Choosing & Using and IT Financial Management Tool

Keys to Success & Common PitfallsITFMA Conference, Atlanta, GA: July 15, 2015

Presenter: Rob Mischianti (rmischianti@nicus.com)

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“A lie can travel half way around the world while the truth is putting on its shoes.”

― Mark Twain

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What is an IT FM Tool going to do for us?

Defining Actionable Transparency

Keys to Success

Common Pitfalls

The IT Finance Staffing Problem

Q: Do we need an IT FM tool?

Q: Are we ready for an IT FM tool?

Discussion Topics & Key Questions

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Choosing & using for 22 years in 100+ organizations

Pre and Post 2008

50% don’t realize full benefit - why?

Solid strategic plan, but poor tactical execution

Lack of due diligence

Choose the wrong tool

Tips for a tool selection process

ITFM Tool Implementation Experiences

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Service Costing

Forecast & Budget

TCO

Bill of IT

Service Demand Forecast

Bench-marking

Actuals

Capabilities

IT Finance Dataset (Forecast, Budget, Actual)

GL (Consolidated)

GL

AP Payroll FA D & A

Contract Data

Capital Tracking

Project View

Resource View

Service (Technical) Application

Service Usage

Config

Business Service

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• Budget/Forecast/ Actual

• GL, AP, Payroll, Procurement

GL View

• Service TCO

• Platform TCO

• Benchmarking

Technology

Services

• Shared Apps TCO

• Apps TCO

Apps

• Apps to Business Services Allocation

• Business Service Metrics

Business Services

Process Dependencies

Service Costing

Allocation/Show-

back/Chargeback

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GL Department/Cost Center View

• This is a consolidated GL view. Sometimes requires consolidation and normalization using data from GL, AP, Payroll, Procurement and other applications.

Service/Product View

• This is a view of costs by IT service (or product). Accomplished using a service costing process.

Project View

• This is a view of costs at the Project level. Accomplished by a combination of assigning direct and allocated costs (from a cost allocation and/or chargeback process).

Consumer View (LOB/Agency)

• This is a bill of IT by organizational entities (LOB, Agency, Application). This is accomplished with a cost allocation and/or chargeback process.

IT Finance Views

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CIO

IT Managers LOB Managers

Portfolio &

Project Managers

Department &

Resource Managers

Individuals

Any producer or consumer of IT

benefits from financial data.

GL

View

Service/Product

ViewProject View

Consumer

(LOB/Agency)

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CIO

IT Managers

IT Controllers

LOB Managers

Portfolio &

Project Managers

Department &

Resource Managers

Individuals

• Vendor & Contract

Management

• Expense Management

• Service Management

• Service Costing

• Service Performance

• Benchmarking

• Supply & Demand Analysis

• Public/Private Cloud

GL

View

Service/Product

ViewProject View

Consumer

(LOB/Agency)

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CIO

IT Managers

IT Controllers

LOB Managers

Portfolio &

Project Managers

Department &

Resource Managers

Individuals

• Project Financials:

• IT financials by project,

portfolio & application.

• Details: Project, resource,

activity & task level.

• Invest/Maintenance Views

• Capitalization

• Often provide financial

summaries via interface to

PPM tool.

• Project forecasting, what-if…

GL

View

Service/Product

ViewProject View

Consumer

(LOB/Agency)

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CIO

IT Managers

IT Controllers

LOB Managers

Portfolio &

Project Managers

Department &

Resource Managers

Individuals

• Visibility: Allocated views of

IT costs by service,

application, project.

• Forecasting: Forecasting

consumption of IT services.

• Chargeback/Show-back?

GL

View

Service/Product

ViewProject View

Consumer

(LOB/Agency)

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CIO

IT Managers

IT Controllers

LOB Managers

Portfolio &

Project Managers

Department &

Resource Managers

Individuals

• Visibility: Reporting of

budget, forecast & actual

spend (allocated &

unallocated views).

• Resource supply & demand

analysis (by resource, FTE &

head count).

