1 ©2010 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice

IT Financial Management kickoff

Mark Bradley

Technical Product Marketing Manager

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Optimizing resources to deliver highest value to business

IT Financial Management

Capital and r

eso

urc

es

Financial year

Capex

Opex

Now

How to govern IT investments?

Change the business

Run the business

How to account for IT spend?

How to predict IT costs?

GovernanceEffective management of the IT investment planning process, cost/benefit (ROI) determination, data integrity

AccountabilityReporting & analysis of IT spend, assessment of IT service costs, cost allocation and recovery

PredictabilityAccurate forecasting of resource & capital requirements, continuous tracking of IT spending & resource consumption

CIO

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How do I better align my resources with the business?

Which customers are costing me more than plan

to support?

How do I connect cost to

value?

What is the real cost for my applications &

services?

What is the impact of increasing or decreasing IT

spending?

CIOBusinessviewpoint

ITviewpoint

―How do we continue to drive high-quality services at declining unit costs, when we are already very good and very lean?‖

Jeffrey Johnson - VP of IT, Constellation Energy

Am I evaluating all sourcing options for

a service?

Am I effectively utilizing assets?

What is our exposure for

software licenses and contracts?

IT Financial Management Challenges

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Business

IT Financial Management Challenges

Immature investment decisions

Operational inefficiencies

No actionablecost information

―IT has weaker internal management systems today than manufacturing had in 1982‖

IDC Industry Insights, 2008

Only 36% of the average CIO‘s budget can be devoted to providing new capabilitiesCIO Magazine ―The State of the CIO‖ online

survey, January 2008

―The IT organization cannot be credible unless it can have meaningful conversations in the language of business. This means having the right information to guide business decisions.‖

Barbara Gomolski, Research VP, GartnerCIO

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Financial Management Current State

Visibility

Process

Data

PMO

SpreadsheetsCorporatefinancial

data

Ops

Configurationdata

Businessunitdata

Projectdetails

Apps

Weak discontinuous

processes

Limited visibility into IT financials

Many unsynchronized data feeds

Governance

Service pricing and charge-backs

Planning and budgeting

Cost accounting

Financial analysis

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Externaldatafeeds

Full visibility, control and

accountability

Governance

Service pricing and charge-backs

Planning and budgeting

Cost accounting

Financial analysis

HP Financial Planning andAnalysis dashboard

HP Project and Portfolio

Management

HP Asset Management

HP Configuration Management

Corporatefinancial

data

Businessunitdata

Automated consolidation of

budgets and costs

Automated cost allocation

Visibility

Process

Data

HP Financial Management Approach

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Key benefits

• Cost transparency

• Rapid identification and analysis of variance

• Improved strategic and execution decisions

Key capabilities

• Multi-source IT cost visibility

• Dashboards for different stakeholders

• Cost allocation and exploration

• Automated data collection for near-real-time reporting

Understand IT cost drivers and variance

HP Financial Planning and Analysis

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Consolidated and Actionable

Project and Portfolio Management

Asset Management

CostsCosts

ProjectsProjects

LocationsRegion

Organizations Department

– Automating large parts of the data gathering process

– Encouraging better behavior as people see the results of their actions

Financial Planning andAnalysis dashboard

User Employee

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Key benefits

• Informed investment management

• Process automation

• Portfolio analysis

• Leading indicators of cost variance

Key capabilities

• Consolidated demand management

• Integrated investment, resource, time and project management

• Lifecycle investment visibility

HP Project and Portfolio Management CenterProject and portfolio alignment/control

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Key benefits

• Efficient asset lifecycle cost & value management

• Effective supply/demand management

• Minimize software costs & risks

Key capabilities

• Fully burdened hardware costing

• Contract and Warranty Management

• Hardware & software usage tracking

• Track operational activities against assets & services

Hardware/software optimization

HP Asset Manager

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Delivering Value Along the Journey

Improve Base InformationEstablish a clear understanding of all IT costs, cost drivers, and variance sources across budget, portfolio and assets.

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Add Depth to Improve DecisionsEffectively manage the entire scope of IT investments—budget, resource, time, and capacity to align spending with business objectives.

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3Optimize valueLink value to cost to make intelligent business decisions that will focus resources on innovation, improve efficiency and maximize business outcomes.

