This document discusses how leveraging IT financial transparency through service costing and automation can drive IT transformation. It covers how cloud computing and IT as a service models are changing IT delivery and require new approaches to costing. Service costing provides transparency by allocating all IT costs to the services consumed. Automating the collection and analysis of cost data from multiple systems helps create accurate service cost models and chargebacks. This enables IT to operate more like a business and deliver value through transparent, market-driven internal services.

1. Leveraging IT Financial Transparency to
Drive Transformation
Mary Lou Alter, EMC
Brett Arnott, VMware
OPT4732
#OPT4732

2. 22
Agenda
1. Cloud and IT as a Service
2. Service Costing Fundamentals
3. Automating the process

3. 33
Agenda
1. Cloud and IT as a Service
2. Service Costing Fundamentals
3. Automating the process

4. 44
Transformational Drivers
Market
Speed
 New Global Markets
Opening, Expanding
 Lowered Barriers Erase
Traditional Advantages
IT Consumers
Have Choices
 Service Providers (SPs)
as Enterprise IT
Alternative
 Mobile Platforms for
Consuming Digital
Products & Services
Disruptive
Technology
 Virtualization, Converged
Infrastructure, Cloud,
Modern Application
Architectures
 Cloud Empowers New
Business Models
Private Public
Hybrid

5. 55
The Attraction of the Cloud
Accelerate Service Deployment1
Increased Financial Transparency3
Pay As You Go2
Better Staff Utilization4

6. 66
IT-As-A-Service
Business Focus
 Service Consumption Mindset
 Service-Based Pricing
 Service Level Expectations
 Integrated Cloud Architecture
 Integrated GRC
Transforming ourselves into a competitive service provider

7. 77
“…As A Service” The New Standard
Internally & Externally Provided Services: Digital + Human

8. 88
ITaaS - A New Way to Deliver Value
Consume
“Everything as a Service”
with robust catalog and
financial transparency
Operate
Highly automated with
transformed people &
process models
Architect
Transformed End User
Computing, Application and
Infrastructure platforms
with interoperability
Private Public
Hybrid

9. 99
Transforming IT through ITaaS
DNA, Skills, Roles &
Organizational Alignment
“Front Office” Capabilities
Service Accountabilities
Technology Breadth
Enabling Technology
Private, Hybrid, Public Clouds
End-to-End Automation
Financial Transparency
Self-Service Capabilities
A New IT Business Model
Service Oriented
Market Driven
“P & L” Focused
Broker and Builder

10. 1010
Cost & Agility Benefits
Virtualization and cloud services have allowed
organizations to become more agile and devote a greater
% of the IT budget to strategic initiatives

11. 1111
Agenda
1. Cloud and IT as a Service
2. Service Costing Fundamentals
3. Automating the process

12. 1212
Service Based Costing
 Business-Value centric & Service-oriented view vs.
Component/Project view (traditional)
 Clearer relationship of IT service cost to business services and
enables more effective demand management
 Effective service cost management helps an IT organization keep
costs under control and make wise decisions of future investments
 Traditional IT Cost Categories are aggregated into the services that
consume them
Service costing changes the conversation between
business and IT to one of value and demand

13. 1313
Achieving Cost Transparency
1. Inventory Services & Their Component Costs
a. Service Catalog
2. Build Cost Model That Illustrate Cost of Each Service
3. Identify Business Value of Each Service
a. Service Portfolio Management
4. Produce Chargeback or Showback invoice for Customers
5. Benchmark Service Costs versus Industry
Service models require that IT costs must be aggregated
by service not by thing

14. 1414
Service Costing Target State
Cost Transparency by:
• Service
• Service component & technology
• Organization
Chargeback of Costs to Users
Competitive/Market Rates for Internal Services
Service Lifecycle Cost Management
Consolidated Request Channels
Automation of Service Provisioning, Costing & Charging
Simple, Clear Reporting & Invoicing
Characteristics of the ideal future state IT Financial
Management