GL

View

Service/Product

ViewProject View

Consumer

(LOB/Agency)

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Effective Transparency IT Finance output that becomes an effective part of the every day

life of the manager

Accountability Workflow approval

Variance tracking

Actionable: The Right Data in the Right Place Deliver the data to the correct manager

Ensure they can and do understand the data & processes

Make sure they know their options

Understood & Actionable Transparency

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IT FM Tool: Key Success Factors & Common Pitfalls

Develop & Socialize a Roadmap

Both strategic & tactical

Socialize the plan

Acquire buy-in, rather than force cooperation

Establish a steering committee

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IT FM Data Sources

ITFM

GL

AP

Payroll

FA

Procurement

ContractsITSM

CMDB

Usage & Config

PPM

BI

Mainframe Midrange

Server Storage

Time Tracking (Labor)

Application Directory

SecurityAsset

Management

HR Other

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IT FM Tool: Key Success Factors & Common Pitfalls

Data & Process Preparation

The IT Finance Data Set: Completing the Alphabet

Identify required data

Ownership of source data – Assign data source owners to manage data quality, completeness, and delivery

Data & process improvements are often a by-product of an IT FM implementation

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IT FM Interfaces: Automation, Transformation, Validation

Interface Type Features Common Use

High Control • Staging Table (Preliminary)

• Control File/Verify Balance

• Control & Error Reporting

• Version Control (Raw Data & Table)

• Data Transformation Rules

• Data Validation Rules

• Audit Trail

• Financial Systems: GL, AP, Payroll,

Procurement, EPM (Hyperion Planning)

Medium Control • Staging Table (Import)

• Version Control (Raw Data & Table)

• Data Transformation Rules

• Data Validation Rules

• Audit Trail

• Utilization Metrics

• Configuration Data (CMDB, ITAM, ITSM)

• Organizational Hierarchies & Roll-ups

• Identity Management (AD, HR)

Low Control • Imports Direct to Target Table

• Audit Trail

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Contributors – Key People

Project Sponsor(s) - Gain Executive (both CIO-level and Finance Executive level) commitment

Finance and IT need to partner

High Quality PM - Assign a Project Manager to ensure regular communications and status updates on risk areas

IT Finance

Consumers of IT Finance Output

Data Source Owners

IT FM Tool: Key Success Factors & Common Pitfalls

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Simplicity Complexity

Simplicity Complexity

Easier to digest; more actionable Accuracy often drives complexity up; lack

of accuracy can damage credibility

Easier to maintain & repeat Poor data quality can drive complexity

Management gravitates toward simplicity Accountants gravitate toward complexity

Sweet

Spot

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Manage Scope

Don’t boil the ocean in phase 1

Start with something directionally correct & refine and evolve

Iterative process (stick to the strategic and tactical roadmap)

IT FM Tool: Key Success Factors & Common Pitfalls

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Application TCO

Take Top 5-10%

Limit collection of Application attributes (tiers, owners, etc.)

Limit mapping of infrastructure and labor

Limiting Scope: Application TCO

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If new to IT FM, you often seek… If experienced with IT FM, you often seek…

Rapid gain in capabilities; perhaps using

templated (OOTB) solutions and

standardized processes

Gain in efficiencies; automation and

streamlining of existing processes

Positioned to expand and mature… Expanding capabilities; grow functionality

Require a larger amount of assistance from

your vendor/partner

Process improvements; escape unnecessary

complexities; you know what you do well

and what you don’t

Experienced

(higher maturity)

New

(low maturity) 0 1 2 3 4 5

Tendencies

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1START

SMALL

2GATHER

YOUR DATA

3DRIVE BUSINESS

CHANGE

If IT FM is new to you, then…

Prioritize the key services

Demonstrate success and capability

Engage with the business and determine pain points

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Criteria

Capability (Data Integration, Calculation, Automation, Reporting & Analysis)

Flexibility

Ability to scale (size and functional extensibility)

Easy to perform analysis

Cost

IT FM Tool Evaluation & Selection

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Evaluation & Selection Process

Heavy engagement: Get face-to-face; discuss experience, methods, approach, etc.

Talk to references…don’t speed date!

Find a partner you can lean on…it’s a long term relationship

Demonstrations

Proof of Concept (POC) or “Day in the Life”

Learn about implementation teams (Vendor & IT) structure & process – What is your engagement going to be like…

IT FM Tool Evaluation & Selection

Implementation &

Design Workflow

Collect/Revise

Requirements

Author Design Documents/Artifacts

IT Finance Approval

Technical Approval

Customer

Review/Approval

Requirements collected in

somewhat standardized formats.

