Improving the Bottom Line - IT Financial Management Best Practices

Improving the Bottom Line: IT Financial Management Best

PracticesJavier Sloninsky, EcoSys Management

Greg Hopkins, Physicians Mutual InsuranceJeffrey Finkiel, Guardian Insurance

Jim McGittigan, SunTrust Banks

IT Financial Management Needs and Best Practices (EcoSys) Best practices from the front lines

Managing a Major Multi-Year IT Initiative (Physicians Mutual) Chargebacks for Project Accountability (Guardian Life) Project Governance Pool Methodology (SunTrust)

Conclusions (EcoSys) Questions and Answers (All)

Agenda

EcoSys Management IT Financial Management Needs and Best

Practices Javier Sloninsky

CEO

Primavera Service Provider and Technology Partner Have supported over 130 enterprise project

management Implementations EcoSys Financial Manager software: bridges project

management with financial management Headquarters in New York

EcoSys Management

How is successful IT financial management defined and measured?

What challenges are faced by organizations in managing budgets and funds?

How can project management practices be leveraged to meet these challenges?

What are some examples of what organizations are doing in these areas?

Some Fundamental Questions

Characterized by lack of surprises Clear control and accountability for spending Transparency and visibility into all aspects of budgeted, forecast,

and actual spending Demand kept in line with top level targets required for profitability Multi-year impact measured accurately Good processes exist for allocating funds and tracking their use Great project management throughout the lifecycle A clear portfolio view encompassing all aspects of IT spending,

visible by impact, priority, etc. Alignment of project, IT, and corporate financial strategy

Characteristics of Successful IT Financial Management

Good project management practices are essential for time to market of service products: ex: banking/investment services

Cost overruns add up. Exceeding IT budgets through poor budget and schedule control can have dramatic impact : TIAA-CREF Government examples: FBI ,etc Airbus A380 avionics delay

For Financial Services, business is IT-driven…the largest IT budgets outside of US DOD are for Financial Services companies

IT Financial Management: Why it Matters

IT budgets have always been notoriously difficult to control: IT projects can still be unpredictable

New variables changing mix: rapid rise of outsourcing and offshoring.

Commoditization pressures provide opportunities and risks

Explosion in storage and processing needs have made IT infrastructure costs difficult to contain

Centralization vs. decentralization trends continue

Consolidating and reconciling disparate sources of financial information relating to IT

IT Financial Management Challenges

Clarifying responsibility for financials Strong control mechanisms Request and funding processes and workflow Chargebacks Understanding multi-year financial impact Auditable software capitalization Alignment of spending along different dimensions Leveraging project management for better financials

Some Best Practices Highlighted

Physicians Mutual Managing a Major Multi-year IT Initiative

Gregory HopkinsVP, Project Accounting

Headquartered in Omaha, Nebraska 1500 Employees : 350 in IT Provider of life insurance, health insurance, and

annuities Greenfield: multi-year initiative to overhaul all

major IT systems Challenges

Meeting year on year budget targets Capitalization Auditing Unbiased reporting of results

Physicians Mutual

Give accounting controlling function over IT Meet auditability and tracking standards Put in place system and processes for

accounting to track project budget and overall financials

Develop process flows that make lines of responsibility clear

Validate that project forecasts will meet spending program targets by category, cap vs. expense

Addressing Challenges

Process for IT to build and present annual program

budget using Primavera and Financial Manager

Accounting validates and approves IT’s budget in

Financial Manager

Monthly Closeout and

GL Reconciliation

Program annual forecasts updated on regular basis

using Primavera and Financial Manager

Accounting reviews revised forecasts and impacts

Guardian Life InsuranceChargebacks for Project Accountability

Jeffrey FinkielSenior Financial Analyst/Chargebacks

Headquarters in New York City $36.9 Billion including subsidiaries 5000 employees, 500 in IT Provider of life, health, disability to individuals

and businesses Has rigorously reduced IT spending through

strong financial control One of the largest mutual life insurance

companies in US 85 agencies around the country

Guardian Life Insurance

IT provides the following services and support to Guardian Profit Centers and Support Areas– Systems production support – Application development – Business continuity / disaster recovery planning and

infrastructure– Information security– Outsourcing management and facilitation for IT and

business processes– Technology strategy and governance

IT’s Relationship to other Guardian units

Holding business units (BU) accountable for IT budget

Holding IT PMs accountable to BU financial targets

Spending IT budget on revenue generating initiatives vs. maintenance and operations

Account for offshoring Accurately compare cost of internal labor,

external services, and non-labor

Guardian Financial Management Challenges

Chargeback costs segregated Business units split project funding by

percentage Results fed monthly through general ledger Consolidated bill provided to business units by

each IT division Budgeting process incorporates commitments

and targets on spending types (i.e. New development vs. Production support)

Guardian Financial Management Processes

Tying Project Mgt to Financial Results - Overview

1. PM Assigned to Project> Transfer Project Budget and Requirements to PM

2. PMs create TeamPlay Project Plans: > Assign Resources to Activities> Plan expenses

3. Resources Begin Project Work by COB Fridays> Log Tiemsheet Hours to Projects> Submit Timesheets or> Revise and Resubmit Timesheets

4. Timesheet Approval by COB Mondays> RMs Review Timesheet> RMs Reject/Approve Timesheets or> RMs Approve Resubmitted Timesheets

$$

4a. Actuals Applied to Projects by COB Tuesdays > PMs Apply Timesheet Actuals> PMs Update Project Plans, if needed

3a. PMs Log Expense Actuals> Start Activities> Log Actual Costs

5. IT FC&A Process Test GL Feed> Jeff Finkiel Begins 2 Iterations of GL Feed Test Runs.> Jeff Finkiel contacts PMs Required to Resolve Questionable Entries.