15. 1515
Cost Model Structure
 Seven layer model for the most mature of
organizations
 Typical organizations will deploy 4-5 of
the layers and evolve this over time and
maturity
 Each layer will support various degrees
of maturity and consideration. Few to
many objects will be used to support
specific customer needs
 Service Groupings support alignment to
ITIL or other customer methodology
EMC IT Approach
 Focus on 5 layers (cost sources, cost
pools, IT projects, IT Products & IT
Services) with ability to extend model to
include additional activity based data in
future.
Service Costing

16. 1616
IT Centric Costing to Business Relevant Pricing
... and prices services based
on business controllable
drivers
New model maps costs to
business-relevant services…
End user services
Driven by headcount
Business application services
Most existing chargeback will b e
reflected here. Billing based on
SDG hours, supporting
infrastructure costs, and
depreciation
Hosting services (PaaS and
IaaS)
Weight number of servers used by
app classification of those servers
Professional services
Actual hours and hourly rates
pulled from IT hours logging
system (PlanIT)
Premium services
Will be item-specific. On-going
effort as new services are defined
and brought online
• 18315 - ENTERPRISE DATA
WAREHOUSE
• 18320 - ECM/COLLABORATION
• 18325 - ENTERPRISE
ARCHITECTURE
• 18330 - E-Business Programs
• 18335 - ENTERPRISE
TECHNOLOGY SERVICES
• 18336 - ENTERPRISE
INTEGRATION SOLUTIONS
• 18410 - DOCUMENTUM
INTEGRATION - IT
• 18415 - IMG IT OPERATIONS
• 18420 - IT EVENT COORDINATION
• 18425 - GLOBAL INFRA & SVCS
OPS
• 18430 - IT CERT
• 18440 - IMG FIELD ENGINEERING
SYSTEMS
• 18445 - IT INTERNATIONAL
CLIENT SERVICES
• 18450 - IMG DOMESTIC DG
• 18610 - KNOWLEDGE
MANAGEMENT BTG
• …
Costs currently tracked
by IT categories
(examples)
*
A
B
C
D
E
Service
Messaging
Collaboration
Conference room a/v
End-user support services
Equipment acquisition*
Remote field office backup & restore
Desktop image provisioning / home dir. svcs
Shared security services
Connectivity services
Fax & print services*
Facilities move, add, change, close
Software acquisition
* portion of these services not currently charged back
Business application services
- Traditional development
- SaaS integration
Hosting services (IaaS & PaaS)
Architecture services
Business intelligence
Event it support
M&A integration
Solution development
Premium services

17. 1717
Service Costing Illustrated
IT Components Srvc 1 Srvc 2 Srvc 3 Srvc 4 Srvc 5 Srvc 6 Srvc 7 Srvc 8 Srvc 9 Srvc 10 Component Total
Component 1 $300 $200 $400 $300 $100 $200 $100 $1,600
Component 2 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $2,000
Component 3 $100 $150 $150 $100 $200 $300 $400 $200 $1,600
Component 4 $400 $350 $340 $230 $230 $420 $230 $320 $230 $500 $3,250
Component 5 $200 $200 $200 $200 $200 $200 $1,200
Component 6 $100 $100 $200 $300 $100 $800
Component 7 $400 $350 $230 $420 $230 $320 $1,950
Component 8 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $1,000
Component 9 $200 $200 $200 $200 $200 $1,000
Component 10 $100 $150 $150 $300 $100 $800
Component 11 $340 $230 $230 $420 $230 $230 $230 $420 $200 $2,530
Component 12 $200 $200 $200 $200 $200 $200 $200 $200 $200 $100 $1,900
Component 13 $100 $100 $200 $100 $300 $800
Component 14 $400 $350 $230 $420 $230 $350 $230 $420 $300 $2,930
Component 15 $100 $100 $100 $100 $100 $100 $600
People $300 $310 $120 $150 $200 $230 $400 $320 $320 $1,000 $3,350
Overhead $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $2,000
Others and T&E $150 $150 $300 $230 $230 $420 $230 $230 $230 $420 $2,590
Services Total $2,890 $2,190 $3,370 $3,650 $2,900 $3,820 $3,450 $3,730 $2,280 $3,620 $31,900
Traditional IT
Accounting
Service-based Accounting Ideally – should match
But error margin
+5% to 10%
What we initially pull from the General Ledger
With Automated dedicated ITFM solution …
You can reduce the error margin to 0

