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

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

2 - 1 - 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 Objectives The objective of todays discussion is to help you understand…

3 CLIENT 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. Future Scope 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 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) Scope

4 CLIENT 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. 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 What Is Changing? 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 What Are The Benefits?

5 CLIENT Overview of the Operating Model Objectives Key Activities Develop an itemized report of IT products and services consumed by the business during the previous fiscal month Consolidate end user and infrastructure consumption data Apply appropriate unit cost /rate card to consumption Allocate charges to cost centers Generate itemized report Report Production Report Analysis Report Presentation Report Inquiry Report Correction Perform analysis of consumption trends, significant deviations on the chargeback reports Analyze report and determine cost saving opportunities Validate findings Append report with analysis and status of previous inquiries Generate predefined views of report Present report and analysis to the business 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 Provide a mechanism for clients to raise questions about the report and to request correction Forward inquiries to Central Inquiry Tracker Capture inquiries Communicate status to the business Determine and implement appropriate action to reports that require adjustment 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 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.

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

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

8 CLIENT The Impact on IT Relationship ManagementInquiry ResponseFinancial 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 Participate in the Coverage teams 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 Participate in the Coverage teams Analyze infrastructure inquiries and route them to the appropriate contact Report progress to the business client and manage their expectations 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 Understanding and acting in your roles assures better coordination, improved interaction, and ultimately better service to the business.

9 CLIENT Calendar of Activities: Targeted BAU Process for March and onward Business Days in the Average Month Report Production Report Analysis Report Presentations, Report Inquiry, Report Correction 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 Financial Reporting RM Group and the ADG RM meet to vet analysis of business consumption trends, and of significant deviations on the chargeback reports 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. Chargeback Reports begin to be released to the business client Reports are released to Financial Reporting RM Group Accounting books are closed for prior month Financial Reporting RM Group begin to meet with ADG RM Presentations of reports to the business begin NOTE: The units are business days. The BAU process will take several cycles to reach target dates.

10 CLIENT Ground Rules 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 Where We Can Help 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 Areas Out Of Scope The IT COO has setup some ground rules to streamline the operating model across all divisions and ensure a consistent service level. 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 Initiating Inquiries

11 CLIENT What to expect from the initial release? 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 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.

12 CLIENT 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

13 Product Pricing Process Overview

14 CLIENT 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. Cost Recovery: As a cost center, IT aims to minimize under (over) recovery for costs that are charged to the business Drivers Estimate the inventory of billable products Determine direct, centrally planned and indirect expenses for each product Calculate unit price per product Key Activities 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 Timing

15 CLIENT Steps in the Product Pricing Process Product Pricing entails three high level activities. StepResponsible Inventory Collection 1. Provide inventory usage detailITG Product Owners 2. 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 3. 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 4. Verify the direct, centrally planned, and pass through expenses associated with each product Cost Transparency Group 5. Verify the application, direct infrastructure, and indirect infrastructure expenses associated with each product Cost Transparency Group Unit Price Calculation 6. Calculate unit price by dividing the total product cost by the volume of billable product Cost Transparency Group

16 CLIENT Product Pricing Process flow ITG Product Owners ITG Inventory Manager Cost Transparency Group Calculate estimated volume of products with billing target Provide product Inventory Inventory volume discrepancy? N Y Run volume through financial model Verify volume discrepancy SS 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

17 CLIENT Total Product Cost Breakdown Labor Cost: Costs for FTEs that book time to support a product Telecommunication: Communication and WAN usage (provided by external vendor) required for a product Depreciation: Software and hardware depreciation required for a product 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 Infrastructure: Infrastructure costs consumed by the product GTI Personal Consumption: Infrastructure costs consumed by direct labor Indirect Expense Centrally Planned Direct Expense TOTAL PRODUCT COST Operating Expenses Allocations 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. NOTE: These are all of the possible components that can go into a products cost, but not all of them are necessarily included.

