The IT Cost Reduction
Journey
Ernst & Young Perspectives
ITFMA – Seattle: July 15, 2016
Pete Hidalgo & Shashank Aggarwal

Page 2
Agenda
Benefits2
Approach3
1 The case for ITCR
Results4
Q & A5

Page 3
The case for ITCR
Realizing and sustaining technology enabled competitive advantage require
organizations to understand the true cost of IT services, effective identify optimization
levers and rapidly redirect efficiencies into strategic business initiatives
▶ Pressure to decrease funding in existing initiatives
▶ Clarity in return of IT spend
▶ Spend stewardship
Investor and Board
expectations
▶ Improve transaction value
▶ Release and store cash for acquisition/divestiture
▶ Consolidate and streamline all services
Pre-/post- acquisition or
divesture
▶ Do more with less
▶ Expectation for better, faster and cheaper services
Budget control and on-going
scrutiny
▶ Growth plans mix aggressive cost mgmt measures
▶ Back-office cost control to ensure lean growth
▶ Need for sustainable cost management
Margin pressure
▶ Sourcing model realignment
▶ Continuous improvement of back-office processes
▶ Realize savings and benefits from centralization
Transition to shared services

Page 4
Benefits of ITCR
IT savings potential based on appetite for change
► Non-discretionary and
discretionary spend is not
prioritized and minimized by
influencing both supply and
demand of IT services
► Inefficiencies found in
organization structure, IT
procurement,
telecommunication, and projects
► Numerous vendors with
independent contracts and no
spend rationalization
Potential Savings
<10% of IT spend
Baseline Change
► Continue to provide IT services
without cost and service level
considerations
► Rigorous project portfolio
management does not exist or
not followed consistently
► Service or maintenance
contracts are not re-visited on a
regular basis for optimization
► Redundant applications and
lack of common enterprise-
grade ERP system
Potential Savings
10% - 20% of IT spend
Fundamental Shift
► Inefficient deployment of human
capital
► Not making use of sourcing
majority IT services from lower-
cost countries
► Significant gap between depth
and breadth of IT services and
the demand
► Service risk and cost are not
aligned with business needs
Potential Savings
>20% of IT spend
Transformation

Page 5
Approach
The IT Cost Reduction (ITCR) Journey
The ITCR journey provides a clear and easy to follow path to enable the identification and delivery of
cost reduction opportunities, and a roadmap to capture those savings
Step 1
Data Discovery and
Analysis
Step 3
Identify
Opportunities
Step 4
Develop Initiatives
Step 5
Execution
 Cost transparency
 Improved efficiency
 Lower costs
Step 2
Benchmarking

Page 6
Step 1 - Data discovery – required data
Encompasses financial, organizational, and technological
Initial Data Sets Baseline Description
Organization
Profile
Information
Current / FY 2016 ► Major networks (Organization Charts, Staffing, Locations, Cost Centers)
► Revenue (Consolidated and by Network)
► Major Initiatives (Key Operating Metrics, Business Strategies)
► Number of End Users (Consolidated and by Network)
► Investment governance policies, procedures and reporting documentation
► Most recent IT value assessments, studies, benchmarking and/or cost
improvement assessment results by Network
IT Financial Data Current / FY 2016 ► OPEX budget / actuals
► CAPEX budget / actuals
Organization Current / FY 2016 ► Organization (organization charts, staffing, locations, and cost centers)
► Staffing Mix (Role, Location, Internal, Contractors)
► Forecast Staffing Mix (Role, Location, Internal, Contractors)
Project Portfolio Current / FY 2016 ► Current and Forecasted Project Portfolio for all five networks
Application
Portfolio
Current / FY 2016 ► Current Applications Inventory within and across all five networks
Asset Portfolio Current / FY 2016 ► Software Assets Inventory
► Depreciation / Asset register
Infrastructure Current / FY 2016 ► Servers, Storage, Database inventories
► Voice, Data and Network operations centers – locations, size, utilization