18. 1818
Pricing and External Benchmarking
Monthly expense
reports provided
with usage and
cost details
Benchmarking is critical to establishing competitive rates for
internal services

19. 1919
Service Costing Planning Considerations
Account for the full cost of every
IT service
 Track actual service costs
incurred
 Allocate all IT costs to services
being delivered
 Correctly tag service costs
with CAPEX and/or OPEX
 Failing to allocate any IT cost
will impact overall service cost
accuracy/ transparency
• Maybe perceived too cheap
• Maybe unfair or unrealistic
In terms of
 Amount $$
 Cost Category
 Cost Drivers
 Business Units
 Services related

20. 2020
Step by Step
8-Step Process For Simple, Fair, Accurate
Charge/Showback
Define
Services
Categories
Allocate
All Costs
Determine
Unit Drivers
Derive Unit
Costs
Determine
Unit Prices
Measure
Service Usage
Invoice
Business
Units
Funds
Transfer From
BU
to IT
1 2 3 4 5 6 7 8
Both Fixed
And Variable
To Specific
Services
For Costs And
Prices In Each
Service
Category
By Dividing
Service
Costs By The
Service Unit
Driver
Prices Should
Reflect
Corporate
Goals
For Each
Service And
Map To The
Appropriate
Service Unit
Drivers
Create
Monthly
Invoices For
Business
Units For
Each
Service
Choose
Services That
Align
To Industry
Offerings
Set Up A
Mechanism
For Easy
Fund
Transfers
PRICING ANALYSIS METERING / INVOICINGSERVICE COSTING

21. 2121
Agenda
 Cloud and IT as a Service
 Service Costing Fundamentals
 Automating the process

22. 2222
Automating Service Costing – 3 Keys
Data Aggregation and Analysis3
Cost Modeling2
Data Discovery1

23. 2323
Data Discovery – Common Concerns
I don’t have the
right data
My data is all over
the place
My data is not
usable

24. 2424
THE TRUTH IS OUT THERE

25. 2525
Rocket Science?
N = R* • fp • ne • fl • fi • fc • L
THE DRAKE EQUATION

26. 2626
Time TrackingOrganisation
Support Tickets
Assets
What to Look for
General Ledger
Metering
Data Sources
CMDBPPM

27. 2727
More Than 100 Different Systems Integrated To Date
• Pivotal
• Amdocs
• Portal
Billing
• Siebel
• PeopleSoft
• Clarify
CRM
• Genesys
• Avaya
• Nortel
CIM
• Oracle
• IBM DB2
• SQL Server
DB
•SMS Gateways
• Glenayre
•SS8 VM
System
Voice
• SAP
• JD Edwards
• Peoplesoft
ERP
• Asset
Management
Apollo
Inventory
• Edify
• Brite
Intervoice
IVR
• MS Excel
• Log Files
• Web Forms
Manual
• Nortel
• Lucent
• Alcatel
PBX
• ServiceNow
•Remedy
• HP
Helpdesk
• Mercury
•LoadRunner
• QA Run
QA
•vCenter Ops
•HP OpenView
• IBM Tivoli
Monitoring
• Novel LDAP
• SiteMinder
Security
• Narus
• Metrica
• TEMS
Telco
• Mercury
SiteSeer
• Keynote
Web
• Nice
• Comverse
• Witness
Logging
Usage / Metering
Tools
Automating Access