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Implementation Lead

IT FA & Implementation Lead

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IT Finance Advisory (ITFA)3

Development 4

5May include collaborative design

sessions with ITFA and

Development.

Where possible, joint meetings

may be more productive; acquire

Technical and Finance approval in

the same meeting.

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Primary focus on data analysis and developing analytical skills

Develop Base Line of Prior Months

Trending of Actuals (Monthly & Quarterly)

Technical Service (TS) and it’s components

Business Service (BS) and it’s components

Fixed v Variable Reporting

Unit Cost Analysis

Consumption by BU/Agency

Understand the components of Unit Cost, Fixed v Variable, 3rd Party Vendor

3 Month Deliverable – Trending Analysis Book

Quantitative and Qualitative

1-3 Months of Implementation

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Incorporate ITFM analysis & reporting into monthly financial process

Develop reporting that will be incorporated into monthly finance reviews

KPI, Actuals vs. Budget/Forecast, Fixed vs. Variable, Variance Analysis

Incorporate Budget & Forecast into cost model

Finalize and publish rates

Develop Bill of IT

Socialize with BU’s Finance teams

Update Trending Analysis

Incorporate automated reporting

6 Month Deliverable – Monthly Financial Review Deck

4-6 Months of Implementation

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Continue to Educate IT Management team on the tool

Conduct monthly/quarterly internal review meetings:

Service costs and Cost per unit with Service Managers

Application costs with Application Owners

Lines of Business (LOB) costs with Engagement Managers and LOB leaders

Analyze cost data to drive efficiencies:

Compare current vs. historical cost and cost per user data

Compare current cost vs. external vendor and benchmark information

Look at underlying cost drivers for each service/app and identify potential savings opportunities

Strive for ongoing process improvement:

Collect feedback from IT staff

Leverage additional operational data sources over time

Refine allocation rules

6-12 Months of Implementation

Initial

Dedicated

Advanced

Visionary

• Basic financials primarily

historically focused

• Financial information

aligned to cost centers

• One size fits all reporting

• No IT Billing – IT is FREE

• Primarily manual

environment

• REACTIONARY TEAM

• Financials include

qualitative and predictive

analysis

• Ability to identify trends at

a high level

• Cost by IT Tower

• Billing is Allocation based

• Standard reporting

available based on

published schedule

• RESPECTED TEAM

• Financials analyze End-

to-End product/service

cost

• Ability to identify

Operational impacts

• Billing is Consumption

based

• Reporting tailored to

customer needs

• On-demand access to

data

• IT Leaders are Financially

Savvy

• PARTNERING TEAM

• Financials models are

primary strategy leans to

develop IT future state

• Future state Capacity,

Demand,, Risk, Cost

analyzed in unison

• Complete cost

transparency

• Self Serve reporting

centrally administrated

• Real time access to data

• Exceptional Service

Brokers

• TRANSFORMATIONAL

TEAM

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The IT Finance Staffing Problem

IT Finance Staff Qualities

Finance degree

2-5 years experience – Corporate FP&A

IT Finance Boot Camp

Excellent analytical skills

Good communication skills

Some leadership qualities

Critical thinking (analyze, form judgments, take action, lead an initiative, ownership)

IT Finance Staffing

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• Dedicated IT Finance (2-30+ FTE)

• Advanced IT FM processes

• Highly centralized IT spend; LoB CIOs

• IT Budget: $50M-$2B+

Tier 1

• Limited or no IT Finance function (1-2 FTE)

• Limited IT FM processes

• Somewhat decentralized IT spend

• IT Budget: $20M-$50M

Tier 2

• No IT Finance function

• No IT FM processes

• IT Budget: Less Than $20MTier 3

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• On-Premise IT FM tools

• Leverage internal tools for selected functions (Hyperion, Data Warehouse/Data Marts for reporting)

• Automation using IT FM tools & IT resources

Tier 1&2

• Excel

• SaaS and hosted IT FM tools

• IT FM processes outsourced

Tier

2 & 3

Q&A

Q: Do we need an IT FM tool?

Q: Are we ready for an IT FM tool?