Caring Culture | Open Communication | Unmatched Service | Personalized Solutions

Effective Financial Management of

Communications and Technology


Paul Lapan Manager of Solutions Engineering
PINNACLE Software Solutions
ITPX 2010
Caring Culture | Open Communication | Unmatched Service | Personalized Solutions
Paul Lapan
PINNACLE Software Corporation
Manager, Solutions Engineering
Denver, Colorado
303 870-5368
paul.lapan@paetec.com

Career History
Enterprise Software Consultant PAETEC Software
Voice Systems Integration Provider Switchview / Brooktrout
Voice Network Manager ATT Wireless, GGU
IT/Telecom Support Manager CompUSA


Help | About Paul
About Todays Discussion
Objectives of Financial
Management
Why is this relevant today?
Value of Best Practice
Frameworks
Cost Modeling
Business Drivers
Improvement of Process
Throughput
Eliminating Bottlenecks


Financial Management - Business Objectives:
Monetary Stewardship
Universal service support and service delivery processes
Planning & execution of budgeting, accounting and charging as it relates to the
entire management lifecycle

Procurement Provisioning Payment Cost Allocation
9
Effective Financial Management of Communications and Technology
Budgeting, Accounting, Chargeback


Accounting
(Fin)
Budgeting
(Mgt)
Charge
Back
(IT/Ops)
Yearly
(Planning)
Monthly
(Managing)
Agree on
Expenditures
Review and
Manage
exceptions
Establish
Standard Costs
Monitor
Cost Centers
Publish
price list
(Service
Catalogs)
Monitor IT
Revenue
Effective Financial Management of Communications and Technology
Effective Financial Management of Communications and Technology

Changes
1. Exponential increase in Data
Center located applications
2. Focus on service business
value relationships
3. Changing cost models from
physical to virtual resources
(big increase in absorbed
indirect costs)
Why is this so much more important today?

Integration to the General Ledger
True chargeback to the responsible
account/party
Integration to Accounts Payable
Lifecycle view of what is going out the
door vs. what is coming in
Self-Service details for customers
Employee Accountability
3-5% Savings across the board (per
Aberdeen)

The end result Visibility and Accountability
Effective Financial Management of Communications and Technology
Transparency is Accountability without the need for a formal
punishment system to manage misbehavior.
Effective Financial Management of Communications and Technology
Focus on the legacy business best
practices from Telecom that
many IT shops didnt
immediately adopt.

1. The business is the customer of
Telecom.

2. Managerial Measurements - i.e.
ITIL Service Level Agreements,
Operational Level Agreements
(Underpinning Contracts) -
Benchmarking Metrics!
How do we start and/or continue to improve what we have?

Effective Financial Management of Communications and Technology
Measuring associated
costs around
Service Hours
Service Availability
Reliability
Customer Support
Targets for Incident Resolution
(Fix) times
Service Performance
Functionality (if appropriate)
Change Management Procedures
Security
Effective Financial Management of Communications and Technology
What other best
practices are key to
focus on to establish a
model for IT/Telecom?

Predetermined Acceptable Fixed
and Variable Costs

Automated Process for Approvals,
Payment and Dispute

Contract Negotiation and
Increased Competition
Popular Best-Practice Frameworks
Title Definition Objective Owning Agency
TEM
Telecom Expense
Management
State of industry and
assessment of TEM solution
providers
Gartner
TEIM
Telecom Expense
Inventory Management
A comprehensive assessment
framework for selecting a
TEM solutions provider
Forrester Research
TLM
Telecom Lifecycle
Management
Defines key lifecycle
processes to help reduce
telecom operational costs
Aberdeen Group
TEA
Telecom Environment
Assessment
Defines seven disciplines to
effectively manage telecom
operations
AOTMP
eTOM
enhanced Telecom
Operations Map
Defines the interaction
between key operational
elements
TeleManagement
Forum
ITIL
Information Technology
Infrastructure Library
Comprehensive framework
for all service support and
service delivery
OGS
7
The Reality of Best Practices
What they provide:
Common sense of proven concepts
and techniques
A method to measure performance
The potential to avoid common pitfalls
The potential to focus on continual
improvement
Assessment criteria
Standard language

What they are not:
An absolute correct solution
Procedural
Recommendations to buy a system or
technology
Effective Financial Management of Communications and Technology
Effective Financial Management of Communications and Technology
What value is there in these
frameworks to assist us with
improving our financial
models?