28. 2828
Mind the GAP
CURRENT
DATA
REQUIRED
DATA
GAP

29. 2929
Automating Data Transformation
GL EXPENSE
ALLOCATION
AUTOMATED
BUSINESS
RULES
GAP ITBM SOLUTION
CONFIGURABLE
MAPPING
CONSUMPTION
DATA
AUTOMATED
BUSINESS
RULES
CONFIGURABLE
ASSUMPTIONS

30. 3030
Proof Points
12
NUMBER OF YEARS
HELPING WITH DATA
DISCOVERY
Hundreds
ITBM CUSTOMERS
HELPED DISCOVER
DATA
>200
DATA SOURCES
LEADING US INSURER

31. 3131
Recapping
Data Aggregation and Analysis
Cost Modeling
Data Discovery

32. 3232
Cost Modeling – Common Concerns
Wrong level and
context
Not flexible
Difficult to explain
and defend

33. 3333
The Basic Idea
IT Organization
Expenses
(General
Ledger)
Technology
Services
Business
Services
IT Cost Flow 
Business Units
(Consumers)
IT Cost Center 1
IT Cost Center 2
IT Cost Center 3
Organizational
Cost Mgmt
Technology
Cost Mgmt
Service
Cost Mgmt
Customer
Management
Compute
Storage
Network
End User
Computing
Applications
…

34. 3434
Cost Modeling in Action
Expenses IT Organization Technical Services
Business
Services
Business
Units
Organizational Cost
Mgmt
Technology Costs Mgmt
Service
Cost Mgmt
Customer
Management

35. 3535
Cost Modeling in Action

36. 3636
Maintaining Flexibility

37. 3737

38. 3838
Recapping
Data Aggregation and Analysis
Cost Modeling
Data Discovery

39. 3939
Data Aggregation and Analysis – Common Concerns
Analysis is limited
Difficult to share
Not sustainable

40. 4040
Time TrackingOrganisation
Support Tickets
Assets
Data Aggregation and Analysis
General Ledger
Metering CMDBPPM

41. 4141
Dashboards for Any Persona

42. 4242
Facilitating Discussion with Line-Of-Business

43. 4343
Addressing IT Quality Management

44. 4444
Leveraging Benchmarking

45. 4545
Planning for the Future

46. 4646
Assuring Data Integrity and Security

47. 4747
Communicating Across the Organization

48. 4848
Recapping
Data Aggregation and Analysis
Cost Modeling
Data Discovery

49. 4949
Cost Transparency with Automated Chargeback
Delivers Full Value of IT Transformation For Major US
State Agency
 Automates chargeback for over 30 state agencies for speed & accuracy
 Provides cost transparency through Web-based invoices for 150 users
 Full cost transparency restores trust between the business and IT
Major US State Agency
Real World Results
Leading US Insurer Validates IT Consolidation &
Uncovers Cost Reduction Opportunities With IT
Benchmarking
 Comprehensive benchmark across 10 domains revealed $400M in cost reduction opportunities
 Automated, repeatable approach provided “apples to apples” industry and peer comparisons
Leading US Insurer
$10 Billion Prestige Cosmetics Company Transforms
to Broker of IT Services
 Improved reporting accuracy to reduce tens of millions in trans-border tax liabilities annually
 VMware ITBM supported client’s enterprise transformation to global shared services model
Cosmetics Company
Z

50. 5050
Final Thoughts
DATA
DISCOVERY
COST
MODELING
DATA
AGGREGATION
& ANALYSIS

51. 5151
Final Thoughts
INFORMATION &
INSIGHT FOR
EFFECTIVE DECISION
MAKING
=

52. 5252
Learn More

53. 5353
Q&A

54. 5454
Other VMware Activities Related to This Session
 HOL:
HOL-SDC-1311
VMware IT Business Management
 Group Discussions:
OPT1004-GD
IT Financial Management for the Cloud with Khalid Hakim

55. THANK YOU

57. Leveraging IT Financial Transparency to
Drive Transformation
Mary Lou Alter, EMC
Brett Arnott, VMware
OPT4732
#OPT4732