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0 ©2010 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice Bridging the gap between IT and the business through enhanced IT financial understanding and transparency Michael Adams Director, IT Advisory, KPMG LLP Marcus Murph Senior Manager, IT Advisory, KPMG LLP

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As budgets tighten, pressures increase to improve bottom lines, and organizations try to leverage complex systems and tools to improve business operations, technology remains a necessary ongoing expense. At the same time, the regulatory environment across industries has become more stringent. Requirements for more transparent and efficient financial reporting processes demand that CIOs better manage enterprise risks and improve performance. Attend this session and learn techniques for responding to the mandate to do more with less in today’s volatile economic environment of slow growth and increasingly stubborn profits. We’ll show you how IT financial management is naturally synergistic with the IT asset management (ITAM) discipline, and how a mature ITAM program can give IT leaders the correct asset and cost data they need to correctly budget, account for, and allocate costs for the business.

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Page 1: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

0 ©2010 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice

Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

Michael Adams Director, IT Advisory, KPMG LLP

Marcus MurphSenior Manager, IT Advisory, KPMG LLP

Page 2: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

Introduction and Summary

As IT leaders address the challenges of balancing financial management with meeting the growing

needs of its customers, they need to have a framework available that allows them to quantify the

services they provide and ensure that the investments made in providing those services are optimized

for value:

1

Changes in the Business

Environment

New market/regional

expansion

Mergers, acquisitions,

divestitures

Information security

Increased Business

Expectations

Better performance

Greater availability

Increased service quality

New Business Initiatives

Expansion of current

services

Shorter time to market

Increased Business

Expectations

Budget reductions

Need to reduce operating

costs

There Is No Choice – Managing Infrastructure Investment Is an Imperative

Page 3: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

The Benefits of ITFM

IT Financial Management (ITFM) requires leaders to embrace multiple disciplines that are vital to

maximizing the return on investment in IT resources. This ensures that business requirements are

satisfied at the lowest possible cost, or in other words, to deliver IT services as efficiently as possible.

2

What are the goals/benefits of ITFM?

• Effective use of budget dollars and cost

optimization

• Financial visibility for all that IT offers throughout

the lifecycle of an asset

• Making the right project and service choices

• Informing the business about the cost of IT

services

• Ability to chargeback or showback IT services

• Control over ongoing IT investments

• Credibility for IT as a strategic business partner

and contributor

Mitigate Risk

Optimize the

IT Investment

Promote Operational

Efficiency and Agility

Page 4: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

The ITIL View of ITFM

In ITIL v3, ITFM is a function described in the

strategy phase of the IT service lifecycle. Its aim

is “to provide the business and IT with the

quantification, in financial terms, of the value of IT

services, the value of the assets underlying the

provision of those services and the qualification

of operational forecasting”.

ITFM Goals from ITIL are:

• Reliably budgeting and accounting for the

cost of each IT service

• Determining the value of each IT service

• Periodically forecasting the cost of each IT

service

IT Accounting

Budgeting

Chargeback

3

Page 5: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

CIO BI

Dashboard

IT

Management

Reporting

Audit,

Compliance

and Control Reporting

Services (Customer / End User)

Devices Connectivity and Collaboration

• Computing Devices• Communication Devices• Security Devices

• Personal Collaboration• Group Collaboration• Connectivity

Applications

• Applications and Servers

Direct

• Services• Support

Charging/Billing (Customer/End User)

Connectivity and Collaboration

Applications DirectDevices

Cost Mapping, Assignment and Allocations

Billing

4

IT Projects

Sourcing and Labor

Assets

IT Finance Goals, Objectives, Capabilities

Cost Mapping, Assignment and Allocations of

Financial Systems of Record

Assets, Projects, Sourcing/Labor, etc.

The Textbook Oversimplifies IT Financial Management

• ITFM is more than a Service

Management process Area

• ITFM is primarily a Finance and

Accounting discipline – not an IT

discipline

• ITFM assumes that our finance

stakeholders and clients fully

Understand IT Costs and their

Drivers

• ITFM frameworks do not

appropriately address the

Resources and Skill Sets required

• ITFM does not stress the need for IT

Financial Analytics

• ITFM does not sufficiently care for

the unique challenges and

importance of IT Asset

Management (ITAM)

Page 6: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL 5

End-to-End IT Financial Management

Typ

es

of

IT F

ina

nc

ial M

an

ag

em

en

t

Labor

Hardware

Software

Facilities

Project and

Port. Mgmt

Asset Mgmt

Sourcing

Primary IT Cost Pools

Wages and Salaries

Benefits

Contractors

Outsourced and Off-

shored Labor

Systems/Storage

Network HW

HW Maintenance

Physical Space

Utilities

Telecom. Expense

Miscellaneous

SW Licenses

SW Maintenance

Agreements

ITFM is a multi-

dimensional process

spanning multiple

disciplines and unique

complicated costs

pools

Page 7: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

ITFM

PPM

ITAM

ITSMStrategic Initiatives

Governance

Resource Allocation

Service Catalog

Support

MAC‟s

Demand Mgmt.