18 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:

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

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

21 CLIENT Inquiry Type Framework DescriptionRaised ByCurrently Directed ToProposed Directed ToRequirements 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 Desk COOs Business Heads Financial Reporting RM Group 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 3 Incorrect End User Technology item (Desktops, Blackberrys etc) Desk COOs Division Controllers Financial Reporting RM Group ITG Inventory Manager Infrastructure Finance group Step 1: Central Inquiry Tracker (logs it) 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) Desk COOs Division Controllers Financial Reporting RM Group IT COO Project Managers Equity IT CIO ITG RM Step 1: Central Inquiry Tracker (logs it) Step 2: ADG RM Step 3: ADG RM will contact the respective project manager. Query definition (excessive work hours, vendor costs, infrastructure) Signoffs from necessary personnel IT 5 Excessive application infrastructure costs Desk COOs Division Controllers Financial Reporting RM Group IT COO Equity IT CIO ITG RM ADG RM Step 1: Central Inquiry Tracker (logs it) Step 2: 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. Query definition (excessive work hours, vendor costs, infrastructure) Signoffs from necessary personnel

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

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

24 CLIENT Coverage Teams: Client Coverage Teams for Equities MEETING 1MEETING 2 Business Unit/DeskADG RM Financial Reporting RM Group ADG RM Financial Reporting RM Group Business COO Business Controller Desk COO Equity Division (Global) U Person namesUNA Equity Division (Americas)UIn all columnsU Equity Division (Europe)UcleansedU Equity Division (Asia)UU Prime BankingUU Equity Proprietary Trading (Americas) UU Equity Proprietary Trading (Europe)UU FID Proprietary Trading (Americas)UU Cash Business (Americas)UU Cash Business (Europe)UU AEP USUU AEP UKUU ResearchUU Equity Derivatives (Europe)UU Equity Derivatives (Americas)UU Convertibles (Europe)UU Convertibles (Americas)UU 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 CLIENT Coverage Teams: Client Coverage Teams for Fixed Income MEETING 1MEETING 2 Business Unit/DeskADG RM Financial Reporting RM Group ADG RM Financial Reporting RM Group Business COO Business Controller Desk COO Fixed Income Division (Global) U Person names U NA Fixed Income Division (Americas) U In all columns U Fixed Income Division (Europe) U cleansed U Fixed Income Division (Asia) Europe Interest Rate ProductsUU US Interest Rate ProductsUU ExoticsUU Europe RepoUU US RepoUU CDOUU CMBSUU ResearchUU Listed DerivativesUU Leverage FinanceUU RMBSUU Coverage (Europe)UU Coverage (Americas)UU Fund Linked ProductsUU 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 CLIENT Coverage Teams: Client Coverage Teams for IB, Division B and Division A MEETING 1MEETING 2 Business Unit/DeskADG RM Financial Reporting RM Group ADG RM Financial Reporting RM Group Business COO Business Controller Desk COO IBD (Global) U Person namesU IBD (Europe)UIn all columnsU IBD (Americas)UcleansedU Division BUU U Division AUU Legal and ComplianceUU 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 CLIENT Coverage Teams: Client Coverage Teams for IB Support and CFO MEETING 1MEETING 2 Business Unit/DeskADG RM Financial Reporting RM Group ADG RM Financial Reporting RM Group Business COO Business Controller Desk COO IB SupportPerson names CorporateUIn all columnsUNA Complex Product SupportUcleansedUNA ExecutiveUUNA Human resourcesUUNA CFOUUNA OperationsUUNA CFO Financial AccountingUUNA Global TreasuryUUNA Group ControllingUUNA Investor relationsUUNA New BusinessUUNA Product ControlUUNA Shared Services ControllingUUNA 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 CLIENT Coverage Teams: Client Coverage Teams for COO and CRO MEETING 1MEETING 2 Business Unit/DeskADG RM Financial Reporting RM Group ADG RM Financial Reporting RM Group Business COO Business Controller Desk COO COOPerson names AuditUIn all columnsUNA Business SchoolUcleansedUNA Corp DevelopmentUUNA Corporate Real EstateUUNA Human ResourcesUUNA Market Info Business MgmtUUNA Public PolicyUUNA CRO Credit RiskUUNA Risk Measurement & MgtUUNA Operational Risk ManagementUUNA Strategic Risk ManagementUUNA 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

