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Objectives The objective of today’s discussion is to help you understand… Scope of the cost transparency operating model Changes to the cost transparency.

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Presentation on theme: "Objectives The objective of today’s discussion is to help you understand… Scope of the cost transparency operating model Changes to the cost transparency."— Presentation transcript:

0 Cost Transparency Operating Model
Training for IT March 1, 2006 CLIENT

1 Objectives The objective of today’s discussion is to help you understand… Scope of the cost transparency operating model Changes to the cost transparency reports Overview of the operating model Flow of chargeback information Impact to IT Calendar of Activities Ground Rules Expectations for the initial release Product pricing process overview

2 Scope of the IT CT Operating Model
The cost transparency reports are currently being distributed to our customers. Initially we will focus on legacy Client Organization. Moving forward we will evaluate additional businesses. Scope Future Scope For the initial release the following legacy Client business units are in scope: Fixed Income Equities Investment Banking Division A Division B Shared Services Operations Product Control Credit Risk / Market Risk Financial Control Financial Control (BASEL II) Legal and Compliance division (LCD) Human Resources (HR) As the impact of the bank integration initiative is determined, the following business units will be evaluated for future action: Legacy Private Bank Legacy Asset Management

3 Background On IT Cost Transparency
IT Cost Transparency chargeback reports have been modified to give the business a better understanding of their consumption of IT products and services. Reports will enable constructive dialogue and rational choices to be made by both the business and IT. What Is Changing? What Are The Benefits? Billing Methodology: Chargeback reports will provide more comprehensive application charges (e.g. infrastructure charges will be incorporated into application costs) Report Presentation Process: The Application Development Group (ADG) RM will present chargeback reports with support from the Financial reporting RM Inquiry Process: The report inquiry process has been streamlined to direct all inquiries through a central point of contact Broader Audience: Chargeback reports will be presented to the Desk COOs and shared services Greater Transparency: Business will have a greater understanding of technology consumption and cost Improved Attribution and Accuracy of Consumption: IT charges are directly linked to Application-Infrastructure and End-User Technology consumption Improved Planning: Business and IT will have the ability to better plan consumption of IT products and services Competitiveness: Migrating IT from a support organization to a service model Improved Customer Support: Inquiries will be tracked and the cost transparency operating model will be continually improved Upstream Costs: Application Development Group (ADG) and Infrastructure Technology Group (ITG) will approach the business with a picture of total application costs that are inclusive of labor and infrastructure expenses Improved Governance: IT will be accountable for all technology related costs pertaining to their business partners

4 Overview of the Operating Model
The chart below outlines the operating model for the IT Cost Transparency process. This new process will minimize confusion and overlap of roles and ultimately result in a faster resolution of billing issues, improved customer satisfaction and ultimately improved control of costs. Report Production Report Analysis Report Presentation Report Inquiry Report Correction Objectives Develop an itemized report of IT products and services consumed by the business during the previous fiscal month Perform analysis of consumption trends, significant deviations on the chargeback reports Present report and analysis to the business Provide a mechanism for clients to raise questions about the report and to request correction Determine and implement appropriate action to reports that require adjustment Key Activities Consolidate end user and infrastructure consumption data Apply appropriate unit cost /rate card to consumption Allocate charges to cost centers Generate itemized report Analyze report and determine cost saving opportunities Validate findings Append report with analysis and status of previous inquiries Generate predefined views of report Review report with ADG RM Send monthly high level view to Business COOs Present detailed report to the Desk COOs Send detailed report to business accounting Forward inquiries to “Central Inquiry Tracker” Capture inquiries Communicate status to the business Forward inquiries to appropriate ADG RM or ITG RM Investigate inquiries and determine action Make corrections and update the Central Inquiry Tracker Track issue and close the loop with business