Page 7
Step 1 – Data discovery
View data through a cost lens to identify opportunities in People,
Process, and Technology
To calculate total IT costs to benchmark against industry peers, we take a cost lens and
perform a broad assessment focusing on People, Process and Technology
People Process Technology
► Org structure of the Enterprise
► Headcount of IT employees (including
applicable agencies)
► Headcount of contractors / contingent
workers (including applicable agencies)
► Roles and responsibilities of key IT
managers and leaders
► Financial management processes that
are used to manage and report IT costs
► Service delivery processes
► Application development and support
processes
► Demand management by demand
sources
► Project management process used to
drive project execution including
executive dashboard reporting
► Data centers
► Network operations centers (NOCs)
► Voice and data networks
► Compute platforms (mainframe, Unix,
Windows/Linux, Cloud)
► Storage platforms (SAN, NAS, backup)
► Applications
► End user (PC, print)
► Digital, Mobile, Analytics
Cost Lens

Page 8
Step 1 – Data discovery
To drive sustainable change, it is necessary to understand the root cause
or drivers of IT spend
Expenditures are influenced by a number of factors, such as business priorities,
governance practices, internal IT practices, external factors and others. Driver-based
analysis on both the supply and demand side of IT spend yields the initial set of cost
transformation opportunities.
Change policies, pricing, role
requirements
Improve internal IT practices
Use a third party for non-critical
application maintenance
IT
spend
Demand
Supply
Quality of technology
Service catalog
Maturity of IT organization
Implementation of projects
Complexity of infrastructure
Functionality
Service level agreements
Transaction performance
Structure/organization
Capability/people
Process
Complexity (standardization)
Use of functionality
Change in functionality
Identify drivers
Determine root
causes
Develop opportunities
Organize in
categories

Page 9
Step 1 – Data analysis
Financial analysis by Opex accounts
► Using all 52 accounts and the total IT budget of $xx.xMM, it was then grouped into standard IT cost
categories to facilitate further analysis. EY analyzed each addressable category over $200k, which
represents 99% of the total budget, and is shown below and on the following slides
> $200k = 99% of
budget ($xx.xM)
Not-addressable

Page 10
Step 1 – Data analysis
Personnel
► The pie chart below represents 90% of the OPEX expenses included in the “Personnel”
category ($xx.xM).
► Client A - IT’s largest personnel expenses are:
► Staff Salaries
► Employers Social Taxes
► Travel
$xx,xxx
65%
$x,xxx
6%
$x,xxx
6%
$xxx
4%
$xx
3%
$xxx
3%
$xxx
3%
Staff salaries
Employers social taxes
Travel
Inter-company time of staff
Short-term incentive bonus
Inter-company personal
costs recharges
Pensions - defined
contribution schemes
Total = $xx.xM

Page 11
Step 1 – Data analysis
IT outsourced services
► Client A utilizes 33 unique vendors for outsourced IT Service for a total expense of
$xx.xM

Page 12
Step 2 – Benchmarking approach
Start with high level benchmarks to determine if spend is too high
Hardware
Software
Services
Labor
Facilities etc.
Typical Cost Inputs
Identify Inputs and confirm
metrics and peer data
Generate summary level data in order to benchmark data
IT OPEX by category
Personnel Analysis
IT Outsourced Services
Data analysis from Step 1 informs
benchmarking
Considerations
• Data inputs are
normalized to
map to right
categories
• Data is aligned
with available
peer benchmark
data

Page 13
Step 2 – Benchmarking
Multiple benchmarks should be used together to “paint a picture” about
overall IT spend

Page 14
Step 2 – Benchmarking example
Run – Grow - Transform
Run – Client A’s run expenditure (29%) is significantly
below the industry benchmark of (62%)
Grow – Client A’s grow expenditure (35%) is significantly
above the industry benchmark of (24%)
Transform – Client A’s transform expenditure (36%), is
significantly above the industry benchmark of (14%)
29%
62%
35%
24%
36%
14%
0%
25%
50%
75%
100%
CAPEXDistribution
Run Grow Transform
Client A - IT CAPEX Distribution
► Sample Benchmarking Report - Benchmarking results for OPEX/CAPEX, Run/Grow/Transform
and headcount are intended to be directional in nature and may point to areas that should be
investigated further.
*Data is illustrative. Client name is not disclosed in accordance with
privacy policies.

