Posts Tagged ‘Brian Superczynski’

Week In Review: Oct 10 – Oct 16, 2010

by Magesh Tarala on October 17, 2010

Developing your financial management talent

by Brian Superczynski, Oct 11, 2010

IT financial management has not evolved into a discipline with its own academic programs and certifications. In addition to learning on the job and tailoring programs for your organization, ITIL and PMI courses/certifications will help. But the first step is to recognize this as a  unique area that needs to be developed in your organization. more…

Chaos and Complexity #5: Chaos vs. Complexity

by Gary Monti, Oct 12, 2010

When patterns emerge in chaotic environment, adaptation happens. This is called complex adaptive behavior. This is driven by self organization. The hallmark of emergent, complex adaptive behavior is it brings about a change from the starting point that is not just different in degree by in kind. more…

Social Media and Tribes #16: LinkedIn gets a local makeover in India!

by Deepika Bajaj, Oct 13, 2010

India’s economy is growing by leaps and bounds and it’s professional class is utilizing social media to keep up. Brijj is the local equivalent of LinkedIn, but it has some local twists. more…

Flexible Focus #23: Manners make the man

by William Reed, Oct 14, 2010

Some of the Japanese traditions from the Edo period are still relevant. It shows how to live with respect, culture and style. In this article William has a short list of some key aspects of the Edo manners. You can also download the EDO SHIGUSA MANDALA to start integrating Edo Manners in your life. more…

Worry and Anxiety – Can we really overcome them?

by Vijay Peduru, Oct 15, 2010

We worry about a lot of things. But if you carefully analyze those worries, you will realize that more than 90% of them are needless. Worries only lead to bad situations like relationship problems are health issues. Overcome your worries by understanding that worries are stories we invent about a future situation. These stories will more than likely never happen. On a positive note, invent a good future situation and deliberately think about the good things that will happen in the future. more…

Share

Developing your financial management talent

by Brian Superczynski on October 11, 2010

Over the course of my career I’ve read numerous books and have attended seminars and classes on developing talent and leadership skills.  These classes have ranged from developing one’s own personal “brand”, to conducting performance reviews and even how to become a “thought leader.”  I’m sure during the course of your career you’ve also had similar experiences.

Now from what I’ve gathered from all of this training is that each of us has unique skills based upon our backgrounds and chosen professions.  In a light-hearted tone I like to refer to these unique skills as special needs.  I’ve also learned that if you don’t think you have special needs, you do – it’s just that you don’t know it yet.  In looking back at my experiences as an IT analyst, leader and mentor to other analysts, there is definitely a unique set of skills that facilitates adding value to financial support within IT organizations.

Finding an individual to perform routine financial tasks and create nice-looking Excel spreadsheets is easy.  Identifying an individual who can provide value-added input to your IT management team is a different ball game.   There are not many universities and even companies who train individuals how to apply their financial skills to IT operational financial management.  Therefore it is incumbent upon IT organizations not only to identify quality financial management talent but to provide training on IT-focused financial management strategy and practices.

I’ve always believed that IT financial management is a smart and rewarding choice for young finance professionals beginning their careers.  For starters, they are usually assigned to executive IT teams to provide financial and administrative support.  As such, they quickly gain invaluable experiences on leadership dynamics and how decisions are made.  I recall early in my career being the lead financial analyst on an executive IT leadership team at a Fortune 50 organization.  We hired a new executive who had just retired with the rank of colonel from the U.S. Marines.  The executive vice president called me into his office and introduced me to this new leader and proceeded to tell him that I would review his budget, his key initiatives, and also provide him with insight into his new team.  Now I was a full 25 years younger than this newly-retired colonel and he had this perplexed look on his face while I was reviewing his budget and organization.  After a while, the colonel looked up and said, “I get it – you’re the bosses S-L-J-O” (pronounced: Slow-Joe).  Puzzled, I inquired what a SLJO was.   I quickly learned that my corresponding position in the armed forces was fondly referred to as the “Stinky Little Job Officer”.  Actually, another word was used instead of “Stinky” but I’ll leave that to your imagination.   Now my point is that at a relatively young stage of my career I was given the invaluable opportunity to participate and be a key member of an IT leadership team, albeit in a “junior” but important and strategic capacity.  Not only did it allow me to utilize my financial skill sets, but it also allowed me to adapt those skills in a new capacity while learning what I found to be the interesting world of running a large Information Technology organization.  I found being accepted as a full-fledged member of the IT organization that I supported the single best training that I could have received early in my career.