6. Project Plan Updates> PMs Update/Clarify TeamPlay Information per Jeff Fikiel's Email Requests

7. IT FC&A Process GL Feed> Jeff Finkiel Processes Final GL Feed File to FM&C

$

8. General Ledger> CB App. Dev. Prog. Chargebacks Processed to ABC MainFrame Database> Reconciled Consultant Invoiced Costs Processed to CDS (Cash Disbursement System)

Pay to $

4b. VIC Feed> Consultant Timesheets Fed to Vendor Invoice Control Interface> Consultant Timesheets Reconciled to Received Invoices

8a. CB Reports> Monthly CB Project Actuals> Consolidate CB Report> YTD CB Aanalysis Report> Spend Type Analysis

Profit Center Budget Allocations to IT Projects

Profit Center Total Budget

IT Project Commitments

SunTrust BankProject Governance Pool Methodology

Jim McGittigan

First VP, IT Financial Manager

Headquarters in Atlanta 33,000 employees, 2000 in IT $181 billion in assets, $124 billion in deposits Consumer, commercial, and institutional banking

services

SunTrust

What Question is asked most often?

Project Governance Pool Methodology Concept

How do I get my hands on the money?


“This is not how the process is intended to work” The Funding process should not get in the way of good business sense


“Demand”“Supply”

All 4 PGG’s = $100MM

Align ResourcesArchitect Project

InfraStructure funded $20MM projects & depreciation

Project Governance Pool Methodology

PGG Ideas

$275MM Pool =

IT Applications funded $60MM for Project costs

CIB funded $5M for CIB Project costs

Corporate funded $15M for Special Projects

$100M Exp + $175M Cap

Business Lines

IT’S AS SIMPLE AS


PGG (PROJECT GOVERNANCE GROUP) FUNDING POOLS ARE DYNAMIC AND CHANGE BASED UPON RESOURCE BALANCING & SHIFTS IN PRIORITIZATION

EACH PGG IS RESPONSIBLE FOR UTILIZING FROM ITS POOL ALL RESOURCES ALLOCATED TO IT BY THE IT DIVISION (FUNDING SOURCE)

PGG POOLS AND FUNDING SOURCES CAN BE INCREASED BY RECEIVING A PLAN TRANSFER FROM CORPORATE OR AN LOB TO THE IT DIVISION WHICH THEREBY INCREASES ONE OF THE PGG FUNDING POOLS


The PGG’s will approve spending, by phase, for individual projects;

the PGG pool availabilities will be reduced as investment spending is

approved Monthly reporting by PGG will show the amount in the PGG pool,

authorized spend to date, project forecast and availability within the pool The PGG’s along with the Corporate Governance Board will prioritize and

approve project requests in line with funding and resource availability Once PGG funding is exhausted, they have the following options:

• Go to LOB for funding • Reprioritize and cancel other projects• Shift core resources to projects• Don’t do the project• Seek approval to fund from either another PGG pool or outside the PGG

pools

PGG FUNDING – HOW IT WORKS


OUTSTANDING ISSUES – 3 YEARS LATER

PGG project approvals can occur without a clear understanding of

where the funding source resides (i.e., who has the real budget). IT labor resources are treated all the same at the PGG level (i.e.,

no distinction is made between labor types; the relatively fixed

internal and offshore resources comprise 90% of the labor budget;

much of the demand is against the remaining 10% of external

contractor/consulting resources). Need to improve the coordination between the 4 PGG’s to

effectively manage funding and resource availability. Understanding the difference between the Demand (PGG View)

and the Supply Side (Budget View). Rate of change of Governance concepts (they continue to change

before we get a chance to implement good processes and tools)


SOLUTIONS TO OUTSTANDING ISSUES

Implement processes that require each PGG to understand the

funding source prior to project approvals (i.e., who has the real

budget). Have detailed labor reporting available for each PMO which allows

them to understand their resource allocation by labor type and

track both the YTD and projected spend by labor type. Move towards a Portfolio Management or Work Stream (or

Portfolio) view that cuts across the 4 PGG’s requiring them more

to effectively manage funding and resource availability across the

Enterprise. Continue to educate both IT and LOB personnel on the difference

between the Demand (PGG View) and the Supply Side (Budget

View). Implement better processes along with EcoSys FM to help us

manage the chaos before it manages us.


PROJECTS UNDERWAY TO SOLVE ISSUES

Time Reporting Inspection Process Improvement Weekly Portfolio Review Process with PMs Financial Process Roadmap (includes redesigning

processes along with financial management

education of PMs and senior managers) Implementing EcoSys FM to capture central financial

reporting repository

IT Divisions allocate to

funding pools

Budget Performance by Project Funding Pool (Governance Portfolio)

How Project Funding Pools are Funded by IT Divisions and Departments

Mutual education, understanding, and buy-in absolutely critical

Processes and organizational structure need to: Provide accountability and transparency Bridge project and financial management processes

and performance reporting Use of tools that can:

Deliver bridged processes Support accountability and transparency Provide financial reporting that can address project

and organizational needs

Conclusions

Q and A

THANK YOU!

Gregory Hopkins ([email protected])

Jim McGittigan ([email protected]) Jeff Finkiel ([email protected]) Javier Sloninsky ([email protected])

mailto:[email protected]




Improving the Bottom Line - IT Financial Management Best Practices

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