5 IT Chargeback Information Flow in Equities
Chargeback information flow will be standardized across other divisions to ensure consistent chargeback report production and presentation. 1 Inventory Manager Consolidates end-user technology and application infrastructure consumption data. 2 Cost Transparency Group sends an interim chargeback report to the Financial Reporting RM Group. ITG RM Equities Division ITG Inventory Manager Person… Cost Transparency Group Person… Financial Reporting RM Group Person… Support as needed Equities Controllers – Person… Equities COO Person… 1 PART A Calculate end-user product costs PART B Calculate infrastructure costs PART C Allocate costs in PART B to the divisions. PART D Allocate labor costs to the divisions. PART E Perform trend and anomaly analysis Generate report from PARTS A,C,D,E End User Technology EUT consumption ADG RM Prime Services COO 4 2 Market Data Cash COO Financial Reporting RM Group Derivatives COO Other IT Towers (App driven) Application-Infrastructure consumption Other Desk COOs Validate report 3 Recommend changes Client Coverage Team 3 Financial Reporting RM Group presents the bill to the IT Coverage Team for validation. 4 ADG RM and the Financial Reporting RM Group present the chargeback report to the business (ITG RM joins as needed).

6 IT Chargeback Inquiry Flow in Equities
There will be a Central Inquiry Tracker function that would be responsible for tracking and forwarding the different inquiry types. Equities Division 2 Business and Desk COOs forward all other inquiries (IT 3,4,5) to the Central Inquiry Tracker. IT 1,2 Financial Reporting RM Group Person… Equities COO Person… Equities Controllers – Person… Prime Services COO IT 4,5 ADG RM Person… IT 4,5 ADG Application Managers 2 Cash COO IT 4,5 IT 3,4,5 4 Derivatives COO Central Inquiry Tracker IT 3 ITG RM Person… IT 3,4,5 ITG Inventory Manager Person… IT 1,2,3,4,5 1 Other Desk COOs 3 Inquiry Type Framework IT 1 Incorrect application cost allocation at cluster level IT 2 Incorrect application cost allocation at division level IT 3 Incorrect End User Technology item (Desktops, Blackberry’s etc) IT 4 Excessive application development charges (labor costs) IT 5 Excessive application infrastructure costs NOTE: A detailed view of this framework is available in the Appendix. 1 Business COOS and Desk COOs forward allocation related inquiries (IT 1, 2) to the Business Controller. 3 Business Controllers forwards progress of allocation inquiries (IT 1, 2), and any additional inquiries to the Central Inquiry Tracker. 4 Central Inquiry Tracker logs inquiries and forwards them to the correct contact

7 The Impact on IT Understanding and acting in your roles assures better coordination, improved interaction, and ultimately better service to the business. Relationship Management Inquiry Response Financial Analysis What Changes About My Role? ADG Lead meeting with the business to present chargeback reports Assume responsibility for chargeback items that correspond to applications and projects Participate in the Coverage teams Analyze inquiries and route them to the appropriate contact Track status and follow up until resolution is achieved Report progress to the business client and manage their expectations Validate the periodic chargeback reports created by the Financial Reporting RM Group Support the Financial Reporting RM group to identify cost drivers, trends, and key performance indicators ADG will own the relationship with the business ADG will own their application charges Financial Reporting RM Group Partner with the ADG RM to meet with the business Support the ADG RM in inquiry resolution Report progress on financial reporting inquiries to the business client and manage their expectations Lead the development of chargeback reports and vet them with ADG Lead analysis of cost drivers, trends, and key performance indicators Financial Reporting RM Group will support ADG in their relationship with the business Financial Reporting RM Group will no longer be the funnel of inquiries from the business ITG Assume responsibility for items on the chargeback report that correspond to infrastructure Analyze infrastructure inquiries and route them to the appropriate contact Support ADG and Financial Reporting RM Group with cost drivers, trends and key performance indicators for infrastructure ITG will support ADG in their relationship with the business ITG will attend meeting with the business to review the report as needed

8 Calendar of Activities: Targeted BAU Process for March and onward
Business Days in the Average Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Cost Transparency Group and Financial Reporting RM Group develop an itemized report of IT products and services consumed by the business during the previous fiscal month Accounting books are closed for prior month Report Production Reports are released to Financial Reporting RM Group Financial Reporting RM Group begin to meet with ADG RM Financial Reporting RM Group and the ADG RM meet to vet analysis of business consumption trends, and of significant deviations on the chargeback reports Report Production Report Analysis Chargeback Reports begin to be released to the business client Presentations of reports to the business begin Client Coverage Team presents the report and analysis to the business. The business clients can then formally raise questions about the report. Finally, the Inquiry Coverage Team determines and implements appropriate action to items that require adjustment. Report Presentations, Report Inquiry, Report Correction NOTE: The units are business days. The BAU process will take several cycles to reach target dates.