On the flip side of my own personal experience, I’ve seen many IT organizations look to their financial support as overhead that is required only to provide corporate financial planning, with little more than budgets, monthly accruals, and variance reports.  In these instances, the relationship is typically somewhat contentious and the individual providing financial support is often unable to articulate the IT drivers in their analysis and they become little more than accountants and end up moving to another job fairly quickly.

By now you’re probably wondering if you need to develop an entirely separate training program for the group or individual providing your IT organization with financial support.  Might be surprising, but the answer is no.  As part of your team, they should be required to participate in your IT training programs.  Now, I’m not talking about your financial analyst becoming certified as a Cisco CCIE or a Microsoft Windows administrator.  I’m referring to having your financial support attend and participate in IT service delivery and project management programs.  Two that come to mind – which I strongly recommend – are

Of course, there are other programs such as Six Sigma that are also relevant and would be a good choice if your organization is adopting these or similar management methodologies.  All of these offerings and others are relevant to financial professionals and teach invaluable skills on translating IT terminology into financial and business relevant terms.

In addition, don’t overlook your company specific certification or training programs.  For example, at one organization all employees and contractors are required to attend a half day class before conducting any type of work in the datacenter.  The purpose of the class is to educate the individual(s) on why the datacenter is mission critical to delivering services and providing an appreciation for all the processes in place to ensure a high availability and error-free environment.  It was amazing how the one half day of training gave non-IT professionals an appreciation for the IT organization as a whole.  However, as a partner in a firm called Datacenter Trust, I must clarify that I don’t condone people frequently walking through your datacenter for training and tours.  At the same time, it’s always a kick seeing those datacenter engineers who don’t get out much impressing people with what they manage.  You know who you are…

These may appear to be obvious suggestions on developing your IT financial management talent, but more times than not I’ve seen the finance support organization recognized as a separate unique function.  The key word to remember regarding developing an effective partnership with your financial resource support is ‘inclusion’.   When developing your meeting agenda’s, identify a regular time to review the financial results compared to budget and forecast and any business cases or ad-hoc projects.  As appropriate, your financial support should attend as much of these meetings as possible to gain an understanding of the operational aspects of the organization.  Finally, elevate your IT financial support even further from the effective resource – or “SLJO” stage to a true technology and financial knowledge partner by having them actively participate in your IT-specific training programs.

Brian-SuperczynskiThis article is contributed by Brian Superczynski, CFO and Senior Partner at Datacenter Trust. Brian has extensive experience leading and advising information technology companies on financial and business operations strategies. His combined financial management and operations background allows him to follow the development of strategic initiatives from system design to detailed implementations
Share

Week In Review – Aug 29 – Sep 4, 2010

by Magesh Tarala on September 5, 2010

The Tale of two budgets

by Brian Superczynski, Aug 30, 2010

Creating and presenting the annual IT budget is a real challenge that can sometimes be compared to a dark Charles Dickens novel. How the budget is presented is the key to bypassing the “worst of times” but IT and finance organizations are not known for their marketing or communication skills; it’s just not in the DNA of either group. The solution is providing clarity and transparency, translating the ongoing costs of previously approved investments and providing options. more…

Character and Personality #9: Negotiator

by Gary Monti, Aug 31, 2010

It is a challenge to create a common bond between different people wanting different things. Some want to work on a bleeding-edge project, others want money, still others want as much personal time as possible, etc. Humility, courage and competency are “must-haves” for leaders to successfully negotiate between the desires of key stakeholders. more…

Social Media and Tribes #10: Facebook and low self-esteem?

by Deepika Bajaj, Sep 1, 2010

Any new technology has its detractors and naysayers. When it comes to social media, there is more than a fair share of them. But don’t let them determine your practices. Using Facebook effectively benefits you and your community and it is not a sign of low self-esteem. more…

Flexible Focus #17: Determine your destiny

by William Reed, Sep 2, 2010

The biggest thing that stands between you and your destiny is not something outside of you, but the fear, uncertainty and doubt in your own mind which saps your energy. Energy is the great multiplier, and the real measure of your strength. In this article, William has listed some practices to increase your energy level, which will enable you determine you destiny. more…

A simple strategy for a good life

by Vijay Peduru, Sep 3, 2010

Our life is completely governed by the stories we deeply believe in. Most of the times we never know that these stories dictate our life i.e. they are hidden to us like a blind spot while driving. If we try to change our behaviors without understanding them (the root cause), we will not be successful. So, how do we recognize our stories? more…

Share

The Tale of two budgets

by Brian Superczynski on August 30, 2010

It was the best of times, it was the worst of times. It was the age of ever-cooler technology. It was the age of ever-increasing spending on IT infrastructure.  It was that time of the year – the season to present our annual IT budget, with company leadership insisting on it being received, for good or evil.

