IIR IT naklady (english)


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IIR IT náklady (english)

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  • IIR IT naklady (english)

    1. 1. IT náklady – Financial Management (FM) for IT Services mblk.cz
    2. 2. Intro Q/A <ul><li>'Why can't the IT organisation provide a better level of Service ?' 'Why does the IT organisation budget have to be so large?' 'How much will it cost to implement and run this new System ?' 'Why do we spend so much time performing redundant tasks, like reprinting large reports that are not read?' </li></ul>
    3. 3. Intro <ul><li>FM ensures that any IT solution meet the requirements defined in SLM are justified from a cost and budget standpoint = cost-benefit analysis </li></ul><ul><li>Same accounting principles found in use today across a wide variety of industries </li></ul><ul><li>The links to other service management functions and process </li></ul><ul><li>IT is not for today only cost center – FM is foundation for strategic business and market planning </li></ul>
    4. 4. FM benefits <ul><li>The questins that IT mgmt must be able to answer at any moment are: </li></ul><ul><ul><li>How do I, and my department, help the organization accomplish its goals? </li></ul></ul><ul><ul><li>What does the IT department contribute to shareholder value ? </li></ul></ul><ul><li>Cost visibility </li></ul><ul><li>Planning </li></ul><ul><li>Optimization </li></ul><ul><li>Cost recovery </li></ul>
    5. 5. Goals and Objectives <ul><li>Cost-effective stewardship </li></ul><ul><li>Account fully for the spend on IT Services </li></ul><ul><li>Assist management decisions on IT investment </li></ul><ul><li>Provide detailed business cases for Changes to IT Services </li></ul>
    6. 6. FM scope <ul><li>Identity assets and activities – develop cost allocation schemes </li></ul><ul><li>Develop budgets </li></ul><ul><li>Analyze the cost and benefits of proposed changes and new services </li></ul><ul><li>Recover the cost of IT services – developing charge-back methods </li></ul>
    7. 7. Key Definitions <ul><li>Capital costs </li></ul><ul><li>Cost element </li></ul><ul><li>Cost unit </li></ul><ul><li>Depreciation </li></ul><ul><li>Direct cost </li></ul><ul><li>Fixed cost </li></ul><ul><li>Indirect cost </li></ul><ul><li>Net present value </li></ul><ul><li>Operational costs </li></ul><ul><li>Payback period </li></ul><ul><li>Total cost of ownership </li></ul><ul><li>Variable cost </li></ul>
    8. 8. Overview <ul><li>Components of FM </li></ul><ul><ul><li>Cost accounting is the monitoring activity </li></ul></ul><ul><ul><li>Budgeting is the planning activity </li></ul></ul><ul><ul><li>Project investment analysis is the analyzing activity </li></ul></ul><ul><ul><li>Cost recovery is the charge -back activity </li></ul></ul>
    9. 9. IT Accounting, Charging and Budgeting cycle
    10. 10. Cost Accounting enables <ul><li>account for the money </li></ul><ul><li>perform cost-benefit </li></ul><ul><li>identify the cost of Changes </li></ul><ul><li>provide cost targets </li></ul><ul><li>facilitate prioritisation </li></ul><ul><li>make day-to-day decisions </li></ul><ul><li>support for charging </li></ul><ul><ul><ul><li>Information only </li></ul></ul></ul><ul><ul><ul><li>Break-even method </li></ul></ul></ul><ul><ul><ul><li>Make a profit </li></ul></ul></ul>
    11. 11. Zero profit method <ul><li>IT department as an integral part of the organization </li></ul><ul><li>The cost charged are the true costs </li></ul><ul><li>IT personnel have more of a stake in reaching corporate goals </li></ul><ul><li>There is less pressure from outside vendors </li></ul>