Common language to describe the
relationships between functional
areas (in terms of associated
costs)
Common repository (CMDB) -
Configuration Management
Database (service, subscriber,
location)
Common provisioning model -
Configuration Items & Related
Vendor Charge Codes
Common Container for Costs
Service Catalog

Service Catalogs Objectives
A service catalog is a list of services that an
organization provides, often to its employees or
customers.
Each service within the catalog typically
includes:
A description of the service
Timeframes or service level agreement for
fulfilling the service
Who is entitled to request/view the service
Costs
How to fulfill the service
Effective Financial Management of Communications and Technology
Publish Accept Request Review Deploy Review

Example Workflow Network Service Delivery
Many parallels to Voice
& Video services
Managed as separate
business process
to provide based on
customer needs
Many opportunities
exist for streamlining
operations
Manual Billing


Workflow - Network LAN Services
Materials
NSG
Review
Customer
Support
Order
Originator
Customer
Cable
Assignments
NSG
Install
Customer
data and workflow
data
workflow
direct interaction
routinely required
notification
NSG
Schedule
OO, OSM,
Requests, &
Customer Materials
Adjust
Customer
Support
Close
OO, OSM,
Customer
Vendor
Cable
Adjust
LAN
Review
Close
Custom App
Other Design
group(s)
Other Ops
group(s)
Custom Ntwk
DB
App
WO folder
email
Other
Database
email with
attached file(s)
Customer
Measuring IT Cost By Customer

Vendor
Charges
Software Personnel Hardware Real Estate
Absorbed Customer B Customer C Customer A Unabsorbed
Cust A B C Cust A B C
Total cost of
IT Services
for Customer A
Indirect Costs

Direct Costs

Cost Elements

Effective Financial Management of Communications and Technology
Measuring Cost by Service Type
Vendor
Charges
Software Personnel Hardware Real Estate
Absorbed
Indirect Costs
Unabsorbed
Indirect Costs
Direct Costs
Hardware
Software
Personnel
Vendor
Charges
Hardware
Software
Real Estate
Software
Real Estate
Personnel
Vendor
Charges
Monthly
Recurring
Charges
Usage
Charges
One Time
Charges
Cost of the
Service
Cost Elements

Effective Financial Management of Communications and Technology
Definitions
Cost Model: Based on calculating the costs for each Customer by service,
location, or other allocation method.
Cost Types include:
Hardware
Software
People
Vendor Services
Space/Accommodations
Cost Elements provide detail on cost type
Specific asset assignment (Hardware, Software, Office Space)
Resource Utilization (Bandwidth, CDR, Kilowatt Hour, Number of Copies
Effective Financial Management of Communications and Technology
Definitions - Cost Categories
Capital or Operational Costs are typically associated with the physical
assets that are required to run day-to day operations such as maintenance
and support staff costs.
Direct Costs are costs that are attributable to a single customer or such as
software used for a research project or PDAs for sales personnel.
Indirect Costs are costs shared on behalf of many such as shared
bandwidth or technical resources.
Absorbed Indirect Costs can be metered. Examples include: power,
network utilization, and phone calls
Unabsorbed Indirect Costs can not be metered. These are shared
services such as a network pipe, IT Salaries, or share facilities.



Effective Financial Management of Communications and Technology
Effective Financial Management of Communications and Technology
What are the drivers for
todays business
requirements?

1. Cost Justification (technology
refresh)
2. Cost Allocation (alignment
w/business value)
3. Capacity Planning (SLA, QoS)
4. Cost Containment and
Transparency
Effective Financial Management of Communications and Technology
What is the real situation for
many today?
Managing to stay in good graces
of vendor accounts.
Quarterly audits and spot
checking after the fact
In-house and homegrown
chargeback systems
Flexible and equitable financial
chargeback processes that use;

1. Clear standard charging increments
2. Easily measured sources metered,
buffered, event-based, time-based
3. Well defined and easily explained cost
models not subject to interpretation
4. Costs unlinked to direct business processes
not transitory
5. Simple and inflexible pricing mechanisms

Effective Financial Management of Communications and Technology
How can we all improve?
Increase throughput of our organizations*

All organizations can be measured by 3 financial things;
1. Inventory

2. Operating Expense

3. Throughput




*Theory of constraints model - Dr. Eliyahu M. Goldratt -The Goal

Effective Financial Management of Communications and Technology
How can we all improve?
Increase throughput of our organizations*

All organizations can be measured by 3 financial things;
1. Inventory
Money invested in communications technology
2. Operating Expense
Money spent in converting Inventory into business enablers
3. Throughput
The SPEED of converting Inventory into business enablers



*Theory of constraints model - Dr. Eliyahu M. Goldratt -The Goal

Effective Financial Management of Communications and Technology
Inventory
Communications inventories
are not ASSETS to your
organization

Operating Expenses
All costs associated with
procuring, provisioning and
enabling the use of inventory
by the business.