Maximizedsupport

forinnovation

Strategic investment portfolio

Inventoryand asset tracking

Resourceand time

management

Assetcapacity

management

IT businessvalue

optimization2

1 2

3

IT service management`

Costvisibility

Costmanagement1 2 3

3

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HP Project Portfolio Management

HP Asset management

HP Financial Planning and Analysis

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HP Project & Portfolio Management

Delivering Value

• IT project scope changes dropped by 57% - Large food retailer and distributor

• The IT demand queue reduced by 67.1% -Large food retailer and distributor

• Immediately identified and stopped $8 million in projects determined unlikely to delivery expected business value – Xcel Energy

Aggregate Demand

• Project funding process reduced from 6 1 wk(s) – Large commercial airline

• IT budget accuracy improved 100%: planned budget exactly tied to actual IT expenditures for the year – Large food retailer and distributor

• Saved $3.7 million by avoiding investment in non-viable projects –Xcel Energy

Optimize the portfolio

• Increase project team productivity by 30% –Birlasoft

• Reduce ‗at risk‘ projects from 50% 14% -Autotrader.com

• Cost overruns reduced to 0%, recouping 2% ($1.5M) of annual IT Budget - Large food retailer and distributor

• Decreased time spent on schedule tracking and updating by 50%. –Packaging firm

Execute projects and other work

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HP Asset Manager

Delivering Value

• Created global asset repository and process for asset management –Large Manufacturer

• 95% of IT asset name/location, configand user now known –Leader in WW Telecommunications

• Centralized collection and management of all desktop, network, datacenter, contracts, licenses & applications –Multinational Chemical Conglomerate

Asset Tracking

• Hardware lease cost reductions of $8M annually Large WW Manufacturer

• Reduced TCO of desktop environment by 50% - Bayer Business Services

• Saved $3M in overlapping/redundant Telecom contracts –Global Investment Bank

• Software license reuse reduces costs by $4.5M – US Food manufacturer

Optimize Costs

• Budget to operational spend accuracy at 95% – WW Telecoms

• Ensured proper asset depreciation accounting – German bank

• Better understanding of infrastructure cost drivers led to headcount reallocation – Global Investment bank

• Yearly savings are 3-5% of the $120M annual budget – Global Bank

Financial Management

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―With HP IT Financial Management, we‘re driving the financial accountability of our technology organization.

We‘ve benchmarked our IT spending in relationship to our operational expenses, and it is substantially lower than our peers.

As its business users become more cognizant of their technology consumption, they find ways to use technology more efficiently

Our unit costs – meaning cost per desktop, per server, per gigabyte of storage – have dropped 14 percent.‖

Jeffrey Johnson – Deputy CIO and VP of Operations and Infrastructure, Constellation Energy

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Before

– Fragmented processes and tools, succeeding through ―pure heroism‖

– Met objectives because we had smart people working very hard

– Not scalable

CASE STUDY

Approach

• Adaptation of ITIL v3

• Started with HP Project & Portfolio Management to understand portfolio investments

• HP Asset manager to help decommission large assets

• HP uCMDB led to better understanding of risks and conflicts associated changes

• HP Discovery and Dependency Mapping to help define the business value of technology assets and resources

• HP Service Manager where escalations reduced by half e.g. thanks to better access to problem data

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Business

Mature investment decisions

Operational Efficiencies

Actionablecost information

CIO

Delivering Value Along the Journey

Eliminate unnecessary operational costs by

3-5% annually**

Save 7% to15% of overall IT budget through betterinvestment management*

Improve project timeliness up to 45%* and reduce labor costs by

up to 11.4% of IT budget*

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Ledger will tell you 100 laptops were purchased three months ago

Actionable Information

But to understand the business perspective you need:

– Deployment project costs

– Unit hardware costs

– Software license information

– Cost of ongoing support

– Deployment rate

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** Asset Management ROI Study

• Analyze cost drivers to effectively reduce waste

• Eliminate unnecessary operational costs by 3-5% annually**

• Reallocate budget and staff resources to more strategic projects

Transform cost data into

actionable information

• Ensure on-time, on-budget completion of projects and programs

• Evaluate asset, resource, warranty ,contract, and license utilization

• Match resource and asset supply and demand for lean service delivery and support

• Improve project timeliness by up to 45%* and reduce labor by up to 11.4 % of IT budget*

Efficiently manage IT execution

• Gain insight through complete IT demand aggregation

• Save an average of 7.8% of the annual IT budget by avoiding non-strategic projects*

• Enable traceability, accountability, and process improvement

Improve IT investment decisions

Delivering Value Along the Journey

Maximize IT contribution to business innovation and manage IT like a business

* Gantry Group HP PPM Center customer benchmark study Feb 2008

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"HP is helping us enhance operational and strategic

decision making by identifying ways to drive more

value to our business while driving out

inefficiencies.