    12. 12. Cost Accounting <ul><li>Service level agreements </li></ul><ul><li>Cost classification </li></ul><ul><li>Cost categorization </li></ul><ul><li>Cost units </li></ul><ul><li>Depreciation </li></ul><ul><li>Cost accounting methods </li></ul>
    13. 13. Service Level Agreements (SLA) <ul><li>SLA is the contract IT – customer </li></ul><ul><li>Tracking performance (agreed SLA) </li></ul><ul><ul><li>Accurate cost collection </li></ul></ul><ul><ul><li>Properly written and implemented SLA </li></ul></ul><ul><li>Renegotiating SLA </li></ul><ul><li>Components SLA </li></ul><ul><ul><li>Fewer, more critical metrics </li></ul></ul><ul><ul><li>Measurement of quality of service </li></ul></ul><ul><ul><li>Metrics agreed to by customers (based on best practices a procedures) </li></ul></ul><ul><ul><li>Better measure minimum performance </li></ul></ul>
    14. 14. Cost Classification <ul><li>Cost Type = categorization of IT costs </li></ul><ul><li>Cost Element </li></ul><ul><ul><li>Capital Costs </li></ul></ul><ul><ul><li>Operational Costs </li></ul></ul><ul><li>Cost Model </li></ul><ul><ul><li>Direct Costs </li></ul></ul><ul><ul><li>Indirect Costs </li></ul></ul><ul><ul><ul><li>Absorbed overheads </li></ul></ul></ul><ul><ul><ul><li>Unabsorbed overheads </li></ul></ul></ul><ul><ul><li>Fixed Costs </li></ul></ul><ul><ul><li>Variable Costs </li></ul></ul>
    15. 15. Cost Types <ul><li>6 or more Cost Types </li></ul><ul><ul><li>Hardware </li></ul></ul><ul><ul><li>Software </li></ul></ul><ul><ul><li>People </li></ul></ul><ul><ul><li>Accommodation </li></ul></ul><ul><ul><li>External services </li></ul></ul><ul><ul><li>Transfer costs </li></ul></ul><ul><ul><li>Management </li></ul></ul><ul><ul><li>Communication </li></ul></ul><ul><ul><li>Support </li></ul></ul><ul><ul><li>Change and implementation </li></ul></ul>
    16. 16. Cost Units <ul><li>Used for collect indirect costs and then allocate the costs to customers (ratio or percentage) </li></ul><ul><li>CPU seconds </li></ul><ul><li>Number of licences </li></ul><ul><li>Number of personal computers/keyboards </li></ul><ul><li>Number of personnel </li></ul><ul><li>File storage </li></ul><ul><li>Bandwidth consumption </li></ul>
    17. 17. Depreciation <ul><li>Straight-Line Depreciation </li></ul><ul><li>Reducing balance method </li></ul><ul><li>By usage </li></ul>
    18. 18. Cost Accounting Methods <ul><li>Cost-by-Customer Accounting Method </li></ul><ul><li>Cost-by-Service Accounting Method </li></ul><ul><li>Activity-based Costing </li></ul>
    19. 19. Cost Model of Costs-by-Customer
    20. 20. Complete view of the Cost-by-service
    21. 21. Cost Model for a Cost-by-service
    22. 22. Project Investment Appraisals <ul><li>Investment decisions are never easy to make </li></ul><ul><li>No one method is the best to use </li></ul><ul><li>Net Present Value </li></ul><ul><li>Payback Period </li></ul><ul><li>Return on Investment </li></ul><ul><li>Total Cost of Ownership </li></ul><ul><li>Real Cost of Ownership </li></ul>
    23. 23. Net Present Value <ul><li>Use value of cashflows with discount rate </li></ul><ul><li>Present Value = (Future Value) / (1+Discount Rate) N </li></ul><ul><li>Calculate NPV for invest years and then sort average NPV </li></ul><ul><li>Best investment is project with higher NPV </li></ul>
    24. 24. Payback period <ul><li>Another method for comparing alternative investments </li></ul><ul><li>Initial investment cost divided by the anticipated annual savings or resulting increased revenue </li></ul><ul><li>Quickest payback be the best to select </li></ul><ul><li>Taking into considaration the salvage value </li></ul>
