YOUR LOGO HERE Slide Master View © (reproduced with permission) Financial Management All course material is copyright. It is forbidden to use this material other than for study purposes. Display for internal use only. Approval for commercial purposes will be granted under contractual agreement

YOUR LOGO HERE Slide Master View © (reproduced with permission) 2 Introductions Your presenter > You Your role(s) Your expectations

YOUR LOGO HERE Slide Master View © (reproduced with permission) 3 Program 09.00Start 10.30Morning tea / coffee 12.30Lunch Afternoon tea / coffee 17.00End Note.. There is enough information here to conduct a full day workshop on Financial Management. If you wish to do a short presentation keep only slides; 1, 5, 7, 8, 9, 13-15, 28-34

YOUR LOGO HERE Slide Master View © (reproduced with permission) 4 Day Objectives Understanding of the Financial Management process and its activities. Good understanding of the relationships with other IT Service Management processes. Ability to execute the Change Management activities.

YOUR LOGO HERE Slide Master View © (reproduced with permission) 5 Overview Service Management

YOUR LOGO HERE Slide Master View © (reproduced with permission) 6 Why Service Management? Business more and more dependent on IT Complexity of technology increases Customers demand more Environment becomes more competitive Focus on controlling costs of IT Low customer satisfaction...

YOUR LOGO HERE Slide Master View © (reproduced with permission) 7 Service Management = The Objective Tree = Quality Flexibility Cost management How / What ? ORGANIZATION BUSINESS PROCESSES IT SERVICE PROVISION SERVICE MANAGEMENT Why! effective efficient organization effective efficient IT service provision

YOUR LOGO HERE Slide Master View © (reproduced with permission) 8 The Functionally Oriented Organization the lines decide GOAL FEEDBACK ACTIVITIES RESULT GOAL FEEDBACK ACTIVITIES RESULT GOAL FEEDBACK ACTIVITIES RESULT GOAL FEEDBACK ACTIVITIES RESULT GOAL FEEDBACK ACTIVITIES RESULT GOAL FEEDBACK ACTIVITIES RESULT

YOUR LOGO HERE Slide Master View © (reproduced with permission) 9 The Process Driven Organization the processes decide GOAL FEEDBACK ACTIVITIES RESULT

YOUR LOGO HERE Slide Master View © (reproduced with permission) 10 IT Service Management (ITSM) Focus Organization Process People Technology

YOUR LOGO HERE Slide Master View © (reproduced with permission) 11 Questions?

YOUR LOGO HERE Slide Master View © (reproduced with permission) 12 ITIL Service Management Service Level Management Financial Management for IT services Capacity Management IT Service Continuity Management Incident Management Problem Management Change Management Configuration Management Release Management IT Infrastructure security Service Desk Availability Management

YOUR LOGO HERE Slide Master View © (reproduced with permission) 13 Financial Management

YOUR LOGO HERE Slide Master View © (reproduced with permission) 14 Financial Management for IT services = Goal of the process = To provide cost effective stewardship of the IT assets and the financial resources used in providing IT services. Financial Management for IT Services

YOUR LOGO HERE Slide Master View © (reproduced with permission) 15 Financial Management for IT services the basics how? insight relationship customer and IT service provider why? budgeting incremental zero-based accounting capital - operational direct - indirect fixed - variable cost price cost price+ going rate market rate fixed price charging method direct used resources proportional output related

YOUR LOGO HERE Slide Master View © (reproduced with permission) 16 Financial Management for IT services = Activities: effective stewardship of IT costs = Why insight? cost management  keeping the budgets under control cost awareness  by gaining insight in the IT costs both customer and IT service provider will not easily waste IT resources insight based on the 3 pillars of economic service provision  quality: capacity, availability, performance, contingency, support, …  costs: spending and investments  customer demand: costs and quality are tuned to the needs of the business how? insight relationship customer and IT service provider why?

YOUR LOGO HERE Slide Master View © (reproduced with permission) 17 Financial Management for IT services = Activities: effective stewardship of IT costs = How?: budgeting incremental budgeting  last year’s figures are the basis for this year’s budget. zero-based budgeting  Blank start: study and decide again on the importance of and amount to budget for every IT service component for this year. how? insight relationship customer and IT service provider why? budgeting incremental zero-based

YOUR LOGO HERE Slide Master View © (reproduced with permission) 18 Financial Management for IT services = Activities: effective stewardship of IT costs = Budgeting sales- and marketing budget  estimate and analyse customers, sales areas, products, …. production budget  quantify labour hours, necessary materials, … administrative budget  overhead budgets for the various departments cost- and investment budget  spending on purchasing / replacing of durable means of production

YOUR LOGO HERE Slide Master View © (reproduced with permission) 19 Financial Management for IT services = Activities: effective stewardship of IT costs = eitheror Capital, outright purchase of fixed assets (e.g. new server) Operational, day-to-day costs of running a service (e.g. personnel, consumables, …) Direct, can be directly allocated to a single customer or customer group (e.g. subscription to internet access, …) Indirect, must be apportioned across all or a number of customers (e.g.exploitation of the company network, …) Fixed, fixed for a reasonable period of time (e.g. salaries, rent, …) Variable, vary with usage or time (e.g. electricity, heating, …) accounting ccapital - operational direct - indirect fixed - variableHow?

YOUR LOGO HERE Slide Master View © (reproduced with permission) 20 Financial Management for IT services = Activities: effective stewardship of IT costs = cost types materialslabouroverhead organisation costs OCU = Organisation Cost Unit accommodation costs ACU = Accommodation Cost Unit transferable costs TCU = Transfer Cost Unit transferable costs TCU = Transfer Cost Unit from other cost centres within the organisation administrative costs CA = Cost Accounting equipment costs ECU = Equipment Costs Unit software costs SCU = Software Cost Unit accounting capital - operational direct - indirect fixed - variableHow?