After completing my fair share of budgets over the past several years, I admit there have been more than a handful of times where the budgeting process was comparable to a dark Charles Dickens novel.  The budget would be “packaged” and presented for executive approval as expected, but only after months of planning, reviewing, justifying, and negotiating savings opportunities.

How the IT budget is presented is the key to bypassing those “worst of times” and being able to confidently steer your organization to the best of times.  This may sound relatively straightforward but let’s face it – IT and finance organizations are not known for their marketing or communication skills; it’s just not in the DNA of either group.  So then, how do you take your technology budget, containing a multitude of services, from network to datacenter operations and from it, develop a sound IT operations plan and budget which the business understands?

It’s the tale of two budgets……

The solution is providing clarity and transparency, translating the ongoing costs of previously approved investments and providing options.  Focusing on these three areas will result in the view that your IT organization is a high-performing business partner and not just another allocation to the business for which there is little or no control.

First, focus on explaining your budget in a manner which does not require an IT decoder ring for the non-technical folks.  One of the qualities that I consistently see in high-performing IT executives is the ability to translate technology and corresponding costs into the business drivers of your organization.  Keep your presentation in tune with the corporate strategy and growth drivers. The easiest way to break your costs down and translate into business drivers is to identify the product portfolios you support.  For example, if you’re a pharmacy operator, identify how much of your IT infrastructure is required to support  traditional brick and mortar pharmacy services versus online pharmacy services.  Furthermore, if on-line pharmacy services is experiencing rapid growth and has become the cash cow be sure to explain the impact on the information technology cost structure. Next, translate how online services, supported by IT have improved the customer experience (and possibly lowered transaction costs).  The success of your presentation will be measured not just by gaining budget approval, but on your ability to provide transparency into your cost drivers.  If you’re really on top of your game, you can even show how segments of your IT shop (like online pharmacy services) are actually profit centers.

Second, you can further enhance your reputation as a trusted business partner by identifying the ongoing impact of approved investments that reside in your budget.  These investments are likely projects that were approved and implemented in prior years and now are part of the infrastructure, which require ongoing support and maintenance.  Having a previously-established governance process is necessary in order for this conversation to be effective in your presentation.  I once worked with a CIO who consistently reminded his organization there was no such activity that was referred to as an “IT Project.”  All projects within the IT organization either supported, enhanced, or created new services which were understood by the business partner – and the investment had previously been approved jointly with the business.  The governance committee responsible for establishing these processes should be made up of members from the executive committee who will ultimately approve your budget, so that they can be familiar, knowledgeable, and even involved in the investment as they are made.  Likewise, many of these investments are predicated upon creating savings in your infrastructure or elsewhere in the organization.  Therefore, be sure to not only identify the impact of ongoing costs but also identify where the savings or enhanced revenue have been realized in the organization.

Finally, identify the investment opportunities in your infrastructure and present them as ‘levers’ that the executive committee can ‘pull’ when they look for reduction opportunities in your budget.  These levers can range from outsourcing portions of your infrastructure, to investing in new technologies that will result in performance improvements or efficiency gains in the future.  In fact, outsourcing is typically an easy sell when it addresses an area of your organization that is not a core system or competency.  As an example, many IT organizations have become responsible for managing the telecommunications infrastructure and related invoices for the entire organization.  This can be a labor-intensive process which often requires specialized knowledge of telecom billing.  Many outsource companies today can provide services to automate the paying and auditing of your telecom invoices – and even make the carriers’ job of servicing your account much easier.  This is a prime example of a lever you want to present to an oversight or executive committee because although it makes fiscal sense, you also want to obtain mutual agreement that it will also result in tough decisions with respect to staff reductions. Presenting options such as this will prove that your IT shop is not only looking to be a partner to the business, but also stepping up as a leader in reducing cost and improving services and performance.

In talking with a number of colleges, this is the time of year many IT organizations begin to work through their annual IT budgets.  Presenting transparency, impact of prior investment through governance, and providing cost-saving options are the keys to providing sound fiscal leadership and to developing a reputation as a trusted partner to the business.  As mentioned at the beginning of the article, the only potential “evil” side effect of following this outline – now that you are an expert – is that you may get cajoled into assisting the marketing department with its annual budget planning.    As sometimes the case, no good deed goes unpunished.