9 Ground Rules The IT COO has setup some ground rules to streamline the operating model across all divisions and ensure a consistent service level. Areas Where We Can Help Supply application usage metrics to the business controller for making allocation decisions End User Product (desktops, Blackberry) consumption Application-related infrastructure charges Application labor costs IT Chargeback trend analysis Areas Out Of Scope Request to upgrade or downgrade application infrastructure (i.e. IT Standards and Architecture are the purview of IT) Financial data without review in the Cost Transparency process Request to change rate card; current rate card is consistent with the Global Allocation Committee (GAC) guidelines Initiating Inquiries Triage issues within your own division before escalating to IT All allocation inquiries will be forwarded to the business controller; business controller will address the inquiry and update the Central Inquiry Tracker All other inquiries will be forwarded to the Central Inquiry Tracker

10 What to expect from the initial release?
The expectation has been set with the business that the initial roll out will have limited capacity to address inquiry requests. All inquiries will be captured, but not all inquires will be responded to. What to Expect? How to Manage It? Increase in the volume of inquiries Request business to direct request through business controller so that inquiries can be prioritized Manage business expectations around resolution timeframe Use contact list to forward queries to the appropriate personnel Refer to the “Ground Rules” in the Appendix Inquiries are received directly from the business Clients will be encouraged to funnel inquiries through business controller and subsequently through the Central Inquiry Tracker If you get direct queries, forward them to the Inquiry Tracker so that they can be captured in the tracking tool

11 Expectations set with the business
Our goal is to continually improve the process and incorporate lessons learned from this initial release. Cost Transparency Expectations Because we anticipate a high volume of inquiries, we will prioritize responses; retroactive adjustments will be made We expect the accuracy of allocation and infrastructure charges to improve as reports are reviewed in detail The business must focus on improving data integrity The business must demand higher accountability from IT Responses to initial inquiries will be prioritized as follows: Frequency of reporting errors and inquiries Materiality of inquiries IT and the business are learning together in this process; our ability to respond to your inquiries will improve as training is rolled out and enhanced We are in the process of implementing the Central Inquiry Tracker position; this may not be fully operational by the time of this initial release IT will get your feedback to improve this process Activities during the rollout include: Communication about the operating model Chargeback reports will be released with limited analysis Meetings with the Financial Reporting RM Group will start to take place Inquiries to the report will start to be raised

12 Product Pricing Process Overview

13 Overview of Current Product Pricing Process
ITG uses a rate card to charge the business for the consumption of infrastructure and technology services. The product prices in this rate card are reviewed on a periodic basis and updated to reflect changes to costs and inventory. Drivers Key Activities Timing Cost Recovery: As a cost center, IT aims to minimize under (over) recovery for costs that are charged to the business Estimate the inventory of “billable” products Determine direct, centrally planned and indirect expenses for each product Calculate unit price per product In 2006, product pricing will occur in Q1 and Q2, and can conceivably result in lower unit prices for the year Beginning with 2007, product pricing will occur annually at the beginning of the year

14 Steps in the Product Pricing Process
Product Pricing entails three high level activities. Step Responsible Inventory Collection Provide inventory usage detail ITG Product Owners Vet the inventory data and provide the cost transparency group an estimated global volume for all products that have a billing target ITG Inventory Manager Run the global inventory through the financial model to determine a more accurate estimate of volume for products that have a billing target Cost Transparency Group Inventory Spend Calculation Verify the direct, centrally planned, and pass through expenses associated with each product Verify the application, direct infrastructure, and indirect infrastructure expenses associated with each product Unit Price Calculation Calculate unit price by dividing the total product cost by the volume of billable product

15 Product Pricing Process flow
Provide product Inventory ITG Product Owners Calculate estimated volume of products with billing target Verify volume discrepancy ITG Inventory Manager S S Y Run volume through financial model Verify direct, centrally planned, pass through expenses Verify the application, direct infrastructure, and indirect infrastructure expenses Calculate unit price by dividing the Total Product Cost by the product volume Inventory volume discrepancy? N Cost Transparency Group

