it financial management in it4it v2 - the open group · pdf file4/25/2017 ·...
TRANSCRIPT
IT Financial Management in IT4IT V2.1A bird’s eye view
April 25, 2017
2
Agenda
• Why IT Financial Management Matters more now?
• IT Financial Management in the Digital World
• How IT4IT standard enables ITFM in the digital world
• Questions
3
Need for IT Financial Management
Today’s CIOs face a difficult balancing act: to achieve high performance they must manage today,
control costs and deliver at increasing pace tomorrow
Run, Grow, Transform IT..• Deliver day-to-day services
• Enhance quality of IT services
• Create more efficient, seamless integration
across services
• Introduce Technology Innovations to create
differentiation
…while controlling costs and driving value• Deliver more with flat or declining budgets
• Maximize business return and value from IT Investments
• Enhance efficiency, effectiveness, productivity, by
removing complexity from the IT portfolio
• Simplify and standardize service costing
In the face of these challenges, IT
organizations need to manage IT
finances in transparent and efficient way
to achieve results:
• Get more bang from the IT buck and drive value through aligning to market trends, to maximize ROI
• Forecast and plan IT budget effectively
• Benchmark your IT spends against the leaders in Industry
• Implement service based costing and data driven investment decisions
• Optimize IT costs and asset management -reduce Unit cost to serve
62% of CIOs do not believe that
there is adequate transparency of IT
costs, contributions and
performance.
74% of IT organizations cannot
clearly define their IT services and
their associated business value.
Source:
Gartner ITScore surveys 2015
The 2015 Gartner CIO survey
81% of IT organizations cant
consistently report/chargeback the
full costs of IT services to business
units
93% of CIOs cannot consistently
apply good benefits realization
practices including benefits
harvesting
4
Scope of IT Financial Management• Manage the preparation of forecasts/budget, challenge
department forecasts as required, ensure forecast numbers
align with company targets.
• Be accountable for the formulation of the 3 year / 5 year
investment plan (company dependent)
• Manage capital expenditure and capital budgeting processes
• Manage IT Financial policies, delegation of authority,
procedures, cost centre structure, project reporting structure• Analyze and report IT spend actuals,
highlight corrective action to ensure
IT delivers to financial plans
• Manage IT service charging
processes both outside and inside IT
• Assess value delivered by IT services
and price IT services.
• Manage regular accounting processes
• Set the requirements for IT financial
systems (e.g. SAP customisations)
• Provide end-to-end view of costs
associated with the entire life cycle
of an IT service
Typically out of scope:
• Tax and treasury management
• Legal entity management
• Asset management
• IT headcount management
• Procure to Pay processing
5
The benefits of strong IT Financial Management
Today’s CIOs face a difficult balancing act, to achieve high performance they must manage today,
control costs and deliver at increasing pace tomorrow
• Enables data driven prioritization of
IT Investments.
• Allows IT to set expectations in an
effective manner through long term
accurate planning
• Enables IT to be run as a business,
for the business
• Provides data points for IT
Optimization: by providing multiple
views on the cost of IT services.
• Provides early visibility of
opportunities or problems so
corrective actions can be taken
• Increases the relevance of IT to the
business through appropriate cost
and value reporting
6
IT Financial Management Maturity
A strategic shift is required in IT investment planning to move focus from “Run the business” and
“Grow the business” to “Transform the Business” projects and services.
Level of Sophistication
Ma
turity
Le
ve
l
Defined
IT as service
provider
InitialIT as Cost
center
Optimized
IT operates as a
value creator
IT operates as a
profit center
Futuristic **
** Futuristic State is an optional maturity level and may be user for IT services in context
where IT is provided to business partners E.g. Franchise Partners for example
* Chargeback Function is optional for IT based on business decision
• Budgeting based on asset classes e.g. software, infrastructure etc.
• Departments have their own systems/manual process for cost capture
• No defined chargeback mechanism
• Investment planning and forecast based on product sets & business units
• Cost information available across the enterprise & reviewed for strategic decisions
• Well defined chargeback based on usage pools [departments…]
• Fixed price not directly related to service cost
• Investment planning linked to a service catalog
• End-to-end integration of service costing to identify true TCO
• Automated chargeback mechanism enabling cost recovery tracking
• Investment decisions based on business value of service
• Sophisticated analytics engine proposing insights for optimizing costs
• Service Priced to create profit for funding IT Budgets
7
Which level is your IT organization ready for
Assessing target maturity level can be tricky, It depends on the overall maturity of the IT
organization.