Brian-SuperczynskiThis article is contributed by Brian Superczynski, CFO and Senior Partner at Datacenter Trust. Brian has extensive experience leading and advising information technology companies on financial and business operations strategies. His combined financial management and operations background allows him to follow the development of strategic initiatives from system design to detailed implementations
Share

Regardless of the size of your organization, someone is responsible for identifying the need of a service or product being purchased. One could therefore surmise this individual would also assume the ongoing ownership and maintenance of the product, providing vendor management oversight, right? Well, you might be surprised by the number of occasions on which the linear progression of identifying a need and satisfying the need becomes disconnected in technology organizations.

This disconnect often occurs when a business unit obtains approval to bring a new product to the company which in turn places new or expanded requirements on its Information Technology (IT) organization.  With their backs often against the wall, the IT department will “buy” the technology in order to meet required deadlines. What happens in this case is that the IT department ends up relying on the vendor to manage the technology, and often times let the supplier act as the IT point of contact for the “customer” – the internal business unit.  Well, as we know problems often start out small and later mushroom out of control.  This situation is no exception:  If the new product the company has developed becomes successful, IT will continue to buy more of the necessary technology for the business unit.  The next thing you know, the original contract for, say, $100,000 morphs into an agreement covering perhaps $5M in purchases – and since the vendor manages the technology, no clear internal owner exists.  A sure-fire recipe for big problems.

The process starts with the negotiation of the contract which typically initiates a rather ‘interesting” time within the organization.  The discussions with the supplier often times become stressful with both sides treating the negotiations as a form of competition to obtain the best price and terms.  This is further complicated with the coordination of the different groups who provide input and are required to approve on both sides of the agreement. For example, the finance departments will be called upon to review the financial impact to budgets and Return on Investment (“ROI”), while the procurement and legal departments review terms and conditions.  With all these organizational units involved, the final agreement ends up segregated into sections which are relevant to disparate groups within the organization, and in many instances no single person understands the agreement as a whole.  This issue can be avoided by identifying the organizational unit that owns and drives the negotiation of the agreement, and ensuring this unit also has the authority to represent the company and manage the supplier.  By insisting on thorough preparation and coordination regarding input and approval processes in advance, the individual or group acting in the vendor management capacity will not only secure a contract which is beneficial to the company but will also foster a positive ongoing relationship with the supplier.

With the vendor management role clearly defined, you will avoid the most costly mistake of relying on the supplier to manage the agreement for your company.  The vendor manager will not only monitor the suppliers’ performance, but will also leverage the vendor on your company’s behalf to provide service level and performance metrics along with other valued services such as expert consulting support.  The individual acting in this role in your company can carry the title of Vendor Manager and coordinate with the technology owner(s), or this role can actually be incorporated into the technology owner’s job description.  In any event, the most important role of the vendor manager is to routinely meet with the supplier to review performance and to insure the negotiated service level agreements are applicable and are being met.  For those of you who practice ITIL, you may even want to invite your suppliers to attend your problem management reviews.  Problem Management aims to resolve the root causes of incidents and thus to minimize the adverse impact of incidents and problems on business that are caused by errors within the IT infrastructure and to prevent recurrence of incidents related to these errors.   Inviting suppliers to problem management reviews was always my favorite way to make sure the supplier understood my business and was focused on working for my company.

Identifying issues with your existing contract will insure that your company is prepared when it is time to negotiate a new agreement. This is especially critical in large organizations with dedicated procurement departments.  These procurement teams are responsible for negotiating agreements on behalf of the technology owner(s), often based upon templates and procurement methodologies meant to cover everything from bed pans to mainframes.  In these circumstances, the vendor manager must be prepared to identify and educate the procurement manager on any issues with the current supplier. This is especially true with products that the procurement department might consider as “commodities”.   (Products are referred to as commodities when the product is seen as fungible or the same no matter who produces it.)  The commodities tag can sometimes prove to be a BIG mistake, especially with technology as this term is often applied incorrectly.  I once had a junior level negotiator assigned to a request for purchase because the procurement department perceived desktop computers as fungible commodities.   That quickly changed once we were able to quickly show – from trends in our monthly product performance scorecards that we had experienced a 20% failure rate of over 75,000 desktops that had been in service less than a year.  These failures not only had a negative impact on customer service but also negatively impacted IT service level metrics with a dramatic increase in help desk calls and required additional contracted field support to fix the devices.  The vendor manager was subsequently able to successfully team with the procurement department and negotiate product quality guarantee’s which the suppliers indicated had never before been included in their contracts.

