improving the bottom line - it financial management best practices
TRANSCRIPT
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
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
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
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
Headquarters in Atlanta 33,000 employees, 2000 in IT $181 billion in assets, $124 billion in deposits Consumer, commercial, and institutional banking
services
SunTrust
“This is not how the process is intended to work” The Funding process should not get in the way of good business sense
Project Governance Pool Methodology Concept
“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
Project Governance Pool Methodology Concept
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
Project Governance Pool Methodology Concept
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
Project Governance Pool Methodology Concept
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)
Project Governance Pool Methodology Concept
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.
Project Governance Pool Methodology Concept
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)
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
THANK YOU!
Gregory Hopkins ([email protected])
Jim McGittigan ([email protected]) Jeff Finkiel ([email protected]) Javier Sloninsky ([email protected])