Improving the Bottom Line - IT Financial Management Best Practices

Improving the Bottom Line:
IT Financial Management Best Practices
Javier Sloninsky, EcoSys Management
Greg Hopkins, Physicians Mutual Insurance
Jeffrey 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 Hopkins
VP, 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 Insurance
Chargebacks for Project Accountability
Jeffrey Finkiel
Senior 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 Bank
Project 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 Resources
Architect 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

THANK YOU!
 Gregory Hopkins
(greg.hopkins@physiciansmutual.com)
 Jim McGittigan (jim.mcgittigan@suntrust.com)
 Jeff Finkiel (jeff_finkiel@glic.com)
 Javier Sloninsky (jsloninsky@ecosysmgmt.com)

Improving the Bottom Line - IT Financial Management Best Practices

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