Page 15
Step 2 – Benchmarking – Unit service costs
IT Service Costing Definition (Bottoms-up analysis)
► IT Service Costing (ITSC) is the process of calculating the
actual unit costs of providing IT services
Key Points
► Once actual unit service costs are determined they can be
compared to market rates to identify potential savings
opportunities
► One key goal for the IT organization is to have the cost of their
services be at or below external service providers
Dependencies
1) Services must be defined first
2) Must have good consumption data
3) Need cost data that is aligned with services
4) Effective chargeback implementation requires unit service
costs

Page 16
Service Costing Framework
Translates IT department costs into service costs that are meaningful to
users/customers and enables benchmarking / savings identification
Others
►Cost per server
►Cost per
application
►Cost per GB of
disk storage
►Cost per help
desk call
►Cost per PC
►Cost per
telephone
►Etc.
Remote
Services
HR FIN
Others
Sales BI
Others
Hosting
Services
Application
Mgmt.
Telecom
Services
Others
►Helpdesk
►Server mgmt.
►Voice
►WAN/LAN
►Storage
►Etc.
Cost Drivers:
►Servers
►Storage
►Applications
►FTEs
►Etc.
Labor
Maintenance
Depreciation
IT Departments Services
Cost
Pools
Unit
Service
Costs
Consumption
Drivers
EY Service Costing Framework
Linkage to
Chargeback
Service
Catalog
Usage Data

Page 17
Unit service cost framework example
► IT Service Costing : The EY service costing framework builds a comprehensive view of IT department costs into
service costs (e.g., cost per server, cost per GB/data storage) to help identify opportunities for improvement/cost
reduction.
*Data is illustrative. Client name is not disclosed in accordance with privacy policies.
Service
Unit of
Measure
Total
Average
Monthly
Usage
Total Usage
2013 FTE
Allocation
2013
Annual
FTECost
2014 FTE
Allocation
2014 Annual
FTECosts
2014 Total
Cost
2013 Unit
Cost per
Month
2014 Unit
Cost per
Month
EY
Benchmark
Variance
Variance
%
Comments
Data
Sources
Recomme
ndation
SAN Per Gb 1,000,000 12,000,000 N/A N/A 9.4 $2,446,782.00 N/A $0.44 N/A $0.56 -$0.12 -21.4%
NAS Per Gb 83,444 1,000,000 N/A N/A 9.8 $1,319,080.00 N/A $0.44 N/A $0.56 -$0.12 -21.4%
Backup Per Gb 1,000,000 12,000,000 N/A N/A 2.5 $1,989,249.00 N/A $0.10 N/A $0.57 -$0.47 -82.5%
L1
Support
Incidents 50,000 597,000 N/A N/A 6 $1,143,225 $13,105,068 N/A $21.95 $7.50 $14.45 192.7%
Reflects Cost Per
Ticket
Exchange Mailboxes 15,000 151,000 N/A N/A 15 $4,338,765 $8,975,231 N/A $4.95 $8.00 -$3.05 -38.1%
Mobility-
iOS
# of
Devices
4,500 42,333 N/A N/A 9.2 $3,117,882 $3,116,982 N/A $6.14 $3.00 $3.14 104.5%
Unit cost
excluded monthly
vendor charges
Mobility-
Android
# of
Devices
333 4,000 N/A N/A 4.3 $3,024,111 $3,024,111 N/A $63.00 $3.00 $60.00 2000.1%
New Service,
Counts estimates
Mobility-
BB
# of
Devices
1,400 16,430 N/A N/A 4.3 $834,888 $834,888 N/A $4.23 $3.00 $1.23 41.2%
Unit cost
excluded monthly
vendor charges
Windows
Physical
Server
530 7,540 N/A N/A 16.1 $4,393,489.00 N/A $290.70 N/A $628.00 -$337.30 -53.7%
Depreciated
hardware
Windows
Virtual
Server
300 6,000 N/A N/A 14.44 $4,811,143.00 N/A $182.20 N/A $183.65 -$1.45 -0.8%
Linux
Physical
Server
62 750 N/A N/A 3.9 $833,625.00 N/A $562.99 N/A $612.00 -$49.01 -8.0%
Linux
Virtual
Server
24 350 N/A N/A 5.8 $852,447.00 N/A $445.40 N/A $167.65 $277.75 165.7%
Labor allocation
methods
Unix Partitions 96 152 N/A N/A 10.3 $1,877,829.00 N/A $1,033.28 N/A $4,590.00 -$3,556.72 -77.5%