16 Total Product Cost Breakdown
Total product cost consists of three types of expenses that are each made up of different components. Direct and centrally planned expenses are accounted as operating expenses, while indirect expenses are allocations of internal costs. Direct Expense Labor Cost: Costs for FTEs that book time to support a product Operating Expenses Telecommunication: Communication and WAN usage (provided by external vendor) required for a product Centrally Planned Depreciation: Software and hardware depreciation required for a product TOTAL PRODUCT COST Machinery / Expenses: Costs for software, hardware and service vendors that are required for a product Application: Costs associated with applications that are used by the product Indirect Expense NOTE: These are all of the possible components that can go into a product’s cost, but not all of them are necessarily included. Infrastructure: Infrastructure costs consumed by the product Allocations GTI Personal Consumption: Infrastructure costs consumed by direct labor

17 Appendix Report Presentation Process Flow
Report Inquiry & Correction Process Flow Inquiry Type Framework Coverage Teams (Inquiry Response Coverage Teams, Client Coverage Teams) Roles and Responsibilities for the Operating Model Participants in the Cost Transparency Process Example: Calculation of the unit price for “ ” Roles and Responsibilities in the Product Pricing Process For more information:

18 Report Presentation Process flow
Business COO or Desk COO Business Controller S Central Inquiry Tracker (CIT) S Financial Reporting RM Group Create Report Present report to clients Make changes to the report IT PL Community ADG RM Review and verify the report N ADG Application Manager Review and verify the report Recommend changes Y ITG RM Review and verify the report (as needed) ITG Inventory Manager

19 Report Inquiry & Correction Process flow
Business COO or Desk COO Report Inquiry Signs off on re-allocation requests Business Controller Report Inquiry Forwards to the desk or business COOs for signoffs Forwards updated allocation to Financial reporting RM via CIT Allocations Application Central Inquiry Tracker (CIT) Logs Inquiry Inquiry Type Logs and closes inquiry Logs and closes inquiry Logs and closes inquiry Logs and closes inquiry EUT Financial Reporting RM Group Updates allocations table IT PL Community ADG RM Reviews and forwards to ADG Application Manager Updates business on inquiry status Updates business on inquiry status ADG Application Manager Infrastructure related N Updates ADG RM Updates ADG RM Y ITG RM Reviews and forwards to ITG Inventory Manager Reviews and forwards to ITG Inventory Manager Updates business on inquiry status ITG Inventory Manager Inquiry Valid ? Y Updates database & ITG RM Updates ITG RM N

20 Inquiry Type Framework
Description Raised By Currently Directed To Proposed Directed To Requirements IT 1 Incorrect application cost allocation at cluster level Desk COOs Division Controller Step 1: Central Inquiry Tracker (logs it) Step 2: Business Controller Allocation details. Reasoning for re-allocation request. Effective dates Signoffs from necessary personnel IT 2 Incorrect application cost allocation at division level Business Heads Financial Reporting RM Group IT 3 Incorrect End User Technology item (Desktops, Blackberry’s etc) Division Controllers ITG Inventory Manager Infrastructure Finance group Step 2: ITG Relationship Manager Step 3: ITG RM will forward the query to ITG Inventory Manager Product type being inquired. IT 4 Excessive application development charges (labor costs) IT COO Project Managers Equity IT CIO ITG RM Step 2: ADG RM Step 3: ADG RM will contact the respective project manager. Query definition (excessive work hours, vendor costs, infrastructure) IT 5 Excessive application infrastructure costs ADG RM Step 3: ADG RM will contact the respective application manager. Step 4: If infrastructure related issue then ADG Application manager will forward app requirements to ITG RM Step 5: If infrastructure related issue then ITG RM will get answer from ITG Inventory Manager.

21 Coverage Teams: Inquiry Response Coverage Teams for Equities
Inquiry Type Originator Step 1 Step 2 Step 3 Step 4 Step 5 IT 1 Incorrect application cost allocation at cluster level Desk COO Person X Business Controller Central Inquiry Tracker Financial Reporting RM Group IT 2 Incorrect application cost allocation at division level IT 3 Incorrect End User Technology item (Desktops, Blackberry’s etc) Desk COO or Business Controller ITG RM ITG Inventory Manager IT 4 Excessive application development charges (labor costs) ADG RM ADG Application Managers IT 5 Excessive application infrastructure costs

