IT Financial Management kickoff

IT Financial Management Optimizing resources to deliver highest value to business Financial year Change the business Capital and resources Capex Now How to account How to predict IT Opex for IT spend? costs? Run the business CIO How to govern IT investments? Governance Accountability Predictability Effective management of Reporting & analysis of IT Accurate forecasting of the IT investment planning spend, assessment of IT resource & capital process, cost/benefit (ROI) service costs, cost requirements, continuous determination, data allocation and recovery tracking of IT spending & integrity resource consumption 2

IT Financial Management Challenges What is our Am I evaluating all exposure for sourcing options for software licenses a service? and contracts? What is the impact of How do I better increasing or align my resources decreasing IT with the business? spending? Am I effectively How do I utilizing assets? connect cost to value? Which customers CIO are costing me IT Business What is the more than plan viewpoint viewpoint real cost for my to support? applications & services? ―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 3

IT Financial Management Challenges Business No actionable Immature investment cost information decisions ―The IT organization cannot be credible ―IT has weaker internal unless it can have meaningful management systems today than conversations in the language of manufacturing had in 1982‖ business. This means having the right IDC Industry Insights, 2008 information to guide business decisions.‖ Barbara Gomolski, Research VP, Gartner CIO Only 36% of the average CIO‘s budget can be devoted to providing new capabilities CIO Magazine ―The State of the CIO‖ online survey, January 2008 Operational inefficiencies 4

Financial Management Current State Visibility Limited visibility into IT financials Governance Service pricing and charge-backs Weak Process Planning and budgeting discontinuous Cost accounting processes Financial analysis PMO Apps Ops Corporate Business Data Spreadsheets Project details Configuration data financial unit data data Many unsynchronized data feeds 5

HP Financial Management Approach Full visibility, control and HP Financial Planning and Visibility Analysis dashboard accountability Governance Automated Service pricing and charge-backs consolidation of Planning and budgeting budgets and costs Process Automated cost Cost accounting allocation Financial analysis Corporate HP Project and financial HP Asset Portfolio data External Management Management data Data Business feeds HP Configuration Management unit data 6

HP Financial Planning and Analysis Understand IT cost drivers and variance 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 7

Consolidated and Actionable Financial Planning and Analysis dashboard User Employee Projects Projects Region Locations Costs Costs Organizations Department Project and Portfolio Asset Management Management – Automating large parts of the data gathering process 8 – Encouraging better behavior as people see the results of their actions

HP Project and Portfolio Management Center Project and portfolio alignment/control 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 9

HP Asset Manager Hardware/software optimization 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 10

Delivering Value Along the Journey 1 Improve Base Information HP Financial Planning and Analysis Establish a clear understanding of all IT costs, cost drivers, and variance sources across budget, Cost Cost portfolio and assets. 1 visibility 2 management 3 2 Add Depth to Improve Decisions HP Project Portfolio Management Effectively manage the entire Maximized scope of IT investments— Strategic Resource IT business support budget, resource, time, and 1 investment 2 and time 3 value for capacity to align spending with portfolio management optimization innovation business objectives. HP Asset management 3 Optimize value Link value to cost to make Inventory Asset 1 and asset 2 capacity 3 intelligent business decisions that tracking management will focus resources on innovation, improve efficiency and maximize business outcomes. IT service management` 11

Delivering Value HP Project & Portfolio Management Aggregate Optimize the Execute projects Demand portfolio and other work • IT project scope changes • Project funding process • Increase project team dropped by 57% - Large reduced from 6  1 productivity by 30% – food retailer and wk(s) – Large Birlasoft distributor commercial airline • Reduce ‗at risk‘ projects • The IT demand queue • IT budget accuracy from 50% 14% - reduced by 67.1% - improved 100%: Autotrader.com Large food retailer and planned budget exactly distributor tied to actual IT • Cost overruns reduced to expenditures for the 0%, recouping 2% • Immediately identified year – Large food ($1.5M) of annual IT and stopped $8 million retailer and distributor Budget - Large food in projects determined retailer and distributor unlikely to delivery • Saved $3.7 million by expected business value avoiding investment in • Decreased time spent on – Xcel Energy non-viable projects – schedule tracking and Xcel Energy updating by 50%. – Packaging firm 12