Once your suppliers are being actively managed, your organization can maintain a fully mature vendor management model by monitoring the lifecycle of your agreements.  The hallmark of a mature vendor management lifecycle model is tracking when agreements are scheduled to terminate.    Being prepared for expiring contracts is critical because your vendor manager will make sure all necessary parties are prepared to enter into a negotiation and avoid delays which result in the original agreement being extended because the organization was not ready to negotiate.  This is often times the point where organizations which are not prepared will bring in outside assistance to coordinate the competitive bid process and subsequent negotiations.  If you believe your organization needs external assistance, make sure that whomever you contract with is not only negotiating terms and conditions, but also provides an on-going vendor management model after the negotiation.

Lastly, I mentioned the importance of fostering a positive relationship with your supplier.  You want your account manager and his/her team to be the envy of the organization for account relationships.   Obviously the amount of revenue an account team brings to their organization is a major component in determining their performance within their company.  However, don’t underestimate the importance that suppliers place on their representatives to maintain healthy relationships.  Just as within your organization, you want your suppliers’ account team to be proud to be working for their company and proudly say they are servicing your company because, at the end of the day, your success is a result of performance – and support – of suppliers’ product and services.

At this point you’re ready to begin managing your vendors.  As we’ve seen, a successful relationship with your suppliers begins not with the contract itself but with the management of the agreement after it has been negotiated.  If you haven’t met with your suppliers recently give them a call and initiate your vendor management process by asking for an account review.  Before the review, draft a list of items you would expect them to cover when they walk into the room and then compare your list with their presentation.  You’ll quickly be able to identify gaps in your supplier relationship and use your list as a roadmap for obtaining better pricing and services from your vendor.  The results are guaranteed not only to surprise yourself but will result in new respect from your vendor.

Brian-SuperczynskiThis article is contributed by Brian Superczynski, CFO and Senior Partner at Datacenter Trust. Brian has extensive experience leading and advising information technology companies on financial and business operations strategies. His combined financial management and operations background allows him to follow the development of strategic initiatives from system design to detailed implementations
Share

Week In Review – Jun 6 – Jun 12, 2010

by Magesh Tarala on June 13, 2010

NBA, NHL and your company’s Key Performance Indicators

by Brian Superczynski, Jun 7, 2010

Competitive sports industry lives and breaths KPIs. Everything is measured and compared with the other teams and actionable items created. This helps them to improve their game. Most companies measure KPIs, but find it difficult to do it at a more granular level within the company. Ask your management chain to identify metrics which translate to their group’s success. more…

Leadership and Mythology #5: Psychology and Entrepreneurs

by Gary Monti, Jun 8, 2010

Transitioning from a job to being an entrepreneur takes you through an interesting journey. Typically you start your career by following orders and delivering results. Then as you gain more confidence, you start expecting more and ultimately decide to go on your own. As you go through the various stages, the individual is transformed continuously. Is it challenging or threatening? It depend upon your psyche. more…

Flexible Focus #5: The Mandala Business Diary

by William Reed, Jun 10, 2010

The concept of time is something that many do not grasp. It is not a resource you control. Your quality of life and legacy depends on where and how you spend your time. Wouldn’t it be nice to have a compass to guide you where you want to go? Mandala Chart can help you do that. more…

Author’s Journey #25: Using video to market and sell your book

by Roger Parker, Jun 11, 2010

Video is easier than ever. In fact, the cost of getting started has dropped to zero – it’s free! In this post Roger explains how you can start building your online video presence today, even if you haven’t had any previous video experience.  more…

Share

NBA, NHL and your company’s Key Performance Indicators

by Brian Superczynski on June 7, 2010

For sports fans this is an exciting time of the year with both the NBA and NHL finals taking place simultaneously.

There’s added excitement this year with the renewal of the classic Lakers and Celtics rivalry and the Chicago Blackhawks looking for their first Stanley Cup championship since 1961.

As in sports, companies and internal departments need to identify key performance metrics which translate to success in their industry.