22 Coverage Teams: Inquiry Response Coverage Teams for Fixed Income
Inquiry Type Originator Step 1 Step 2 Step 3 Step 4 Step 5 IT 1 Incorrect application cost allocation at cluster level Desk COO Person X Business Controller Central Inquiry Tracker Financial Reporting RM Group IT 2 Incorrect application cost allocation at division level IT 3 Incorrect End User Technology item (Desktops, Blackberry’s etc) Desk COO or Business Controller ITG RM ITG Inventory Manager IT 4 Excessive application development charges (labor costs) ADG RM ADG Application Managers IT 5 Excessive application infrastructure costs

23 Coverage Teams: Client Coverage Teams for Equities
MEETING 1 MEETING 2 Business Unit/Desk ADG RM Financial Reporting RM Group Financial Reporting RM Group Business COO Business Controller Desk COO Equity Division (Global) U Person names NA Equity Division (Americas) In all columns Equity Division (Europe) cleansed Equity Division (Asia) Prime Banking Equity Proprietary Trading (Americas) Equity Proprietary Trading (Europe) FID Proprietary Trading (Americas) Cash Business (Americas) Cash Business (Europe) AEP US AEP UK Research Equity Derivatives (Europe) Equity Derivatives (Americas) Convertibles (Europe) Convertibles (Americas) MEETING 1 - Monthly validation of application data in chargeback MEETING 2 - Presentation of chargeback report to the business at various levels: Business COO, Business Controller, Desk COO NA – Not applicable

24 Coverage Teams: Client Coverage Teams for Fixed Income
MEETING 1 MEETING 2 Business Unit/Desk ADG RM Financial Reporting RM Group Business COO Business Controller Desk COO Fixed Income Division (Global) U Person names NA Fixed Income Division (Americas) In all columns Fixed Income Division (Europe) cleansed Fixed Income Division (Asia) Europe Interest Rate Products US Interest Rate Products Exotics Europe Repo US Repo CDO CMBS Research Listed Derivatives Leverage Finance RMBS Coverage (Europe) Coverage (Americas) Fund Linked Products MEETING 1 - Monthly validation of application data in chargeback MEETING 2 - Presentation of chargeback report to the business at various levels: Business COO, Business Controller, Desk COO NA – Not applicable

25 MEETING 1 - Monthly validation of application data in chargeback
Coverage Teams: Client Coverage Teams for IB, Division B and Division A MEETING 1 MEETING 2 Business Unit/Desk ADG RM Financial Reporting RM Group Business COO Business Controller Desk COO IBD (Global) U Person names IBD (Europe) In all columns IBD (Americas) cleansed Division B Division A Legal and Compliance MEETING 1 - Monthly validation of application data in chargeback MEETING 2 - Presentation of chargeback report to the business at various levels: Business COO, Business Controller, Desk COO NA – Not applicable

26 Coverage Teams: Client Coverage Teams for IB Support and CFO
MEETING 1 MEETING 2 Business Unit/Desk ADG RM Financial Reporting RM Group Business COO Business Controller Desk COO IB Support Person names Corporate U In all columns NA Complex Product Support cleansed Executive Human resources CFO Operations Financial Accounting Global Treasury Group Controlling Investor relations New Business Product Control Shared Services Controlling MEETING 1 - Monthly validation of application data in chargeback MEETING 2 - Presentation of chargeback report to the business at various levels: Business COO, Business Controller, Desk COO NA – Not applicable

27 Coverage Teams: Client Coverage Teams for COO and CRO
MEETING 1 MEETING 2 Business Unit/Desk ADG RM Financial Reporting RM Group Business COO Business Controller Desk COO COO Person names Audit U In all columns NA Business School cleansed Corp Development Corporate Real Estate Human Resources Market Info Business Mgmt Public Policy CRO Credit Risk Risk Measurement & Mgt Operational Risk Management Strategic Risk Management MEETING 1 - Monthly validation of application data in chargeback MEETING 2 - Presentation of chargeback report to the business at various levels: Business COO, Business Controller, Desk COO NA – Not applicable

