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IT Cost Optimization using a Financial Management for IT Service Approach Transforming Information Technology departments into IT Service Management (ITSM)

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Presentation on theme: "IT Cost Optimization using a Financial Management for IT Service Approach Transforming Information Technology departments into IT Service Management (ITSM)"— Presentation transcript:

1 IT Cost Optimization using a Financial Management for IT Service Approach Transforming Information Technology departments into IT Service Management (ITSM) organizations

2 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies About Us Founded 2001 Headquarters in Lewisville, TX Offices in Fort Worth and Washington, DC Operations in San Diego and Singapore Certifications Minority Business Enterprise (MBE) Service Disabled Veteran Owned Business Texas Historically Underutilized Business (HUB) K eeping E nterprise D ata and A pplications R esilient using i nformation t echnologies 2 An innovative IT Service Management consulting company creating IT Governance solutions from strategy to implementation.

3 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Some Of Our Customers 3

4 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Evolution Of IT And Financial Management 4

5 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies What is IT Financial Management? Financial Management within an IT function performs activities that develop and maintain business intelligence systems which: Follow general accounting practices, Apply managerial accounting concepts and disciplines, and Map to approved business objectives. 5

6 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies IT Financial Management Activities Strategy PolicyPlanningPricingInvestment Budgeting AnnualForecastOptimization Accounting Closure Delta Management Allocation Charging Value Statement 6

7 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies IT Financial Management Maturity Levels Maturity and Complexity OBJECTIVE: Determine the cost of business functions and value of assets to achieve business goals. OBJECTIVE: Apply budgeting and accounting practices for IT Services to establish allocation or charging systems. OBJECTIVE: Ensure total evaluation of IT Services provisioning and sustainable value for users and/or customers. 7

8 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Untangling The IT Hairball 8

9 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies IT Is Complex Incident & Problem Management Change Management Configuration Management 9

10 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies The IT Hairball We keep feeding it We cant describe it Its difficult to unwind It keeps growing in complexity Justifying improvements is difficult Changes often causes more problems We cant benchmark because value or cost of services are not defined 10

11 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies WorkstationNetwork DomainsStorage Application Technology Centers of Excellence IT Service 11 What The Business Wants

12 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Unanswered Questions What is the cost of each service? What are the service cost drivers? How many services do we support? What is the demand and usage of services? What is the cost to complete a service work unit? How viable are managed services solutions for us? Who are involved, and what are their roles? 12

13 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies IT Financial Management Strategies Total Cost of Ownership (TCO) is the total of direct capital investment in hardware and software plus indirect costs of installation, training, repairs, downtime, technical support, and upgrading. 13 Activity-based costing (ABC) is a costing model that identifies activities in an organization and assigns the cost of each activity resource to all products and services according to the actual consumption by each: it assigns more indirect costs (overhead) into direct costs. Financial Management for IT Services (FMITS) is 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 – typically in the Service Level Agreement (SLA).

14 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies What the Cost Optimization Service (COp-S) Delivers 14

15 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Client Benefits COp-S Features Client Data Budgets, Inventory & Resources Services Cost Accurate Services Costing & Charging Detail Supply-Chain BI Value Alignment Service & Customer CatalogOptimized Service Costs Staff & Process Utilization Value Aligned Work Activity What-If Analysis Accurate Forecast Planning Advanced IT Financial Management 15

16 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Improved Capabilities Cost Transparency Line of Business IT Organ- ization Value Alignment Business Objectives IT Resources Business Intelligence Cost DriversUnit Cost 16

17 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Comprehensive Evaluation Cycle 17

18 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Source: Corporate Executive Board Study 18 OpportunityDescriptionSaving Platform Standardization & Consolidation Consolidation of Data Centers, Tools, and Organizational Roles Standardization of Technology Platforms 8% - 20% Process Standardization Operations, Development, Engineering, and Service Management 6% - 14% Vendor Management Contract Negotiations, Vendor Process and Interactions Management Optimization 8% - 16% Strategic Sourcing Right Place, Right Cost 2% - 8% Usage Transparency Cost visibility of the IT supply chain 3% - 8% Procurement Controls Using approved vendors within parameters of negotiated contracts 2% - 10% Needs-based Segmentation Meet needs with cheaper and/or more efficient alternatives 2% - 5% Optimization and Reduction Opportunities

19 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Cost Optimization Service (COp-S ) Solution Overview 19

20 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies SaaS Architecture Cost Modeler Financial Impact Resource Usage Organizational Structure Consumer Demand Service Cost Drivers Service Managers Reference Library Reference Library Cost Optimization Service Catalog of Services Customers and Other Managers 20

21 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Cost Modeling Framework Expense Revenue Demand Service Customer Service Resources Service Cost = Units Alignment Allocation Utilization Direct/Indirect Outcome 21

22 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies (per mailbox) Shared Infrastructure Network (bandwidth %) Servers (by the Server) Applications (% usage) Labor (Work Activities) Storage (by the Tb) Business Service Resources Technical Service Consumers Cust. 1Cust. 5Cust. 4Cust. 3Cust. 2 Projects (Resource & Effort) Security Methodology 22

23 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Engagement Deliverables Service-based Cost Model – Services Alignment and Usage – Services Cost Allocation – Demand Management IT Service Business Intelligence – Service Cost Drivers and Unit Cost – Comprehensive Service Cost Metrics – Organizational FTE Utilization – ITIL Adoption Assessment Cost Optimization/Reduction – Recommendations – Implementation Roadmap 23

24 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Business Intelligence (BI) Dashboards and Reports 24

25 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Customer Dashboard 25

26 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies No.Description 1# of Business Services 2Name of Business Service 3Total annual IT Business Services budget 4 IT Department name responsible for Business Service Cost 5 Annual number of budgeted Business Service units 6Description of Business Service units Business Services Summary No.Description 7Total number of Business Service customers 8 Annual cost per Business Service of: Activity – all people cost Technology – all technology and facility cost Indirect – all indirect cost Total – the total of all cost % - the per of the Total Annual Cost Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies, Inc. 26

27 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Business Service Dashboard 27

28 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Technical Service Cost Detail No.Description 1IT Department name responsible for Technical Service Cost 2Technical Group name for Technical Services 3Name of the Technical Service 4 Annual Technical Service labor cost 5Annual Technical Service technology component cost 6Annual Technical Service total cost Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies, Inc. 28

29 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Technical Services Dashboard 29

30 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies 3214 No.Description 1Indicator of the number of FTE above/below 100% of staff 2Number of an IT Departments above/below needed FTEs 3Name of the Technical Service 4 Note that FTEs are calculated minus overhead hours bBB FTE Utilization Dashboard 30

31 Proprietary & Confidential Copyright ©2010 KEDAR Information Technologies Charles Williams KEDAR Information Technologies, Inc. (972)


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