Just as analysts review a company’s balance sheet and operational metrics, many fans and sports analysts refer to team and player statistics in order to support their predictions of who will win their respective league championship.   In the NBA finals, they’ll be citing each team’s shooting percentage from the free throw line and the field as a key performance indicator. In hockey, there are the obvious statistics of number of power play goals and goals against average.  But this year, analyst have cited the unusual statistic of Chicago’s offense scoring 11 goals with 10 different players as a key indicator of its success through game 3 of the championship series.   The implication is identifying the Stanley Cup series specific statistics over and above the commonly followed season statistics in order for either team to make adjustments to win the Cup.

Many organizations today do a terrific job at measuring their own teams’ statistics – take the airline industry for example: they measure the use of number of seat miles for which the company earned revenues.  What’s more difficult is identifying meaningful performance indicators at the departmental or individual level within an organization?  Effective identification and translation of organizational specifics makes an executive’s job easier when identifying and adjusting to trends, defending team budgets, identifying savings opportunities, and even negotiating contracts.  This is especially true within an IT organization.

One of my favorite Information technology metrics which typically does not appear on the company’s balance sheet or in the annual report but translates into effective IT performance are the metrics related to desktop or PC support. I like these metrics because Joe the worker at Company X probably does not care anything about IT metrics.  But Joe and his peers know who to call for problems with their PC’s.  You know – the “IT guy” who the department takes out to an appreciation lunch once or twice a year.  Keep Joe and his peers happy and that will translate to good scores for IT support.  Remotely identifying and correcting Joe’s PC problems at the help desk is almost always the most efficient and cost effective way to provide desktop support.  Therefore statistics such as average time to answer and mean time to repair (MTTR) are often cited as an accurate performance measurement of the desktop support unit.  These statistics have further downstream implications for identifying the desktop to technician ratios or the number of technicians required to be in the field when problems cannot be solved remotely or over the phone with an agent.  Organizations which typically resolve most incidents remotely with an agent do not need as many field technicians and therefore have high desktop to field technician ratio’s and are considered the most cost efficient.

But just as the Lakers, Celtics, Blackhawks and Flyers will be identifying opportunities and adjustments based upon shot percentages and other common game time metrics, an organization must know how to translate their metrics into performance-improving activities.  Although the Flyers have allowed goals by 10 different players after three games, they have been able to hold the Blackhawks top scorers this season to just one goal in the finals.  So in some respect, part of the Flyers game plan may be working in shutting down the opposing team’s top scorers and the high number of individual goals per Blackhawk player is a positive metric.

Using the same analogy, there may be reasons why an IT organization has metrics which are out of line with industry standards and those reasons need to be well understood to justify costs.  In the desktop support example cited above, a company may require higher PC to technician ratios due to Joe’s high availability requirements.  For example, our friend Joe is an order taker on a trading floor and does not have the time to call the help desk and work with an agent to solve problems with his PC while the markets are open.  The same dynamic is also seen in the healthcare industry within clinical environments, where nurses and doctors are focused on treating patients and do not have the bandwidth to diagnose problems accessing automated medical records from PC’s.  In these environments, it would obviously be acceptable to experience higher desktop to field support ratio’s to insure key functions within the company have highly available systems and support.  Understanding these dynamics is critical when performing organizational benchmarking activities and considering out source opportunities.  With regard to outsourcing, you’ll want to understand how a supplier is proposing to achieve savings.  Are they proposing to increase the number of PC’s a technician supports from 250 to 500 devices? If their model is predicated by resolving more calls remotely at the help desk you’ll want to closely examine the impact to your organization.  Having a deep understanding of your metrics will allow you to better negotiate support costs within your company and negotiate actionable savings strategies offered by department heads and suppliers.

The challenge is to drive meaningful measurements to all levels within your organization.  Ask your management chain to identify metrics which translate to their group’s success.  Then ask them why the metrics are meaningful and actionable and what needs to be done to improve the scores.  I would also suggest that if the measurements are not actionable then they are probably not the right performance indicators to be tracking.

For those deep thinkers out there, I hope these insights will not cause you to become distracted with thoughts of your company’s metrics while watching the NBA and NHL finals.

For those of you wondering, Blackhawks in six games with Kane becoming the scoring leader and Lakers in five by taking advantage of Celtic fouls and a higher free throw percentage.