Traditional IT Organization:
• Has a legacy core and
operations
• Builds incrementally upon
existing infrastructure and
services
• IT is seen as a cost center
• Delivery speed is perceived as
slow
Multi-speed IT Organization:
• Has a hybrid core and
operations
• Builds incrementally on core
and innovates on consumer
experience.
• IT is seen as a service center
Digital IT Organization:
• Has cloud based core and
operations
• Links external and internal
capabilities to Innovate on
core services as well as
consumer experience.
• IT is seen as a value creator
• Delivery is with Agile methods
• Speed perceived as fast
Traditional IT Multi-speed IT Digital IT
8
Agenda
• Why IT Financial Management Matters more now?
• IT Financial Management in the Digital World
• How IT4IT standard enables ITFM in the digital world
• Questions
9
How does ITFM work in Organizations at initial maturity
stage
Currently, ITFM tools bring data from disparate systems to a
consolidated data store to provide capabilities to analyze IT
investments and spends
• Dependency on ITFM tools – ITFM tools are
typically used in large organisations and require
significant effort and cost to implement
• Focus on managerial accounting – At present
ITFM in organizations focus on managerial
accounting driven by the needs of corporate
finance
• Fixed budget - Budget is often fixed, lacks
flexibility and is focused more on running the
business & product management than on
enterprise strategy
• IT viewed as a cost center - IT organization,
currently, is viewed as a cost center and doesn’t
focus on the value IT investments can bring to an
enterprise
• Limited cost transparency - The current view of
IT costs provides very limited visibility. Cost
tracking in these organizations is done by the
project and there is no view of the Total Cost of
Ownership (TCO) at the service level
Issues/ChallengesCurrent ITFM state
10
What should ITFM look like in the Digital world
For CIOS, the focus now is to reinvent the Enterprise IT to convey business value in the midst of
a Digital Revolution. To truly improve business outcomes CIO’s need a more mature IT Financial
Management
Service
• Maintain an authoritative list of all IT investments and
measure the ROI of each investment
• Enable CAPEX vs. Opex decisions
• Track total cost of ownership for each service
• Define the offer catalog for all services offered
internally or externally (or as a mix of both)
• Chargeback based on consumption and price
• To implement pricing models, organizations
often start with a simple mechanism where price
equals to cost.
Costing
Budgeting
Chargeback & Pricing
11
Agenda
• Why IT Financial Management Matters more now?
• IT Financial Management in the Digital World
• How IT4IT standard enables ITFM in the digital world
• Questions
12
IT4IT Standard enables end-to-end traceability to
accelerate you ITFM Journey
Service Lifecycle:
13
IT4IT Standard enables end-to-end traceability to
accelerate your ITFM Journey
Stages of Service Lifecycle:
Servitize Everything Track costs Here
Aggregate costs at each
lifecycle stage to
understand TCO
Build service budgets at
required level of detail
1 3
2
4
14
IT4IT Standard enables end-to-end traceability to
accelerate you ITFM Journey
Service Lifecycle:
Service
Portfolio
Component
Portfolio
Demand
Component
Proposal
Component
Policy
Component
Defect
Component
Requirement
Component
Project
Component
Test
Component
Build
Component
Source Control
Component
Change
Control
Component
Problem
Component
Incident
Component
Event
Component
Diagnostics &
Remediation
Component
Usage
Component
Chargeback/
Showback
Component
Strategy to
PortfolioRequirement to Deploy Request to Fulfill Detect to Correct
Offer Mgmt.
Component
Offer Consumption Component
Service
Archi-
tecture
PolicyRequire-
ment
Scope
Agree-
ment
IT
Initiative
Portfolio
Backlog
Item
Source
Concep-
tual
Service
Logical
Service
Test
Case
Defect
Offer
Service
Release
Build
Service
Catalog
Entry
Desired
Service
Model
Usage
Record
Fulfill-
ment
Request
Sub-
scription
Charge-
back
Contract
Request
Problem/
Known
Error
Incident
Event
Service
Monitor
Run
Book
RFC
Service
Monitoring
Component
Catalog
Composition
Component
Shopping
Cart
Enterprise
Architecture
Component
Service
Design
Component
Fulfillment
Execution
Component
Request
Rationalization
Component
Configuration
Management
Component
Release
Composition
Component
Service Level
Component
Service
Contract
Actual
Service
Build
Package
Build Package
Component
Service
Release
Blueprint
IT4IT Reference Architecture L1 V.2.1Service
Archi-
tecture
Enterprise
Architecture
Component
Policy
Component
Policy
Proposal
Component
Scope
Agree-
ment
Service
Portfolio
Component
Concep-
tual
Service
Project
Component
IT
Initiative
Logical
Service
Service
Design
Component
Service
Release
Release
Composition
Component
Service
Release
Blueprint
Service
Catalog
Entry
Catalog
Composition
Component
Desired
Service
Fulfill-
ment
Request
Fulfillment
Execution
Component
Offer Mgmt.