Our IT organization is better able to attract internal

capital for investment by managing itself like a business in

a transparent, fact-based manner.―

Allan Hackney – CIO, John Hancock Financial Services

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CASE STUDY

Before

– CFO of IT weekly conducts

analysis of variances and

manages exceptions in

flight

– CIO and CFO of IT go to

business meeting and

present results from FPA

Dashboard

• Budgets are created by cost center in excel, they are manually rolled up to an IT budget

• Actuals are created by manually pulling data from Asset Manager and PPM and then manually loaded into cost center Excel plans

• Budget versus actual is then manually rolled up by the CIO and the CFO of IT to get totals

• Meanwhile, at the spreadsheet level, limited analysis is possible at best

DIRECTION

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Financial Management Visualization

IT Provider

Infrastructure

Department

Geography

Business Unit

Projects

Plan

Actual

OPEX

CAPEX

IT FinanceCIO

Lines of Business

IT managers

CFO

VP Applications

VP Operations

ResourcesLabor

AssetsHardware/Software

FinancialsProject portfolio management

Asset management

Organizational view Component view

―Free your people up from just data collection and collating to actually analyzing the data for gaps, areas of improvements, etc. You turn your financial analysts into analysts that can help managers.‖

– VP IT Finance, Large Insurance Company

3rd Party Data Sources

Financial Planning & Analysis

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HP Financial Planning & Analysis Allocation Engine

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Where to Start?

– Financial Planning & Analysis

• Already have a mature PPM and/or AM deployment

• Customize data gathering from equivalent products

• No PPM/AM? Collate data into FPA-ready spreadsheet template

• Focus is on views of financials for stakeholders or cost allocation

– Project and Portfolio Management

• Do not already have a portfolio perspective

• Inefficient or routinely cancelled projects is a pain point

• Difficulty keeping track of demand for investments

• No current view of labor costs (e.g. time recording)

– Asset Management (and uCMDB)

• Not currently tracking assets

• No real link between assets and business services

• Issues with software licensing and compliance

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You have been managing your department based on near-real time financial data.

You can link and demonstrate the value of services to the business.

You have the transparency and flexibility to answer questions and provide data to improve decision-making.

When the Quarterly Budget Review Is Due...

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What Is ITFM?

IT Financial Management (ITFM) plans, accounts and

controls spending on resources used in providing IT

services aligned to business entities.

―The aim of Financial Management for IT Services is to give accurate

and cost effective stewardship of IT assets and resources used in

providing IT Services. It is used to plan, control and recover costs

expended in providing the IT Service negotiated and agreed to in the

Service Level Agreements (SLA).‖ (ITIL V3)

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IT Financial Framework

•Budgeting

•Forecasting

• Value Assessment

Planning Accounting Control

• Financial Accounting• Asset Management• Cost Management

• IT Spending Visibility

•Variance analysis

•Performance Management

•Reporting

A framework describes the processes of an industry or enterprise domain, and defines the boundaries and requirements for the business components and services which support those processes. Frameworks provide a common starting point for every organization from sales through delivery.

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ITFM—Functional View

DemandManagement

CapacityManagement

PortfolioManagement

Forecasts•Cost Center•Service• Portfolio

Revenue & Expenses

•Cost Pools•Cost Center•Category•Object Code•Service•Portfolio

Budgets•Cost Center•Service•Portfolio

Cost ManagementCost DriversAllocation to ServicePrepare Chargeback Invoice

Asset CostsHW, SW, Supplies, ContractsBy Cost Center

AssetService

Visibility•Dimensions Drill Down•Dashboards•Green IT

Reporting-Standard-Custom

AnalysisVariance•Time•Measure•Scenario

Financial Management Process

ConfigurationManagement

Value•Cost Center•Service•Portfolio

AssetManagement

Financial Management Solution

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ITFM—Typical Requirements

Cost GroupingCompany A

Dept Obj. Code Amount

X X X

X X X

X X X

IT Salaries

IT Supples

IT Maintenance

IT Uti;ities

IT Capital Equipment

IT Captalized SW

Projects Cost

Non Projects

Cost

Business Service

Asset ID Amount

X X X

X X X

X X X

Operating Exp

Capital Exp

Object Code Description

Infra Service

Direct Tracing

By Usage

By Percentage

Allocate Service

Cost to Line of

Business

Costed Service

Components

Allocation Method

Cost Objects

Service Cost

Objects

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UCMDB

Services and Relationships

PPM

AM

FPA

Demand Management

Project Management

Asset Financials

Allocation Engine

Order Service

BRM

Data: Project, Resource Costs , Planned/Actual(ETL)