Brian-SuperczynskiThis article is contributed by Brian Superczynski, CFO and Senior Partner at Datacenter Trust. Brian has extensive experience leading and advising information technology companies on financial and business operations strategies. His combined financial management and operations background allows him to follow the development of strategic initiatives from system design to detailed implementations
Share

Achieving IT Financial transparency with activity based costing

by Brian Superczynski on April 26, 2010

Transparency of IT costs continues to gain momentum as a shared strategic goal between business units and their IT organizations.  It is therefore no surprise that Activity Based Costing (ABC) or activity based cost accounting has become a popular methodology to track spending beyond standard accounting codes to provide greater transparency to IT cost drivers.  Spend with ABC is not just a tracked by dollars and cents, but by function, portfolio, location, application, or any other way that is meaningful to the people ultimately paying the IT bills.  A successful implementation of ABC not only includes the “nuts and bolts” of implementation but also identifies responsibilities for socializing the results and providing actionable findings and suggestions.

IMPLEMENTATION CONSIDERATIONS:

Creating an assessment of how costs and metrics are currently tracked within an organization is critical in determining how quickly an ABC system can be implemented and then creating a maturity roadmap.  As an example, tracking resource costs and what those resources are working on is an important component to providing transparency to application development and support.  A mature organization may have a time-keeping system already in place to segregate their personnel costs.  However, even companies that do not have a formal time-keeping system in place can simply use cost centers to identify labor costs by application or project support costs.  The point is – options always exist to apply costs and your metrics to the cost drivers within your organization.  Another common assessment that will need to be performed is to identify how your organization tracks system utilization (MIPS– Million Instructions per Second, OLTP – On Line Transaction Processing, etc).  Once these assessments have been performed, you can put a system and reports in place to provide transparency to your cost structure and also define a roadmap for improving your metrics gathering.

SAMPLE OF ABC TRANSPARENCY:

A common ABC system implementation may track costs by

  1. region or country,
  2. location within the region/country,
  3. portfolio or function, (application, operational group, etc) and
  4. Expense or Capital account code.

Using network costs as an example, the ABC output will show how network costs vary by region down to the labor, transport and equipment costs.  This allows business units to compare their support cost with other units and if appropriate, even benchmark their internal performance.

SOCIALIZATION OF TRANSPARENCY:

In order to insure activity based cost accounting is not just another finance owned exercise to show executives and business units another way to slice the IT budget there must be joint ownership with IT leaders in explaining the results.  It is therefore imperative to structure your activity based accounting system in a manner which coincides with how the IT organization is structured to deliver services and implement new initiatives.  Many organizations today utilize a type of functional or “portfolio management” structure to align IT service delivery with the business units they support.  As an example, an IT organization of a full service banking institution would have units which are responsible for delivering services and understanding the needs of three separate lines of internal businesses or portfolios:

  1. Commercial and Private Banking
  2. Commercial and Home Loans
  3. Brokerage and Investment Services

In this example, the activity based cost accounting would be structured in order to explain the costs associated with operating systems and applications that support these specific lines of businesses.  The portfolio manager would work jointly with the finance organization to translate the activity based cost accounting results in a manner which will provide transparency to the business units.  Furthermore, the reports would be structured in a manner which would provide the business units with options or “levers to pull” to modify and thereby reduce the costs of the services provided by their IT organizations.

When implemented properly, ABC is a tool that can be used by all levels of management to make important decisions in a more educated manner.  When used in conjunction with operational metrics, results including best practices and efficiency become known… and from this point; true organizational improvement can happen.

Brian-SuperczynskiThis article is contributed by Brian Superczynski, CFO and Senior Partner at Datacenter Trust. Brian has extensive experience leading and advising information technology companies on financial and business operations strategies. His combined financial management and operations background allows him to follow the development of strategic initiatives from system design to detailed implementations
Share

Week In Review – Mar 14 – Mar 20, 2010

by Magesh Tarala on March 21, 2010

More bang for your IT buck: Three keys to success

by Brian Superczynski, Mar 15, 2010

Making sense of financial implications of IT operations can be tricky. In fact, many organizations struggle to understand IT cost drivers and savings opportunities. To start with, IT and corporate finance should establish a meaningful partnership. But long term success depends upon applying traditional financial management practices to vendor and asset management. more…

Leadership Cancers #1: Independence, The Prisoner’s Dilemma and the Death of Cooperation

by Gary Monti, Mar 16, 2010

Imagine you have 2 resources who need to cooperate to get the task done, but are at odds with each other. This is not an atypical problem in teams. To understand the various scenarios, you can create a cost comparison matrix using the prisoner’s dilemma model in game theory. The most optimal solution may not be viable. You could tie other forms of compensations and incentives to this model to come up with the most cost effective strategy. more…