Delivering Value HP Asset Manager Financial Asset Tracking Optimize Costs Management • Created global asset • Hardware lease cost • Budget to operational repository and process reductions of $8M spend accuracy at 95% for asset management – annually Large WW – WW Telecoms Large Manufacturer Manufacturer • Ensured proper asset • 95% of IT asset • Reduced TCO of depreciation accounting name/location, config desktop environment by – German bank and user now known – 50% - Bayer Business Leader in WW Services • Better understanding of Telecommunications infrastructure cost drivers • Saved $3M in led to headcount • Centralized collection overlapping/redundant reallocation – Global and management of all Telecom contracts – Investment bank desktop, network, Global Investment Bank datacenter, contracts, • Yearly savings are 3-5% licenses & applications – • Software license reuse of the $120M annual Multinational Chemical reduces costs by $4.5M budget – Global Bank Conglomerate – US Food manufacturer 13

―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 14

CASE STUDY Before – Fragmented processes and tools, succeeding through ―pure heroism‖ – Met objectives because we had smart people working very hard – Not scalable Approach • Adaptation of ITIL v3 • HP Discovery and Dependency Mapping to • Started with HP Project & Portfolio help define the business value Management to understand portfolio of technology assets and investments resources • HP Asset manager to help • HP Service Manager where decommission large assets escalations reduced by half • HP uCMDB led to better e.g. thanks to better access to understanding of risks and conflicts problem data associated changes 15

Delivering Value Along the Journey Business Actionable Mature investment cost information decisions CIO Save 7% to15% of overall Improve project timeliness up to Eliminate unnecessary IT budget through better 45%* and reduce labor costs by operational costs by investment management* up to 11.4% of IT budget* 3-5% annually** Operational Efficiencies 16

Actionable Information Ledger will tell you 100 laptops were purchased three months ago But to understand the business perspective you need: – Deployment project costs – Unit hardware costs – Software license information – Cost of ongoing support – Deployment rate 17

Delivering Value Along the Journey Transform cost • Analyze cost drivers to effectively reduce waste data into • Eliminate unnecessary operational costs by 3-5% annually** actionable • Reallocate budget and staff resources to more strategic projects information • Gain insight through complete IT demand aggregation Improve IT • Save an average of 7.8% of the annual IT budget by avoiding non- investment strategic projects* decisions • Enable traceability, accountability, and process improvement • Ensure on-time, on-budget completion of projects and programs • Evaluate asset, resource, warranty ,contract, and license utilization Efficiently • Match resource and asset supply and demand for lean service manage IT delivery and support execution • Improve project timeliness by up to 45%* and reduce labor by up to 1 % of IT budget* 1.4 Maximize IT contribution to business innovation 18 and manage IT like a business * Gantry Group HP PPM Center customer benchmark study Feb 2008 ** Asset Management ROI Study

"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 19

CASE STUDY Before DIRECTION • Budgets are created by cost center in – CFO of IT weekly conducts excel, they are manually rolled up to analysis of variances and an IT budget manages exceptions in • Actuals are created by manually flight pulling data from Asset Manager and PPM and then manually loaded – CIO and CFO of IT go to into cost center Excel plans business meeting and • Budget versus actual is then present results from FPA manually rolled up by the CIO and Dashboard the CFO of IT to get totals • Meanwhile, at the spreadsheet level, limited analysis is possible at best 20

Financial Management Visualization VP Applications IT Finance CIO VP Operations Actual CAPEX CFO Plan OPEX Projects Department Financial Planning IT Provider & Analysis Geography Lines of IT managers Infrastructure Business Unit Business Organizational view Component view Resources Financials Assets Labor Hardware/Software Project portfolio Asset management 3rd Party Data Sources management ―Free your people up from just data collection and collating to actually analyzing the data for gaps, areas of improvements, etc. You turn your 21 financial analysts into analysts that can help managers.‖ – VP IT Finance, Large Insurance Company

HP Financial Planning & Analysis Allocation Engine 24

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 26

When the Quarterly Budget Review Is Due... 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. 27

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) 28

IT Financial Framework Planning Accounting Control •Budgeting • Financial Accounting •IT Spending Visibility •Forecasting • Asset Management •Variance analysis • Cost Management • Value Assessment •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. 29

