastructure, and professional services) to identify cost optimization opportunities:

• Reviewed > 200 software, maintenance, and professional services contracts

• Partnered with accounting to apply proper accounting treatment to reclassify $11M of IT OpEx into project CapEx

• Designed and implemented an IT chargeback / allocation of $23M of shared IT costs

• Armed leadership with insight needed to realize $10M in annual software & professional services savings

Outcomes

Soft Benefits

• Fostered cultural shift (via an IT chargeback model) to drive future period operating expense reductions through more thoughtful IT consumption

• Partnered with accounting to update company's fixed assets policy for project work to be more consistent with GAAP standards & tax treatment (including enhancing existing IT project template to support justification for future projects)

• Launched IT business case review board with CFO and CIO to align technology investments with corporate strategy

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