Save Energy, be on the offensive

by Guy Ralfe, Mar 17, 2010

Being a project manager can sometimes feel like playing the role of “the pack” in rugby. The opposing team can be compared to time and money. Slipping delivery dates is not uncommon. But if you don’t manage the situation carefully, your stakeholders will be calling the shots instead of you. At this point you wills tart playing defense and this will wear your team out. more…

Looking to sell your company? Don’t be in a hurry…

by Steve Popell, Mar 18, 2010

You are right on the money if you are thinking this is not the right time to sell your company. In fact, it may be three or four years before the situation is ripe for merger and acquisition market to turn around fully. In the meanwhile, focus on making your company a highly attractive strategic acquisition candidate. Have a strategic plan and periodically compare plan vs action. more…

Author’s Journey #13: Testing your book’s proposed title and subtitle

by Roger Parker, Mar 19, 2010

Test your shortlisted titles to narrow down to the best one for your book. It takes a little effort to test, but it can save you a lot of frustration down the road. You can use websites, pay-per-click options and online surveys. Follow the best practices and survey the right people. To learn more about surveys and market testing, the recommended reading is Jay Conrad Levinsonand Robert Kaden’s More Guerrilla Marketing Research. more…

Share

More bang for your IT buck: Three keys to success

by Brian Superczynski on March 15, 2010

Many companies do not have the luxury of providing dedicated financial support to their Information Technology (IT) organizations, which often results in a struggle to understand IT cost drivers and savings opportunities.  This struggle has become more evident as companies increasingly rely upon effective IT to drive operational efficiencies while simultaneously expecting IT units to reduce operating costs. This paradigm often results in the CIO seeking a liaison between IT and corporate finance in order to help provide transparency of technology costs as well as to identify the value proposition of all IT services. Identifying meaningful savings and efficiencies in your IT environment begins with a partnership between the technology and financial support units.  Preparing for these conversations requires an understanding of how to build a successful partnership between IT and corporate finance – the foundation for which begins with three related key practices:

Applying traditional financial management practices with the IT disciplines of vendor and asset management.

FINANCIAL MANAGEMENT:

The key to world-class IT financial management is coupling financial processes to your technology infrastructure and the organization’s strategic technology roadmaps.  Effective financial management ensures the IT infrastructure is obtained at the most cost-effective price, while providing the organization with a deep understanding of its IT services costs.  In many instances however, the most cost-effective price may not necessarily mean the lowest price; depending upon availability requirements and other demands placed on technology.   Financial transparency must therefore exist in order for the business to understand the tradeoffs between price and performance.

VENDOR MANAGEMENT

This price and performance tradeoff was painfully evident following one organization’s switch to a well-known personal computer supplier, which was initially calculated to save the organization millions of dollars.  Not surprisingly, the finance organization was quick to identify how the new agreement would reduce expenses in the following year’s budget.  However, those savings quickly evaporated after the supplier experienced a 20% failure rate on over 100,000 devices, which had been in service for less than a year.  Obviously, managing your suppliers not only includes obtaining the best price but also monitoring the quality of the product or service being provided.  This is why continually monitoring your relationships and agreements with suppliers (and including your finance organization in this process) is often your first and best opportunity to identify operational inefficiencies and IT cost savings.  The end result will not only mean achieving better price performance from your technology assets, but also will improve the reputation of your IT organization to provide a quality product at an explainable and predictable cost.

ASSET MANAGEMENT:

Keeping your technology assets current also requires active management of these assets:   An effective asset strategy not only tracks the asset but takes into account the lifecycle of the product from procurement to eventual disposition.  For example, leasing is a common asset and treasury strategy found in IT because it frees up cash flow associated with large capital purchases.  I’ve witnessed on numerous occasions leases being subsequently bought out because the technology owner was not made aware of the lease and was not prepared to replace the technology at end of term.  These pitfalls can be easily avoided by linking asset strategies with technology roadmaps and the organization’s budgeting process.

These three practices may appear straightforward, but in order to be successful they require the constant collaboration between your finance and technology organizations.  The application of financial, vendor, and asset management methodologies will keep your IT organization on track to realizing operating efficiencies while also optimizing operating costs.

Stay tuned: Our next few posts, we (my fellow Datacenter Trust teammates and I) will delve deeper into each of these key three areas as well as other topics on IT finance.

Brian-SuperczynskiThis article is contributed by Brian Superczynski, CFO and Senior Partner at Datacenter Trust. Brian has extensive experience leading and advising information technology companies on financial and business operations strategies. His combined financial management and operations background allows him to follow the development of strategic initiatives from system design to detailed implementations
Share