ITFM—Functional View Demand Management Configuration Asset Portfolio Management Management Management Capacity Management Budgets Forecasts Revenue & Asset Costs Visibility Analysis •Cost Center •Cost Center HW, SW, Variance •Service Expenses •Dimensions Drill •Service •Cost Pools Supplies, Down •Time • Portfolio •Portfolio •Cost Center Contracts •Dashboards •Measure •Category By Cost Center •Green IT •Scenario Value •Object Code Asset •Cost Center •Service Service •Service •Portfolio Cost Reporting •Portfolio Management -Standard Cost Drivers -Custom Allocation to Service Prepare Chargeback Financial Management Process Invoice Financial Management Solution 30

ITFM—Typical Requirements Operating Exp Object Code Description Dept Obj. Code Amount IT Salaries X X X IT Supples X X X IT Maintenance X X X IT Uti;ities Cost Objects Business Service Service Cost Cost Grouping Allocation Method Objects Company A Projects Cost Direct Tracing Allocate Service By Usage Infra Service Cost to Line of Non Projects By Percentage Business Capital Exp Cost Asset ID Amount Costed Service Components X X X IT Capital Equipment X X X IT Captalized SW X X X 31

ITFM End to End Solution PPM Order BRM Service Demand 1 Management 2 Add Portfolio Item PPM FA Portfolio Management Consolidate Costs 5 FPA 3 Add Project w/resource and cost details Data: Project, Resource Costs , Allocation Project Planned/Actual(ETL) Engine PM Management Allocate Costs 6 AM By Standard Data: Projects, Services and Usage to Service Asset AM Financials Cost Explorer ITAM Trusted Sources Data: CI Data DDMi OLAP Engine: 7 Relate Assets, Costs Reports By and Services 4 Dimension Business CM Services and Dashboard UCMDB Assets Data: Business Data: Asset Cost, Asset Budget Services Business Services (ETL) Services and Relationships DDM Product Legend People Legend Interaction Legend UCMDB… Universal CMDB CM… Configuration Manager PPM…Project Portfolio Manager BRM…Business Relationshp Manager Process Step… 1 n AM…Asset Manager PPM…Project Portfolio Manager FPA…Financial Planning and Analysis PM...Project Manager AM…Asset Manager 32 FA…Financial Analyst

ITFM End to End Solution PPM Order BRM Service Demand 1 Management 2 Add Portfolio Item PPM FA Portfolio Management Consolidate Costs 5 FPA 3 Add Project w/resource and cost details Data: Project, Resource Costs , Allocation Project Planned/Actual(ETL) Engine PM Management Allocate Costs 6 AM By Standard Data: Projects, Services and Usage to Service Asset AM Financials Cost Explorer ITAM Trusted Sources Data: CI Data DDMi OLAP Engine: 7 Relate Assets, Costs Reports By and Services 4 Dimension Business CM Services and Dashboard SM Assets Data: Asset Cost, Asset Budget Business Services (ETL) Services and Data: Business Services, Infrastructure Relationships Services, CIs DDM Product Legend People Legend Interaction Legend UCMDB SM… Service Manager CM… Configuration Manager PPM…Project Portfolio Manager BRM…Business Relationshp Manager Process Step… 1 n AM…Asset Manager PPM…Project Portfolio Manager FPA…Financial Planning and Analysis PM...Project Manager AM…Asset Manager 33 FA…Financial Analyst

Area of future HP BTO Data Model (BDM): Conceptual Model IT Processes = development Business Enablement Business Service Business Process Incident Problem Change Operations SLA HasA DependsOn Business Activity Request For Application & Services DependsOn Change Contains Infrastructure Business KPI Service Application Transaction CostCenter Software DependsOn Running Software Realizes InstalledSoftware CostCategory Financial/Asset Asset Purchase Order Web Server Database Hypervisor Application Server Messaging Server Cluster Software Virtualzes .. RunsOn Infrastructure InstalledOn Communication Application Contains Node System Project End Point Mounts Resource IP Address Cluster Resource Cluster DirectorySystem Node Element Skill Set Group PMO isBoundTo .. Interface Physical Port Logical Volume Hardware Board File System Fail Over Cluster Development Defects Facilities LocatedAt .. 34 Location 3 HP Proprietary & Confidential

ITFM Services Solution Discovery Service Costing Technology Workshop Consulting Service Implementation Service Creating a Cost Model : Implementation: An Assessment and Roadmap Service Identify Service Install FPA Model Integrate AM and Define Cost Objects PPM with FPA Choose Drivers Choose Data Sources Consider other Design to Data Sources Requirements Extend ETL as needed 35

Questions? hp.com/go/itfm 36

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

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