Advances in technology are ever evolving and emerging technologies are being adopted at a pace to help organisations develop an edge over their competition.
While emerging technologies such as container-based deployments and artificial intelligence (AI) are becoming the norm across IT departments, other technologies such as Serverless computing, IoT based Digital Twins, Quantum computing, etcare set to accelerate this trend.
Unless Finance Leaders implement enhanced controls the rise of intangibles will only become unmanageable.
The ‘perfect storm’ in the last few months of FY21 is setting the context for FY22
Agile leadership in the future hybrid workplace as we accelerate into the recovery
Dealing with hybrid, multi-cloud environment to accelerate digital transformation
Think of Hybrid Stacks...
...operating within agile Operating Models
Implications of a transition to the Hybrid, multi-cloud world
Key priorities for CIOs/CTOs
CIOs/CTOs needing to be increasingly hybrid business and technology leader
CIOs/CTOs need to close gaps to position them for emerging opportunities
- Press, Consultants & Analysts have been talking about the ‘New Normal’
- 3 core themes that characterise the ‘New Normal’
- 3 Quotes that capture the trend + 3 implications for the IT costbase
- CIOs need an IT Cost Management capability in an increasingly virtual & fragmented world that demands speed in decision-making
- The 4 key components to an effective IT Cost Management capability
- An IT Cost Mgmt capability enables CIOs to plan and manage this uncertainty
- CostLens provides the capability that CIOs need to manage costs with certainty
The Finance Departments of Market Infrastructure firms need to provide transparency of internal costs at a segmental level to their regulators, in order to prove they are pricing their services ‘fairly’. They also need to provide evidence to their auditors that the computation of Transfer Pricing charges and VAT recoveries are fully compliant with global accounting standards.
In order to meet these requirements, Finance need to implement a consumption-led IT Costing Model. IT Costing Models are by very nature complex and multi-tiered. The global Legal Entity (LE) structure and complex technology ecosystem of Market Infrastructure firms further adds to the complexity.
Historically, IT departments look to periodically reduce their costs; typically, by undertaking a cost-cutting review. Often these focus on obvious areas of high cost or low complexity. These can include: focusing on large IT contracts, hoping to renegotiate for desirable terms; reducing technical staff, hoping others in the team will be able to cover their work. These are traditional quick wins, but are often the only areas addressed. This is due to a lack of readily available information with which to help make cohesive, often complex decision making. There is a great fear in IT of touching anything, when you don’t know what it does. Nobody wants to turn off an old application, that probably does not cost much and probably does nothing, only to see the core IT Service grinding to a halt! The issue is that over time, a large company could end up with 10s or 100s of these applications, so the notion that they don’t cost much does not ring true.
Pitfall #1: Attempting to take on too much too soon
Pitfall #2: Not employing people with requisite skillsets
Pitfall #3: Failure to gain cross-departmental senior management buy-in
Pitfall #4: Failure to take your organisation on your journey
Pitfall #5: Not making data custodians responsible for their data
Pitfall #6: Failure to start with defining a service catalogue
Pitfall #7: Failing to prepare for take off 9 Pitfall #8: Failure to be adaptable
Digital Transformation refers to the integration of digital technologies into all areas of a business, resulting in fundamental changes to how businesses operate and how they deliver value to your organization’s employees, customers, suppliers, partners and stakeholders.
Beyond this, it also involves a change in leadership and thinking, the encouragement of innovation and new business models. Although this paper does not attempt to get into the cultural aspects of Digital Transformation, it is important to bear in mind that organizations need to be open to adapting to new ways of working to fully leverage what emerging digital technologies have to offer.
Our team has several decades of experience in producing cost/value reports for C-level executives. This ‘IT Value Statement’ provides you with an example of what you could prepare for your Management easily in less than an hour.
Technology Costings is a means to an end. It is meant to achieve a business objective typically driven by either the Finance or IT departments.
A consumption-based Technology Cost Model is complex with many tiers of cost allocation. In comparison, Cost Allocation Models for other departments such as Legal, HR, is far simpler as it doesn’t involve IT Infrastructure. What further complicates matters is that Global Operating Models are quite complex as firms typically centralise their back-of- fice technology infrastructure – driven by regulatory and tax reasons, to generate economies of scale across multiple revenue lines. This makes the LE structure quite complex as LEs may or may not be domiciled in the same location as that of the LEs providing the services. To make matters worse, the data and infrastructure ecosystem of organisations is constantly evolving. This results in changes to the data environment that has implications on IT Costings.
The transition to a Shared Service Operating model typically involves the creation of new Group-owned Legal Entities (LEs). These LEs may or may not be domiciled in the same location as that of the current legal entities providing the services. While some of these entities are setup as asset holding entities for the purposes of tax efficiency, others are setup to consolidate staff or vendor contracts to maximise procurement and productivity efficiency gains respectively.
Such a structure while delivery financial benefits to the wider organisation, typically results in adding layers of complexity to the Finance Team responsible for managing and reporting on this costbase. The additional demands are specifically in relation to the computation of intercompany charges. These charges need to be robust, justifiable and compliant with globally accepted Transfer Pricing policies.
Every day critical large scale IT decisions are made without being based on adequate data analysis. This is due to the lack of companies using specialist tools and instead relying on calculations and modelling performed in Microsoft Excel. This reliance on Excel has become the weakest link in today’s decision-making process that drives hundreds of billions of dollars of investment decisions.
Significant decisions on important initiatives such as Cloud Sourcing, Digital Transformation and Outsourcing require a large amount of data analysis, both to justify them, but also to ensure that they meet their intended outcomes. Typically, this data analysis and modelling is performed in Microsoft Excel, which therefore relies heavily on the skills of the user, but also results in a number of limitations.
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