Component
Offer
Usage
Component
Usage
Record
Configuration
Management
Component
Actual
Service
Service
Monitor
Service
Monitoring
Component
Sub-
scription
Request
Request
Rationalization
Component
Chargeback/ Showback
Component
Charge-
back
Contract
Charge-
back
Record
Portfolio
Demand
ComponentPortfolio
Backlog
Item
15
IT Investment Portfolio
Aligning business with IT and data driven decisions empower IT organizations to track actuals
against budgeted costs.
Service
Portfolio
Component
Portfolio
Demand
Component
Proposal
Component
Policy
Component
Defect
Component
Requirement
Component
Project
Component
Test
Component
Build
Component
Source Control
Component
Change
Control
Component
Problem
Component
Incident
Component
Event
Component
Diagnostics &
Remediation
Component
Usage
Component
Chargeback/ Showback
Component
Strategy to
PortfolioRequirement to Deploy Request to Fulfill Detect to Correct
Offer Mgmt.
Component
Offer Consumption Component
Service
Archi-
tecture
PolicyRequire-
ment
Scope
Agree-
ment
IT
Initiative
Portfolio
Backlog
Item
Source
Concep-
tual
Service
Logical
Service
Test
Case
Defect
Offer
Service
Release
Build
Service
Catalog
Entry
Desired
Service
Usage
Record
Fulfill-
ment
Request
Sub-
scription
Charge-
back
Contract
Request
Problem/
Known
Error
Incident
Event
Service
Monitor
Run
Book
RFC
Service
Monitoring
Component
Catalog
Composition
Component
Shopping
Cart
Enterprise
Architecture
Component
Service
Design
Component
Fulfillment
Execution
Component
Request
Rationalization
Component
Configuration
Management
Component
Release
Composition
Component
Service Level
Component
Service
Contract
Actual
Service
Build
Package
Build Package
Component
Service
Release
Blueprint
Charge-
back
Record
Finance
IT Investment
PotfolioIT
Budget
Item
IT Financial Management
Sourcing & Vendor
Management(External to IT)
Cost Modeling
IT Cost
Model
BenchmarkingPrice
Modelling
Price
Model
IT Asset Management(External to IT) Supportive Function
Engagement Experience Portal
User
Profile
Portfolio
Demand
ComponentPortfolio
Backlog
Item
Proposal
Component
Scope
Agree-
ment
Service
Portfolio
Component
Concep-
tual
Service
Service
Catalog
Entry
Catalog
Composition
Component
Finance(External to IT)
IT Investment
PotfolioIT
Budget
Item
Clear view of IT Budget forecast
and actuals for every service in
service catalog
Investment PortfolioPrioritized
business
demands
Proposed
Scope and
budget
Scope linked to
service portfolio
Proposal ComponentPortfolio Demand
New demands
from business
Service Portfolio Catalog Composition
Budgeting Inputs such as
3rd Party service costs,
Facility costs etc.
Finance
Budget
Request &
Approval
Service
portfolio linked
to Service
catalog
Approved Service Budget
Actual Service Costs
Operations
Continuity
Budgets
demand
Change
Requests
(from D2C)
1
2
34
5
6
7
ILLUSTRATIVE
16
Service
Portfolio
Component
Portfolio
Demand
Component
Proposal
Component
Policy
Component
Defect
Component
Requirement
Component
Project
Component
Test
Component
Build
Component
Source Control
Component
Change
Control
Component
Problem
Component
Incident
Component
Event
Component
Diagnostics &
Remediation
Component
Usage
Component
Chargeback/ Showback
Component
Strategy to
PortfolioRequirement to Deploy Request to Fulfill Detect to Correct
Offer Mgmt.
