See how WGroup helped a major healthcare system develop more cost effective IT sourcing strategies. WGroup's analysis and recommendation will help the client develop more sophisticated IT sourcing strategies — to leverage synergies between institutes, improve patient and employee experiences, and reduce costs.

1. IT Strategic Sourcing Can
Help Relieve the Squeeze
on Healthcare
Drive Your Business
Case study

2. See how WGroup helped a major healthcare system
develop more cost effective IT sourcing strategies.

3. The client, a major nonprofit healthcare system, had a highly decentralized business
model, consisting of several clinical specialties operating as separate entities with their
own IT services group.
1OPPORTUNITY
Each institute had different IT service-level
needs, so a decentralized business model
made sense at the outset. Changes in
the healthcare industry, however, forced
the client to reconsider this practice and
search for more cost-effective, transparent
alternatives.

4. In this environment, the client saw a need to consider the costs and delivery models for
several non-core services, including IT, and whether there were opportunities for cost
reduction.
The client initiated a program aligned
with the Care Affordability Act which
focused on enhancing patient care and
safety, improving patient and employee
satisfaction, and reducting costs.
As this program continued, the client
sought to improve efficiency by re-
evaluating their decentralized operating
model in regard to IT.
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At this time, the healthcare industry had two major changes happening
simultaneously. There was an increased focus on pricing transparency to
help empower the customer, and fee-for-service was shifting toward a
managed population model.

5. The client selected WGroup to aid them in evaluating their overall
IT service delivery, capabilities, and performance.
The client’s IT sourcing goals included increased
flexibility, IT transformation facilitation, improved
transparency, improved cost predictability, and
a cost reduction of at least 15%. Following three
failed engagements that did not proceed past
the financial analysis stage, the client sought
additional help.
They wanted recommendations for strategic
alternatives to transform IT service delivery while
increasing service levels, reducing costs, and
managing the risk associated with the change.

6. 2APPROACH
The process was driven by a cross-functional business
committee, rather than an internal IT effort. This shifted the
focus from IT alone and instead sought to align IT sourcing with
broader organizational goals. The analysis included a deeper
examination of exact unit-rate costs for in-scope IT services.
Instead of comparing costs to proprietary benchmark data,
WGroup utilized outsourcing market rates as a reference point.
WGroup used a fundamentally different
approach from the client’s past failed
engagements.
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7. The sourcing-strategy phase of the engagement
lasted three months. The first several weeks were
spent performing interviews, gathering data
related to services performed by vendors, and
understanding resources and costs to support the
IT environment.
This preparation formed the basis for the
sourcing analysis and recommendations.
6

8. Managers within all the IT towers were interviewed about storage, servers, service
desk, end-user computing, facilities networking, and security. Other leaders within the
organization, including those in the finance, heart and vascular, pharmacy, imaging,
nursing, and medical operation departments, also were interviewed to provide insight
into what IT services were needed and how changes might affect the organization’s
goals. This process informed future financial modeling, services and technology
modeling, and organizational modeling to form a comprehensive sourcing strategy.
A secondary critical challenge for the
client was shadow IT spend. There was
a significant amount of IT spending
occurring outside the purview of the IT
department. In order to ensure that a
new sourcing strategy was effective,
it was critical that this spending be
classified, managed, and folded into
the consolidated strategy.
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9. WGroup also assessed the
overall IT operating model to
further identify opportunities for
IT transformation in support of
business goals.
After conducting interviews and learning about the client’s goals and
sourcing situation, WGroup began identifying areas to reduce costs,
increase transparency, and improve end-user outcomes
WGroup identified potential
partnerships based on
knowledge of service providers’
capabilities and fit with the
client’s needs and culture.

10. 3INSIGHT + ADVICE
Given the client’s goals of improving end-
user experience, increasing transparency,
and reducing costs, a fundamentally
updated sourcing strategy was required.
The analysis discovered that the client
lacked metrics in a wide variety of
areas. Performance and volume data
was inconsistent; complete IT financials were not readily available; and it was clear that
effective governance was not in place. Current IT service management (ITSM) process
maturity and service-level maturity were found to be relatively low for an organization of
their size, and the IT operating model did not use industry-standard service-management
practices. There was also an underemphasis on service-level management.
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11. WGroup found that the decentralized IT operating model was not effective, driven
in part by a lack of standardization across the health system as a whole. The
decentralized model increased overall operating costs and did not allow for synergies
between various institutes. In many cases, the internal cost structure for IT services
within the organization was higher than the market rate for outsourced services. This
presented a further challenge, as individual institutes were reluctant to shift services to a
central IT group. There was concern over central IT’s ability to deliver quality of service
consistent with their own.
In order to ease these concerns and
ensure the entire organization’s
business needs were met, a
centralized strategy with effective
governance was needed.

12. In order to address the issues with service management, governance, and
the decentralization of IT, WGroup helped the client identify opportunities to
transform the IT operating model to be more cost-effective and efficient.

13. The analysis concluded with a recommendation to launch an RFP work stream, redesign
the IT operating model, and establish and launch a more robust IT governance program.
In particular, IT infrastructure services could be provided more effectively via
centralization, while providing tiered service-level agreements to each of the specialties
utilizing WGroup’s multiple supplier governance model. In addition to costs, WGroup
carefully considered the clinical processes that are key to the hospital provider service.
With the help of WGroup’s
experience, this transformation will
be phased in, with strong business
and IT executive level participation.
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14. 4RESULTS
WGroup’s analysis and
recommendation will help the
client develop more sophisticated
IT sourcing strategies — to
leverage synergies between
institutes, improve patient and
employee experiences, and
reduce costs.
13

15. Conservative estimates project annual
savings of over $7 million for the client,
primarily as a result of outsourcing
services within the scope of IT towers.

16. With the success of this initial phase, the client has further contracted
WGroup to assist in the RFP process in order to implement the
recommendations laid out in phase one.
This process is ongoing and expected to be complete in 2016.

17. Founded in 1995, WGroup is a management consulting firm that provides
Strategy, Management and Execution Services to optimize business
performance, minimize cost and create value. Our consultants have years of
experience both as industry executives and trusted advisors to help clients think
through complicated and pressing challenges to drive their business forward.
Visit us at www.thinkwgroup.com or give us a call at
610-854-2700 to learn how we can help you.
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