1 2

4

People LegendCM… Configuration ManagerBRM…Business Relationshp ManagerPPM…Project Portfolio ManagerPM...Project ManagerAM…Asset ManagerFA…Financial Analyst

Portfolio Management

PPM

Product LegendUCMDB… Universal CMDBPPM…Project Portfolio ManagerAM…Asset ManagerFPA…Financial Planning and Analysis

AM

FA

ITFM End to End Solution

CM

Cost Explorer

Data: Asset Cost, Asset BudgetBusiness Services (ETL)

Data: Business Services

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Interaction Legend

Process Step…

Allocate Costs By Standard and Usage to Service

DDM

ITAM Trusted Sources Data: CI Data

DDMi

Business Services and

AssetsDashboard

OLAP Engine: Reports By Dimension

Add Portfolio Item

3 Add Project w/resource and cost details

Data: Projects, Services

Relate Assets, Costs and Services

5

PM6

7

Consolidate Costs

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SM

Services and Relationships

PPM

AM

FPA

Demand Management

Project Management

Asset Financials

Allocation Engine

Order Service

BRM

Data: Project, Resource Costs , Planned/Actual(ETL)

1 2

4

People LegendCM… Configuration ManagerBRM…Business Relationshp ManagerPPM…Project Portfolio ManagerPM...Project ManagerAM…Asset ManagerFA…Financial Analyst

Portfolio Management

PPM

Product LegendSM… Service ManagerPPM…Project Portfolio ManagerAM…Asset ManagerFPA…Financial Planning and Analysis

AM

FA

ITFM End to End Solution

CM

Cost Explorer

Data: Asset Cost, Asset BudgetBusiness Services (ETL)

Data: Business Services, Infrastructure Services, CIs

1 n

Interaction Legend

Process Step…

Allocate Costs By Standard and Usage to Service

DDM

ITAM Trusted Sources Data: CI Data

DDMi

Business Services and

AssetsDashboard

OLAP Engine: Reports By Dimension

Add Portfolio Item

3 Add Project w/resource and cost details

Data: Projects, Services

Relate Assets, Costs and Services

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PM6

7

Consolidate Costs

UCMDB

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HP BTO Data Model (BDM): Conceptual ModelBusiness Enablement

Application & Services

Software

Infrastructure

Facilities

IT Processes

Opera

tions

Financi

al/

Ass

et

PM

OD

eve

lopm

ent

DependsOn

DependsOn

LocatedAt

Virtualzes

RunsOn

InstalledOn

Business Activity

Business Service Business Process

SLA HasA DependsOn

Business

TransactionApplication

Contains

Infrastructure

Service

Running Software InstalledSoftware

Web Server Database Application ServerHypervisor

Realizes

Cluster SoftwareMessaging Server

Node

Node Element

Contains

Interface File SystemLogical Volume

Communication

End Point

Cluster

Mounts

IP AddressCluster Resource

Group

Fail Over Cluster

isBoundTo

Physical Port Hardware Board

Application

System

DirectorySystem

Location

Incident

Problem

Change

KPI

Request For

Change

CostCenter

Asset

Purchase Order

CostCategory

..

Project

Resource

Skill Set

..

Defects

..

Area of future development=

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HP Proprietary & Confidential

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ITFM Services

Solution Discovery Workshop

An Assessment and Roadmap Service

Service Costing Consulting Service

Creating a Cost Model :

Identify Service Model Define Cost ObjectsChoose DriversChoose Data SourcesDesign to Requirements

Technology Implementation

Service

Implementation:

Install FPAIntegrate AM and

PPM with FPAConsider other Data SourcesExtend ETL as

needed

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hp.com/go/itfm

Questions?

37 ©2010 Hewlett-Packard Development Company, L.P.

To learn more on this topic, and to connect with your peers after

the conference, visit the HP Software Solutions Community:

www.hp.com/go/swcommunity

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