CMDB

Application Mgmt.

Asset information

Costs

Ownership

Lifecycle Status

Assignment/Accountability

ERP

HR Data

Fixed Assets

Accounts Payable

Vendor Management

Procurement Data

6

Asset Management Is the Cornerstone of ITFM

There are multiple definitions of ITFM. KPMG firmly believes that ITFM is a cross-functional discipline

that is based on the foundational underpinnings of IT Service Management, Project and Portfolio

Management and IT Asset Management.

Page 8: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

What Is Asset Management

IT Asset Management is the control point that fully integrates the processes, systems, people, tools

and data to effectively control and utilize assets throughout their lifecycle.

Technology

Lifecycle Processes

Organization/ People

ITAM

ITAM

Relationship Management

Inventory

Management

Tim

e

Service

Management

Financial

Management

Procurement

Management

Retirement

Management

Inventory

Management

7

Page 9: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

Asset Management Is the Cornerstone of ITFM

IT Asset Management provides a method for managing the financial aspects related to technology

assets from the time an asset is received until it is retired. IT Asset Management works to ensure that

all assets including leased or purchased equipment and software licenses are known, controlled, and

that their cost is minimized.

The IT asset information captured by ITAM will help service managers to streamline IT governance

processes and provide cost-effective IT services across the company. The ITAM solution empowers

organizations to recognize economic benefits across these IT business drivers:

• Cost Reduction

• Controls Integration – Cost, Compliance, Financial and Security

• Organizational Governance and Data Normalization/Integrity

• Process Standardization

8

Page 10: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

ITAM – Lifecycle Management Integration and Automation

ITAM provides a framework for managing the lifecycle of assets from initial request through retirement. The integration of

multiple systems and departments is required to effectively manage, control and utilize IT assets while optimizing the

investment in those assets

ITAM Repository As the Asset progresses through its lifecycle, the attributes (new or updated) associated with the asset are updated

within the ITAM Repository via integrations with other systems

Te

ch

no

log

ies

A

cti

vit

ies

P

ha

se

s

ERP/Financials Procurement A/P HR Fixed Assets

Configuration Management System

IT Order to Bill Systems/Provisioning

Discovery Tools

Change Management System

Initial Request

•Approval process

•Stock is checked for availability

•Create ITAM record

Redeployment

• Is asset re-configured?

• Does it replace existing assets?

• Update/create ITAM records

PO is Created

• Fields populated

• Assign Asset tag

• Update ITAM record

Asset is Received

• Fix barcode

• Assign asset status

• Change PO status to “received”

• Update ITAM record

Asset is Deployed

• Asset is installed and configured

• Owner/dept. assigned

• Support structure is assigned

• Update ITAM record

Asset Changes

• IMAC data

• Business unit changes

• ITAM record is updated

• Fixed Asset record is updated

Asset Retirement

• ITAM status is changed to „Retired‟

• Update FA Ledger

• Legal ownership is transferred

RetireRedeployUpdateDeployReceiveProcureInitial

Request

Asset Status Controls - (Provision)Asset Entry Controls - (Procurement) Asset Exit Controls - (Retire)

9

Page 11: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

Asset Mgmt

ITAM – Integration with ERP

Integrating an IT Asset Management solution with an ERP system provides visibility to support accurate

budgeting, financial reporting and vendor management.

Procurement

Account Payable

Fixed Asset

Vendor Mgmt.

ERP

ERP Systems are not

designed to manage and

track the detailed

requirements of IT assets

Asset Request

Asset Disposition

(legal ownership)

Asset updates

ITAM manages the

demand/requests for assets

Repository of detailed,

operational information

Is their a linkage between

procurement and standard

technology catalogs

Provides updated location and

cost center information

Manages physical entry and

exit of assets

Financial data

Detailed data for forecasting

10

Page 12: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

Asset Mgmt

ITAM – Integration with ITSM

IT Asset Management is an integral linkage to Service Management, and provides key functionality to

the Configuration Management Database

Incident

Problem

Change

Release

Configuration

Service Mgmt

Service Management tools

and processes are designed

primarily to manage assets

after they have been

deployed into an enterprise.