Page 18
Step 3 - Identify Opportunities
This is based upon the previous work done in Steps 1 and 2
Data and gap analysis
High level benchmarking
Unit service cost
benchmarking
Opportunity identification!

Page 19
Step 3 - Identify Opportunities
Typical opportunities
We see a ceiling on IT spend reduction / redirection of ~ 20% of the current IT cost base
.
0
5
10
15
20
6 months 12 months 18 months 24 months 30 months
IMPROVEMENT
SHIFT
% of current
IT spend
returned to
the
organization
TRANSFORMATION
25
30 , .
Fiscal Transparency
Service Tower
analysis
Sharing of good practices
Demand side freeze
Supply side discipline
Understand and reduce
cost drivers
Data Centre
Consolidation
Contract
Renegotiation
Platform
Rationalization &
Standardization
Adjust service
levels to match
business
requirements
Move to ‘shared service’
and ‘centers of
excellence’
Apply Benefit Assessment
& Realization
Revise Enterprise
Architecture
Use IT to enable
business capability
Reduce reliance
on contractors
Challenge non
essential demand
and supply side
consumables
Revise and consolidate
sourcing arrangements
Rationalize resource
structures
Leverage economies of
scale
Implement revised
standards & practices
for common locations
Benefit
Realization
Timeframe
Hardware/
Software
Rationalization &
Standardization
Functional
Reorganization
Use new/disruptive
technology to obtain
competitive advantage
For returns in excess of 20%, technology spend can be use to generate returns thorough (1) business enablement or (2) business efficiency

Page 20
Step 4 – Develop initiatives
For the identified opportunities you need to transform them into
executable initiatives
► Each initiative requires the following components in order
to make them executable and assessable:
► Detailed description
► Cost and benefits detail
► Implementation steps
► Priority
► Complexity
► Value index
► Duration
► Cost savings
► Resource requirements

Page 21
Step 4 - Sample Initiative
Develop one page detail for each initiative

Page 22
Step 4
Initiative summary – sample
# IT Category Recommendation Description Priority Complexity
Duration
(Months)
Potential
Annual
Savings
Value
Index
Client
Resource
Reqmts.
5 IT Finance
Design and implement an IT chart of
accounts that is aligned with services,
which will improve service cost
transparency and enable chargeback.
H M 1.5 NA 90% 3
6 IT Finance
1. Design an IT Service Costing process
and implement in an ITFM tool to
calculate unit service costs
2. Develop and provide service cost
reports to all business customers on a
monthly basis using an ITFM tool
H H 3 NA 84% 3
7 IT Services
Develop and provide service usage
reports to all business customers on a
monthly basis using an ITFM tool
H H 2 NA 80% 3
8 IT Finance
Develop a usage based chargeback
process and implement in an ITFM
tool for the 2015 budget year
H H 6 $2 - $4MM 94% 5