    25. 25. Return on Investment <ul><li>ROI is measure of financial performance </li></ul><ul><li>ROI = Savings / Cost </li></ul><ul><li>Higher ROI is better </li></ul><ul><li>Use for project which brings </li></ul><ul><li>Lower maintanance costs </li></ul><ul><li>Lower service costs </li></ul><ul><li>Less required training </li></ul><ul><li>User time saved using the new asset </li></ul>
    26. 26. Total Cost of Ownership <ul><li>Total cost of an item over its useful lifetime (TCO) </li></ul><ul><ul><li>Purchase price </li></ul></ul><ul><ul><li>Training costs </li></ul></ul><ul><ul><li>Application costs </li></ul></ul><ul><ul><li>Support and maintanance costs </li></ul></ul><ul><ul><li>Enviromental change costs </li></ul></ul><ul><ul><li>Contracted technical support costs </li></ul></ul><ul><li>TCO does not adress the concept of risk </li></ul><ul><li>TCO does not adress benefits </li></ul><ul><li>TCO is hard to quantify </li></ul>
    27. 27. TCO studies <ul><li>Planning and deployment are more expensive in a more complex organization </li></ul><ul><li>The more undefined process will have higher TCO </li></ul><ul><li>More complex IT environment typically leads to a higher TCO </li></ul><ul><li>More information provide Gartner Group </li></ul>
    28. 28. Real Cost of Ownership RCO <ul><li>Measurement </li></ul><ul><ul><li>Direct costs </li></ul></ul><ul><li>Management </li></ul><ul><ul><li>Indirect cost factor </li></ul></ul><ul><li>Managerial Reports </li></ul><ul><ul><li>Small org </li></ul></ul><ul><ul><li>Midsize to Large org </li></ul></ul><ul><li>Outsourcing </li></ul>
    29. 29. Outsourcing Advantages <ul><ul><li>Stable price level </li></ul></ul><ul><ul><li>Focus on core competencies </li></ul></ul><ul><ul><li>Eliminates the need to purchase </li></ul></ul><ul><ul><li>Eliminates problem of hiring and retaining employees </li></ul></ul><ul><ul><li>Can improve an IT resource that is not working effectively </li></ul></ul><ul><ul><li>Increased vendor competition </li></ul></ul>
    30. 30. Disadvantages of Outsourcing <ul><li>Loss of control </li></ul><ul><li>Having to conform to the vendor´s way of doing things </li></ul><ul><li>Being locked into contracts </li></ul><ul><li>Having to be dependent on external resources </li></ul><ul><li>Loss of in-house expertise </li></ul><ul><li>Possible loss of internal career paths </li></ul>
    31. 31. Budgeting enables <ul><li>Predict the money </li></ul><ul><li>Ensure that actual spend can be compared </li></ul><ul><li>Reduce the Risk of overspending </li></ul><ul><li>Ensure that revenues are available to cover predicted spend (where Charging is in place). </li></ul>
    32. 32. Budget <ul><li>A budget is a detailed plan that specifies how resources are acquired and used over a specified period </li></ul><ul><li>Prior period trends </li></ul><ul><li>SLA with each organizational group </li></ul><ul><li>IT organizational requirements such as personnel training and systém upgrades </li></ul><ul><li>Organizational changes </li></ul><ul><li>Industry and economics trends </li></ul><ul><li>Special requirements such as developing „in-house“ applications </li></ul><ul><li>Customer satisfaction </li></ul>
    33. 33. Budget inputs <ul><li>SLA </li></ul><ul><li>Customer Requirements </li></ul><ul><li>Internal Cost Inputs </li></ul><ul><li>Trends </li></ul>
    34. 34. Budget types <ul><li>Operating Budget </li></ul><ul><li>Capital Budget </li></ul>
    35. 35. Budgeting methods <ul><li>Prior Year Budgeting </li></ul><ul><li>Zero-based Budgeting </li></ul>
    36. 36. Charging enables <ul><li>make formal evaluations of IT Services and plan for investment based on cost recovery and business benefits </li></ul><ul><li>recover IT costs in a fair manner </li></ul><ul><li>influence Customer behaviour </li></ul>