Fixed Assets Ledger

Standards for creating

CI‟s in CMDB

Updates and

Retirements

Asset availability

Asset updates

from IMAC‟s

ITAM provides a business

perspective and financial

view of assets

Assets are created via

request and procurement

ITAM provides normalized

data for the CMDB

Asset updates from IMAC‟s,

Auto-discovery/Inventory

Manages physical entry

and exit of assets

Request for Assets

IMAC = installs, moves, adds and changes

CMDB = configuration management database

11

Page 13: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

Asset Mgmt

ITAM – Integration with PPM

IT Asset Management provides base costing and asset availability for PPM requirements

Projects

Resources

Demand

PPM

PPM requires asset and

organizational information in

order to manage services and

assets into standard services

or CI’s.

ERP – Procurement , FA

Availability of Assets

Purchase Requests

Asset updates

Asset Costs

Asset updates for

assignment, etc.

ITAM provides basic asset

information – what we have

and what is available

Vendor/contract management

requires updates to prepare

for new licensing requirements

New chargeback models must

be developed to support new

initiatives

ITAM provides request/

purchase function for new

assets (out of standard)

Request for Assets

Maintenance Contract

Updates

12

Page 14: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

Software Assets Add Significant Complexity

Critical Elements for Software Asset Management

Hardware Inventory – Scope of servers/desktops where software

can be installed

Software title – Software title at version and license metric level

License metric – Method by which company is authorized to use

product (e.g., # of users, servers, tiers, concurrent, etc.)

Entitlements – # of licenses (by metric) company is permitted to

deploy (e.g., purchased)

Deployments – # of licenses (by metric) company has deployed

Contract Mgmt – Effective contract mgmt and ability to influence

vendor negotiations with respect to software licensing

Data Normalization – Consistent data/naming conventions across

vendor contracts, product catalog and discovery

Software Distribution – Control software distribution and support

with corporate policies/codes of conduct

Impacts on ITFM

Forecasting – Software is inherently complicated to forecast

because it is subject to frequent change (e.g., HW inventory)

Service Management – IT commonly allocates software costs to

services/business units due to the complexity

Rogue purchasing – Uncontrolled purchasing can result in un-

budgeted financial commitments

Trailing expenses – Forecasting efforts can easily under estimate

trailing maintenance expenses

Vendor Management – Changes to license metrics, terms and

pricing regularly impact forecast accuracy

Hardware

Inventory

Software

Entitlements

Software

Deployments

Reconciliation

13

Organizations that can Impact Your Software Positions

Procurement

Vendor Management

Asset Management

IT Operations

Customers

End Users

Deployment/Project

Management

Page 15: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

ITFM

PPM

ITAM

ITSM

ERP

The IT Portfolio

Enables Assets

IT Assets are the

foundation for IT

service delivery

Assigning HW/SW to

Services

Tracking HW/SW

Assets to Projects

Common ITFM Challenges

Delivering projects on budget

Accurately forecasting asset expense trailers

Impact of portfolio capacity on the forecast

Managing benefits realization on the IT

portfolio (e.g., did we buy the assets

needed)

Common ITFM Challenges

Effectively linking SW/HW POs to projects

Project level status on asset orders

Complicated actual to estimate

reconciliations

Integration between project and asset tools

Common ITFM Challenges

Reporting IT costs to customers in a simple,

easy to follow manner

Providing transparency into IT service costs

Relating cost drivers to asset costs

Establishing meaningful benchmarks

Common ITFM Challenges

Effectively understanding the relationship

between IT assets and IT services

Defining the right granularity for assigning

asset costs to IT services

Relating ELA costs to IT services

14

Summary: ITAM Is Critical for Effective ITFM

Insight into the relationships with ITAM is a fundamental enabler to effective ITFM

Page 16: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL 15

Perspectives on the Future of ITAM and ITFM

• The migration to cloud environments will necessitate change to:

ITFM and ITAM processes

IT organizational funding models

Customer perceptions of asset ownership

• Software vendors are beginning to view broader ITFM as an area of opportunity

• IT customers and F and A stakeholders continue to demand greater simplification of IT cost

reporting, and at the same time need more granular IT cost data (platforms, lease vs. buy,

transactions)

Page 17: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

Speaker Contact Information

Michael Adams

Director

IT Advisory

KPMG LLP

[email protected]

Marcus Murph

Senior Manager

IT Advisory

KPMG LLP

[email protected]

16

Page 18: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Printed in the USA. 12197COL

Questions?

17

Q&A

Page 19: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

18 ©2010 Hewlett-Packard Development Company, L.P.

To learn more on this topic, and to connect with your peers after

the conference, visit the HP Software Solutions Community:

www.hp.com/go/swcommunity

Page 20: Bridging the gap between IT and the business through enhanced IT financial understanding and transparency

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