Page 23
Step 4 - Initiative analysis
Priority and Complexity View – assists in prioritization
Low Medium High
LowMediumHigh
Complexity
Priority
Low
High
Value of Initiative
15
1 14
12
13
9
3
11
8
5
2
10
7
16
6
4

Page 24
Step 4 - Initiative analysis
Implementation View – assists in prioritization
Wave 1 Wave 3Wave 2
15
14
12
13
11
16
1
Initiative Duration
(Months)
2
3
4
1
4
2
5
3
9
8
10
7
6
5
1 – 6 months 6 – 12 months 12+ months

Page 25
Step 5 – Execution
Sample roadmap – a detailed project plan would then be built to execute
against each initiative shown in the roadmap
2014
Jan Feb Mar Apr May Jun
1. Establish ITFM
group
2. Develop IT service
catalog
3. Create CMDB in ServiceNow – in progress by GroupM
4. Implement time tracking in ServiceNow
5. Design an IT chart
of accounts
6. Design & implement IT Service Costing

Page 26
Q & A

Page 27
Peter Hidalgo, Jr
ITFM Services Leader
Senior Manager
IT Transformation
Advisory Services
Ernst & Young LLP
5 Times Square
New York, NY 10036-6530,
United States of America
Pete.Hidalgo@ey.com
Mobile: 973-223-5616
Education
West Point - USMA
BS – Engineering
Columbia University
MBA
Certification(s)
PMP
ITIL Financial Management
► Senior Manager with over 20 years of experience in I.T. Financial Management, Telecom and I.T. infrastructure,
Cost Optimization, Program Management, and I.T. Shared Services Transformation.
► Deep industry experience in managing and optimizing I.T. costs. Previous responsibilities included serving as the
Global I.T. Financial Manager for a Fortune 100 company, where he managed an annual operating budget of over
$100 million. In that role he also developed and implemented an ITIL based service costing and chargeback
process, resulting in improved client satisfaction and major, recurring cost savings.
► Currently serves as the I.T. Financial Management Service Leader within Ernst & Young’s IT Advisory practice
Relevant experience
► Assisted a Fortune 50 global manufacturing client with redesigning their current IT allocation model and
processes for over $1 billion in annual spend
► Advised a Fortune 50 pharmaceutical client with improving their IT financial management processes, cost
transparency, data management, chargeback model redesign, service owner framework, and automation
► Advised and assisted a leading media and entertainment company to transform their IT operations into a shared
services model encompassing 11 major service domains. Also assisted in the development of a data center
strategy, a WAN architecture review, and a detailed IT service cost analysis, to include the development of a
service catalog, and a chargeback model.
► Assisted in an IT infrastructure (voice, data, and data center) strategic assessment and financial analysis for a
Fortune 500 corporation, which resulted in identifying the strategies to improve network and data center
performance and availability, in addition to saving $32M - $53M over three years in IT operating expenses.
► Supported an IT Cost Optimization study for the premium spirits and wine supplier in the U.S., which addressed
their telecom and infrastructure spend. Identified annual savings of 10% to 19%.
► Advised in the strategic assessment of the voice and data networks for a Fortune 500 high tech manufacturing
firm, which resulted in a new technology direction (VOIP) and Identified over $9M in annual savings.
► Assisted in performing an IT Operations strategic assessment for a Fortune 100 manufacturing corporation,
focusing on data center consolidation. Developed data center consolidation and disaster recovery strategies, in
addition to Identifying over $5M in annual savings.
► Advised a leading medical device manufacturing company in the evaluation of their outsourced infrastructure
service contracts, resulting in overall savings of $5M - $6M, or 35% - 45%.
► Assisted a Fortune 100 consumer staples company with the assessment of their wireless telecom services
contracts, resulting in overall savings of $6M - $9M, or 45% - 55%.

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