    37. 37. Charging <ul><li>For instance, it may not be possible to provide a higher quality of service to an individual Customer even if that Customer is prepared to pay a premium for it, nor to provide less service to a Customer who expects a discount. </li></ul>
    38. 38. Transfer Pricing Methods <ul><li>At Cost </li></ul><ul><li>Cost Plus </li></ul><ul><li>Flat Rate Plus Premium </li></ul><ul><li>Market Rate </li></ul><ul><li>Billing </li></ul>
    39. 39. Roles and Responsibilities <ul><li>Financial Manager </li></ul><ul><ul><li>Providing guidelines on organizational financial policy </li></ul></ul><ul><ul><li>Assisting in setting up cost accounts </li></ul></ul><ul><ul><li>Creating budget templates </li></ul></ul><ul><ul><li>Ensuring that all finance-related policies developed conform to generally accepted accounting principles </li></ul></ul><ul><li>Budget Committee </li></ul>
    40. 40. Relationship to other ITSM processes <ul><li>Service Level Mgmt </li></ul><ul><li>IT Service Continuity Mgmt </li></ul><ul><li>Availability Mgmt </li></ul><ul><li>Capacity Mgmt </li></ul><ul><li>Workforce Mgmt </li></ul><ul><li>Configuration Mgmt </li></ul><ul><li>Change Mgmt </li></ul><ul><li>Problem Mgmt </li></ul><ul><li>Network Administration </li></ul>
    41. 41. Costs <ul><li>Associated with Budgeting, IT Accounting and Charging fall into 3 broad categories: </li></ul><ul><li>1)  the administration and organisation costs </li></ul><ul><li>2)  the extra computing resources </li></ul><ul><li>3)  the purchase and support of tools </li></ul>
    42. 42. Planning for IT Accounting and Charging <ul><li>Terms of Reference </li></ul><ul><li>The Project Board </li></ul><ul><li>The project team </li></ul><ul><li>Feasibility study </li></ul><ul><li>The project plan </li></ul><ul><li>Designing the Cost Model and related processes </li></ul><ul><li>Performance indicators </li></ul><ul><li>Dependencies </li></ul><ul><li>Organisation </li></ul><ul><li>Tools </li></ul><ul><li>Training </li></ul>
    43. 43. Implementation <ul><li>Documentation </li></ul><ul><li>Preparation </li></ul><ul><li>Awareness </li></ul><ul><li>Pilot the systém </li></ul><ul><li>Monitor the systém </li></ul><ul><li>Plan IT Accounting and Charging Continuity </li></ul>
    44. 44. Ongoing management and operation <ul><li>Daily/Weekly </li></ul><ul><li>Monthly </li></ul><ul><li>Quaterly/ half – yearly </li></ul><ul><li>Annually </li></ul>
    45. 45. Reporting <ul><li>Report to Management </li></ul><ul><li>how much they have spent on IT during the financial year </li></ul><ul><li>whether the charges made match the predicted profile </li></ul><ul><li>the current Charging policies and IT Accounting methods </li></ul><ul><li>how the IT organisation is investing any profits </li></ul><ul><li>Reports to IT Services </li></ul><ul><li>cost total, broken down by business </li></ul><ul><li>cost analyses by service line, equipment domain or other relevant view </li></ul><ul><li>revenues total, broken down by business </li></ul><ul><li>costs and cost recovery against profile </li></ul><ul><li>outlook on costs and cost recovery </li></ul><ul><li>problems and costs associated with IT Accounting and Charging systems </li></ul><ul><li>recommendations for changes </li></ul><ul><li>future investments required. </li></ul>
    46. 46. Possible problems <ul><li>New disciplines - limited understanding of leading practice in Cost Modelling and Charging mechanisms </li></ul><ul><li>Accountancy support for IT </li></ul><ul><li>IS strategies and objectives of an organisation may not be well formulated and documented </li></ul><ul><li>The monitoring tools providing resource usage information are inaccurate </li></ul>