Component
Offer Consumption Component
Service
Archi-
tecture
PolicyRequire-
ment
Scope
Agree-
ment
IT
Initiative
Portfolio
Backlog
Item
Source
Concep-
tual
Service
Logical
Service
Test
Case
Defect
Offer
Service
Release
Build
Service
Catalog
Entry
Desired
Service
Usage
Record
Fulfill-
ment
Request
Sub-
scription
Charge-
back
Contract
Request
Problem/
Known
Error
Incident
Event
Service
Monitor
Run
Book
RFC
Service
Monitoring
Component
Catalog
Composition
Component
Shopping
Cart
Enterprise
Architecture
Component
Service
Design
Component
Fulfillment
Execution
Component
Request
Rationalization
Component
Configuration
Management
Component
Release
Composition
Component
Service Level
Component
Service
Contract
Actual
Service
Build
Package
Build Package
Component
Service
Release
Blueprint
Charge-
back
Record
Finance
IT Investment
PotfolioIT
Budget
Item
IT Financial Management
Sourcing & Vendor
Management(External to IT)
Cost Modeling
IT Cost
Model
BenchmarkingPrice
Modelling
Price
Model
IT Asset Management(External to IT) Supportive Function
Engagement Experience Portal
User
Profile
IT Service Costing – Service Subscription
IT4IT framework connects various consumers with goods and services they need and fosters
service consumption and fulfilment
Service
Catalog
Entry
Catalog
Composition
Component
Sub-
scription
Request
Request
Rationalization
Component
Chargeback/ Showback
Component
Charge-
back
Contract
Charge-
back
Record
Desired
Service
Fulfill-
ment
Request
Fulfillment
Execution
Component
Service
Monitor
Service
Monitoring
Component
User
Profile
Engagement Experience Portal
Service Monitoring
ChargebackEngagement
Experience Portal
Service Bundled
into Offers
Service
subscribed by
business users
Contract details
terms for
Chargeback
Service Fulfilment
instantiates service
monitorCatalog
Composition
Request
Rationalization
Instance
Listing of all
IT services
including 3rd
Party
Services
Listing of
bundled
services
offered to
users
2
1
ILLUSTRATIVE
Subscribed services are
delivered to the consumer
and service consumption is
monitored
Fulfillment Execution
service monitor
3a
3c
3b
A desired service is
created for each
subscription
17
IT Service Costing (Development) - Chargeback
IT4IT uses the Service Backbone to establish transparency in cost flows for services offered by
IT Organizations
Service
Monitor
Service
Monitoring
Component
Chargeback/ Showback
Component
Charge-
back
Contract
Charge-
back
Record
Service
Portfolio
Component
Concep-
tual
Service
Usage
Component
Usage
Record
Project
Component
IT
Initiative
Service Usage/
Subscribed
Service
Chargeback
Accumulates the actual charge
of the subscribed services
based on usage, invoice
Costs can be consolidated at
any level of service backbone
giving end-to-end cost visibility
Service Monitoring Usage
Contract details terms
for Chargeback of
subscribed services
Service monitors created
for subscribed services
Usage
Collection
1 2
ILLUSTRATIVE
Service Portfolio
Chargeback
Actual
Spend
3
Determines and tracks the
Total Cost of Ownership
(TCO) of a service
Project
Chargeback
Record
4
18
IT Asset Management
IT Asset management ensures optimal utilization of assets and correct valuation of period costs
of assets in use
Note: The function of IT Asset Management is not
included in RA v2.1 and is still work in progress
Usage
Component
Usage
RecordService
Monitor
Service
Monitoring
Component
Finance(External to IT)
IT Asset ManagementSupportive Function
Usage Finance
IT Asset Management Purchased Assets (from
Sourcing & Vendor
Management)
Service Monitoring
Asset health and
Utilization Depreciation
Rules
Invoice for capital
Investments e.g. servers
(from Sourcing & Vendor
Management)
Request for asset
expensed cost
Input: Invoice for
capital investments,
period
Depreciated Asset
Costs per period
Keeps track of utilization
and asset health. Interacts
with capacity management
capability to optimize
assets (incl. hardware and
software licenses)
2
3 1
4
6
5
ILLUSTRATIVE
19
IT Financial Management – Progress so far
IT Financial
Management
20
IT Financial Management - Documents
• IT4IT Pocket Guide – This document provides an in depth view on the IT4IT
Reference Architecture. It describes a reference architecture illustrated by an IT Value
Chain necessary to manage the business of IT. IT Financial Management
recommendations are incorporated as a part of IT4IT 2.1 standard.
• Scenario documents – This document provides a walkthrough on how service
costing is calculated and tracked across the service lifecycle for a pure service and
hybrid service with the help of a hypothetical scenario
Pure Service Scenario
Hybrid Service Scenario
• Guidance Paper – This document provides the major concepts of IT Financial
Management
21
Table of Contents
• What’s the need for ITFM
• Journey of ITFM to the digital world
• How IT4IT standard enables ITFM in the digital world
• Questions
22
Questions?