YOUR LOGO HERE Slide Master View © (reproduced with permission) 21 Financial Management for IT services = Activities: effective stewardship of IT costs = Charging policy: is our company going to do this? communication of information accounting + reporting to the customer of the actual costs (if needed including specific amounts) accounting + reporting to the customer of the actual costs (if needed including specific amounts) pricing flexibility prices are calculated and set each year and charged prices are calculated and set each year and charged with this method excessive use can be influenced with this method excessive use can be influenced notional charging costs are charged, but need not yet to be paid costs are charged, but need not yet to be paid very useful when experience needs to be gained and possible faults have to be filtered out very useful when experience needs to be gained and possible faults have to be filtered out

YOUR LOGO HERE Slide Master View © (reproduced with permission) 22 Financial Management for IT services = Activities: effective stewardship of IT costs = Charging: cost price  price = calculated cost cost-plus  price = calculated cost + % (to cover for aspects like R&D and training) going rate  price is comparable with other internal departments’ costs within the organisation or with similar organisations (e.g. price per seat) market rate  price matches that what is charged by external suppliers fixed price (negotiated contract price)  a set price is agreed, possibly for a set period of time, with the customer (e.g. customer does not pay for the full development costs of software, but an agreed part) cost price cost price+ going rate market rate fixed price charging

YOUR LOGO HERE Slide Master View © (reproduced with permission) 23 Financial Management for IT services = Activities: effective stewardship of IT costs = Method of charging – The method of charging depends on: the companies’ charging policy the companies’ charging policy the (technical) possibilities (also combination of methods) the (technical) possibilities (also combination of methods) the desired influence by the customer the desired influence by the customer cost price cost price+ going rate market rate fixed price charging method direct used resources proportional Output related

YOUR LOGO HERE Slide Master View © (reproduced with permission) 24 Financial Management for IT services = Activities: effective stewardship of IT costs = Method of charging direct charging  e.g. direct settlement of bills like water, electricity, telephone, … charging used resources  e.g. used CPU-time, internet data traffic, … proportional charging  e.g. part of the costs of a centrale network printer shared by several departments output related charging  e.g. the costs of every line printed on a detailed telephone bill method direct used resources proportional output related

YOUR LOGO HERE Slide Master View © (reproduced with permission) 25 Questions?

YOUR LOGO HERE Slide Master View © (reproduced with permission) 26 Financial Management for IT services = Activities: effective stewardship of IT costs = Forms of organisation Memorandum Trading Accounts (MTA) do trend analyses concerning cost control do trend analyses concerning cost control but no accounting and no charging but no accounting and no charging Utility Cost Centre (UCC) budgeting and accounting budgeting and accounting but no charging but no charging Computer Services Business Centre (CSBC) budgeting, accounting as well as charging budgeting, accounting as well as charging high level of responsibility and authority (e.g. business units, commercially (sales?) Oriented IT-department) high level of responsibility and authority (e.g. business units, commercially (sales?) Oriented IT-department)

YOUR LOGO HERE Slide Master View © (reproduced with permission) 27 Financial Management for IT services = Costs, Points of Attention, Advantages = Costs – P ersonnel  for “budgeting”,“accounting” and “charging” – A ccommodation  also physical storage of financial documents, … – S oftware – H ardware – E ducation  ITIL Master Class / ISM-Practitioner, (IT-)accountancy, … – P rocedures  designing & managing Financial Management for budgeting, accounting and charging, …

YOUR LOGO HERE Slide Master View © (reproduced with permission) 28 Financial Management for IT services = Costs, Points of Attention, Advantages = Points of Attention – an accurate calculation of costs is often new to IT-organisations – the accurate calculation of costs depends on optimal organisation and correct information from other ITIL processes, but also from non IT-services (e.g. facilities management) – personnel having administrative as well as financial as well as IT knowledge is not always easy to find lack of future perspective (the “why”-question) makes the cost-benefit analysis difficult organizing Financial Management is expensive setting up a (new) charging system is difficult to introduce

YOUR LOGO HERE Slide Master View © (reproduced with permission) 29 Financial Management for IT services = Costs, Points of Attention, Advantages = Advantages: budgeting & accounting our own IT-management as well as the customer’s can make decisions based on reliable costs insight in Return on Investment insight in and justification of IT expenditures (Value for Money) accurate budgeting accurate services related calculation of costs accurate customer related calculation of costs

YOUR LOGO HERE Slide Master View © (reproduced with permission) 30 Financial Management for IT services = Costs, Points of Attention, Advantages = advantages: charging the customer is able to influence the use of IT- services  e.g. higher tariffs on peak hours, combined with an “off- peak depreciation card” accurate services related billing accurate customer related billing by the gained insight in the IT costs and by being charged for these costs the customer will not easily waste IT resources

YOUR LOGO HERE Slide Master View © (reproduced with permission) 31 Financial Management for IT services = Functionally Oriented vs. Process Driven = mainframenetworkpc-lan Financial Management The Art of

YOUR LOGO HERE Slide Master View © (reproduced with permission) 32 ITIL Service Management = “webbing” = Financial Management Service Level Management Capacity Management Availability Management Security Management Incident Management Problem Management Configuration Management Change Management Continuity Management Release Management Service Desk

YOUR LOGO HERE Slide Master View © (reproduced with permission) 33 Questions?

YOUR LOGO HERE Slide Master View © (reproduced with permission) 34 Change Management: Q & A ? ? To provide cost effective stewardship of the IT assets and the financial resources used in providing IT services. Financial Management for IT Services