28 Roles and Responsibilities in the IT Cost Transparency Process
Report Production Consolidate end-user technology and application infrastructure consumption data RA Apply rate card against end-user product consumption Apply rate card against application infrastructure consumption Allocate application charges (infrastructure) to divisional cost centers Allocate application development charges (labor) to the divisional cost centers Report Analysis Perform trend analysis for the past 12 months of IT chargeback C Perform chargeback anomaly analysis Determine cost saving opportunities R AC I Coordinate with IT to validate the anomaly analysis and cost saving suggestions RAC Incorporate suggested changes (requested by IT PL Community) into the summary of observations Append report with the status of previous report inquiries Generate predefined views for different audiences (e.g.. Newsletter for Business COO etc,) Business Head Business/Desk COO Business Controller Cost Transparency Group Financial Reporting RM Group Central Inquiry Tracker Global Division RM ADG RM ADG Application Manager ITG RM ITG Inventory Manager A = Accountable (makes decision) R = Responsible (does the work) C = Consulted (provides input) I = Informed (told of decision) Note: Activities and roles in bold italics are proposed

29 Roles and Responsibilities in the IT Cost Transparency Process - 2
Report Presentation Send high level monthly chargeback view and summary of observations (e.g. Newsletter) to the Business COO, Controller and Desk COO I RA Meet with, and present detailed reports to the Controller and Desk COOs according to client needs R C Gather feedback during meeting Create action items based of feedback Issue responses to the business Report Inquiry Client identifies a problem or is not satisfied with explanation and formally questions an chargeback item Record the question in the tracking tool Determine the inquiry type and forward to the appropriate contact for investigation. Use contact list If it’s an allocation related inquiry, resolve it on the business side Investigate the inquiry and determine an explanation If item can be explained, communicate the response to customer. Close the issue If item requires correction, provide update to customer, update status Business Head Business/Desk COO Business Controller Cost Transparency Group Financial Reporting RM Group Central Inquiry Tracker Global Division RM ADG RM ADG Application Manager ITG RM ITG Inventory Manager A = Accountable (makes decision) R = Responsible (does the work) C = Consulted (provides input) I = Informed (told of decision) Note: Activities and roles in bold italics are proposed

30 Roles and Responsibilities in the IT Cost Transparency Process - 3
Report Correction Get business sign offs for all application re-allocation related inquiries and forwards it to the Financial Reporting RM Group, and notifies the Central Inquiry Tracker. I RA Central Inquiry Tracker forwards Application issues to the appropriate ADG RM and Inventory issues to the ITG RM ADG RM reviews the issue and forwards it to appropriate ADG Application Manager C ADG Application Manager forwards Application Infrastructure related issue to the ITG RM A R CI ITG RM reviews the issue and forwards it to the ITG Inventory Manager Inventory Manager investigates the issue and determines appropriate action Inventory Manager makes correction and communicates the change via ITG RM to the single point of contact Central Inquiry Tracker tracks issue and closes the loop on the inquiry Communicate the resolution to the client Business Head Business/Desk COO Business Controller Cost Transparency Group Financial Reporting RM Group Central Inquiry Tracker IT PL Community ADG RM ADG Application Manager ITG RM ITG Inventory Manager A = Accountable (makes decision) R = Responsible (does the work) C = Consulted (provides input) I = Informed (told of decision) Note: Activities and roles in bold italics are proposed

31 Key Contacts Involved in the Cost Transparency Process for Equity
EQUITY - Global Person names Equity Division (Americas) In all columns Equity Division (Europe) cleansed Equity Division (Asia) Prime Banking Equity Proprietary Trading (Americas) Equity Proprietary Trading (Europe) FID Proprietary Trading (Americas) Cash Business (Americas) Cash Business (Europe) AEP US AEP UK Research Equity Derivatives (Europe) Equity Derivatives (Americas) Convertibles (Europe) Convertibles (Americas) Business/Desk COO Business Controller Cost Transparency Group Financial Reporting RM Group Central Inquiry Tracker Global Division RM ADG RM ADG Application Manager* ITG RM ITG Inventory Manager * The ADG Application Manager will depend on the application that is in question. The ADG RM will be able to route the issue to the appropriate ADG Application Manager.

32 Key Contacts Involved in the Cost Transparency Process for Fixed Income
FIXED INCOME - Global Person names Fixed Income Division (Americas) In all columns Fixed Income Division (Europe) cleansed Fixed Income Division (Asia) Europe Interest Rate Products US Interest Rate Products Exotics Europe Repo US Repo CDO CMBS Research Listed Derivatives Leverage Finance RMBS Coverage (Europe) Coverage (Americas) Fund Linked Products Business/Desk COO Business Controller Cost Transparency Group Financial Reporting RM Group Central Inquiry Tracker Global Division RM ADG RM ADG Application Manager* ITG RM ITG Inventory Manager * The ADG Application Manager will depend on the application that is in question. The ADG RM will be able to route the issue to the appropriate ADG Application Manager.