29 CLIENT 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 RA Apply rate card against application infrastructure consumption RA Allocate application charges (infrastructure) to divisional cost centers RA Allocate application development charges (labor) to the divisional cost centers RA Report Analysis Perform trend analysis for the past 12 months of IT chargeback CRAC Perform chargeback anomaly analysis CRAC Determine cost saving opportunities CRACCICI Coordinate with IT to validate the anomaly analysis and cost saving suggestions RRACCCC Incorporate suggested changes (requested by IT PL Community) into the summary of observations RAIIIII Append report with the status of previous report inquiries RACCCCC Generate predefined views for different audiences (e.g.. Newsletter for Business COO etc,) RA Business Head Business/Desk COO Business Controller Cost Transparency Group Financial Reporting RM Group Global Division RM ADG RM ADG Application Manager ITG RM ITG Inventory Manager Central Inquiry Tracker 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 CLIENT 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 IIIRAIIIII Meet with, and present detailed reports to the Controller and Desk COOs according to client needs IIIRRARC Gather feedback during meeting CCCRRA Create action items based of feedback CRACCC Issue responses to the business IIIIIRAIII Report Inquiry Client identifies a problem or is not satisfied with explanation and formally questions an chargeback item RRRAIII Record the question in the tracking tool RA Determine the inquiry type and forward to the appropriate contact for investigation. Use contact list RAIIII If its an allocation related inquiry, resolve it on the business side RAII Investigate the inquiry and determine an explanation RRARRR If item can be explained, communicate the response to customer. Close the issue IIIRRAR If item requires correction, provide update to customer, update status IIIRRAR Business Head Business/Desk COO Business Controller Cost Transparency Group Financial Reporting RM Group Global Division RM ADG RM ADG Application Manager ITG RM ITG Inventory Manager Central Inquiry Tracker 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 CLIENT 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. IIRAII Central Inquiry Tracker forwards Application issues to the appropriate ADG RM and Inventory issues to the ITG RM RAII ADG RM reviews the issue and forwards it to appropriate ADG Application Manager RAC ADG Application Manager forwards Application Infrastructure related issue to the ITG RM ARCI ITG RM reviews the issue and forwards it to the ITG Inventory Manager RACI Inventory Manager investigates the issue and determines appropriate action RA Inventory Manager makes correction and communicates the change via ITG RM to the single point of contact IIRA Central Inquiry Tracker tracks issue and closes the loop on the inquiry RAIIII Communicate the resolution to the client IIIIRA Business Head Business/Desk COO Business Controller Cost Transparency Group Financial Reporting RM Group IT PL Community ADG RM ADG Application Manager ITG RM ITG Inventory Manager Central Inquiry Tracker 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

32 CLIENT 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 Controller Cost Transparency Group Financial Reporting RM Group Global Division RM ADG RM ADG Application Manager* ITG RM ITG Inventory Manager Central Inquiry Tracker Business/Desk COO * 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 CLIENT 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 Controller Cost Transparency Group Financial Reporting RM Group Global Division RM ADG RM ADG Application Manager* ITG RM ITG Inventory Manager Central Inquiry Tracker Business/Desk COO * 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 CLIENT 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 Controller Cost Transparency Group Financial Reporting RM Group Global Division RM ADG RM ADG Application Manager* ITG RM ITG Inventory Manager Central Inquiry Tracker Business/Desk COO * 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 CLIENT Key Contacts Involved in the Cost Transparency Process for IB Support and CFO IB SupportPerson names CorporateIn all columns Complex Product Supportcleansed Executive Human resources CFO Operations CFO Financial Accounting Global Treasury Group Controlling Investor relations New Business Product Control Shared Services Controlling Business Controller Cost Transparency Group Financial Reporting RM Group Global Division RM ADG RM ADG Application Manager* ITG RM ITG Inventory Manager Central Inquiry Tracker Business/Desk COO * 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 CLIENT Key Contacts Involved in the Cost Transparency Process for COO and CRO COOPerson names AuditIn all columns Business Schoolcleansed 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 Controller Cost Transparency Group Financial Reporting RM Group Global Division RM ADG RM ADG Application Manager* ITG RM ITG Inventory Manager Central Inquiry Tracker Business/Desk COO * 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.

37 CLIENT Example: Calculation of the unit price for The total product cost is composed of direct expenses, centrally planned expenses, and indirect expenses. DescriptionExampleAnnual ExpenseCost 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 Accounts35,244 Cost per account$663 /year unit price$55 / month NOTE: The figures in this chart are for illustrative purposes only.

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


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