Throughput
The speed at which Inventory
items are converted to use by
the business

Inputs & Outputs:
Email with
attachments
Hardcopy & Faxes

Challenges:
No complete view
Manual intervention
Tracking status
Multiple copies of
same Data record
Synchronization
Data Integrity
Manual Billing
TS
Scheduling
OO (Order
Originator)
Customer
TS
Field Work
CUST
Support
Close
App
WO folder
email
email with
attached file(s)
data and workflow
data
workflow
direct interaction
routinely required
notification
CUST
Support
Materials
Materials
Adjust
Cable
Adjust
Vendor
Vendor
Database
OO/
Customer
CUST
Support
Cable
Assign.
Custom App
Custom App
Custom App
Other
Design
Groups
Workflow - Voice Services
Example Workflow Voice Service Delivery
Effective Financial Management of Communications and Technology
How can we all improve throughput?
Eliminate bottlenecks

What creates bottlenecks?
Leadership Skill Tools
Resources Behavioral Change Deployment issues

People Process Technology

Financial tools that enable visibility of costs will increase your
business throughput if you take care not to create a model that
fails.

Effective Financial Management of Communications and Technology
Why do efforts to improve financial chargeback
models often fail?

1. System development and maintenance issues
2. Pushback on management metrics
3. Usage Misunderstood
4. Changes over time - lack of flexibility
Financial Management
Our Observations
Activity Common Assessment Observations
Production
Operations
Incomplete insight into network and mobile assets prevents optimization
Massive quantities of invoices prevent accurate validation
Inability to automatically exchange information with other enterprise systems such as:
Reporting
Insufficient tools prevent adequate financial analysis
No correlation of procurement cost to operational use by service type or owner
Incomplete information to help properly forecast budget requirements
Financial Systems Support Operations
Human resources (HR)
General ledger (GL)
Accounts payable (AP)
Billing receivables (BR)
Accounts receivables (AR)
Procurement
Inventory
Facilities
Service desk
Telephony provisioning devices
Network provisioning devices
Carrier systems
Utilization of network services
Telephony
Data networks
Printers
Storage
Power consumption
Cost vs. Profit Centers Our Observations
IT as a Cost Center
Silos and stovepipes within IT
Subject to cost cutting initiatives
Lack of common processes, language,
job titles, skills, and tools
Lack of transparency into IT costs
Reactive to government regulation
New technology because its new
IT as a Profit Center
IT management sees IT as a key to
winning
Deploys IT strategically to empower the
business
Seeks innovative IT solutions to stay
ahead of the competition
Transparency in IT Our Observations
Business Requirements:
Implement sound stewardship of the
monetary resources for the organization.
Planning & execution of budgeting,
accounting and chargeback to the
organization responsible for the cost.
Common Observations:
Lack of visibility
Challenges with Audit Compliance (Sarbanes
Oxley, OMB)
Budgeting is based on last year +/- 3%
C-Level Management can not determine
why/where there are cost fluctuations
No way to correlate cost to revenue
No SLAs in place to account for high-
maintenance customers

Integration to the General Ledger
True chargeback to the responsible
account/party
Integration to Accounts Payable
Lifecycle view of what is going out the
door vs. what is coming in
Self-Service details for customers
Employee Accountability
3-5% Savings across the board (per
Aberdeen)

The end result Visibility and Accountability
About Todays Discussion
Objectives of Financial Management
Why is this relevant today?
Value of Best Practice Frameworks
Cost Modeling
Business Drivers
Improvement of Process Throughput
Eliminating Bottlenecks




Questions?






Service Management
Manage access, distribution, configuration and financial ownership
Operations
Management
Streamline workflow,
service delivery and
service support
operations
Integration Management
Automate the exchange of data with other systems
Financial
Management
Track usage, automate
invoice processing,
charge back and
optimization activities