33 Key Contacts Involved in the Cost Transparency Process for IBD, Division B and Division A
IBD (Global) Person names IBD (Europe) In all columns IBD (Americas) cleansed Division B Division A Legal and Compliance Business/Desk COO Business Controller Cost Transparency Group Financial Reporting RM Group Central Inquiry Tracker Global Division RM ADG RM ADG Application Manager* ITG RM ITG Inventory Manager * The ADG Application Manager will depend on the application that is in question. The ADG RM will be able to route the issue to the appropriate ADG Application Manager.

34 Key Contacts Involved in the Cost Transparency Process for IB Support and CFO
Person names Corporate In all columns Complex Product Support cleansed Executive Human resources CFO Operations Financial Accounting Global Treasury Group Controlling Investor relations New Business Product Control Shared Services Controlling Business/Desk COO Business Controller Cost Transparency Group Financial Reporting RM Group Central Inquiry Tracker Global Division RM ADG RM ADG Application Manager* ITG RM ITG Inventory Manager * The ADG Application Manager will depend on the application that is in question. The ADG RM will be able to route the issue to the appropriate ADG Application Manager.

35 Key Contacts Involved in the Cost Transparency Process for COO and CRO
Person names Audit In all columns Business School cleansed Corp Development Corporate Real Estate Human Resources Market Info Business Mgmt Public Policy CRO Credit Risk Risk Measurement & Mgt Operational Risk Management Strategic Risk Management Business/Desk COO Business Controller Cost Transparency Group Financial Reporting RM Group Central Inquiry Tracker Global Division RM ADG RM ADG Application Manager* ITG RM ITG Inventory Manager * The ADG Application Manager will depend on the application that is in question. The ADG RM will be able to route the issue to the appropriate ADG Application Manager.

36 Example: Calculation of the unit price for “Email”
The total product cost is composed of direct expenses, centrally planned expenses, and indirect expenses. Description Example Annual Expense Cost per unit Direct Expenses Labor Cost: Costs for FTEs that book time to support a product People book their time in Project Web for “ ” support $6,500,000 Centrally Planned Expenses Telecommunication: Communication and WAN usage (provided by external vendor) required for a product Telecommunication and WAN consumption costs for “ ” $1,244,431 Depreciation: Software and hardware depreciation required for a product Depreciation of software and hardware used by “ ” $1855,024 Machinery / Expenses: Costs for software, hardware and service vendors that are required for a product Cost of vendors supporting “ ,” e.g. IBM, Microsoft etc. $3,788,123 Indirect Expenses Application: Costs associated with applications that are used by the product A percentage of the fully loaded costs of applications used by “ ,” e.g. FTP, Tumbleweed etc. $2,077,981 Infrastructure: Infrastructure costs consumed by the product A percentage of the infrastructure consumed by “ ,” e.g. servers, databases etc. $6,000,000 GTI Personal Consumption: Infrastructure costs consumed by direct labor Costs associated with desktops, Blackberry's, etc. used by direct labor associated with “ ” $1,894,062 Total Product Cost $23,359,621 Volume of Accounts 35,244 Cost per account $663 /year unit price $55 / month NOTE: The figures in this chart are for illustrative purposes only.

37 Roles and Responsibilities in the Product Pricing process
ITG Product Owners ITG Inventory Manager Cost Transparency Group INVENTORY COLLECTION Provide inventory usage detail RA I Vet the inventory data and provide the cost transparency group an estimated global volume for all products that have a billing target CI Run the global inventory through the financial model to determine a more accurate estimate of volume for products that have a billing target INVENTORY SPEND CALCULATION Verify the direct, centrally planned, and pass through expenses associated with each product Verify the application, direct infrastructure, and indirect infrastructure expenses associated with each product UNIT PRICE CALCULATION Calculate unit price by dividing the total product cost by the volume of billable product A = Accountable (makes decision) R = Responsible (does the work) C = Consulted (provides input) I = Informed (told of decision)


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