Challenge: Reducing Internal Costs
A major regional bank wanted to help business unit managers recognize the cost of doing business. They quantified the expenses associated with providing the requested services, and then charged the associated expenses back to the business unit for whom the services were performed.

The client solicited Armada’s assistance in reengineering their existing costing system with the intent of providing cost information that supported recovery and profitability reporting. The overall objective of this effort was to provide comprehensive unit cost information to linesof business.

Additional objectives included:
• Technology consumption management (processes and technology for ongoing technology charge monitoring).
• Provide a consistent methodology and framework for cost modeling across the organization.
• Identified a more relevant set of cost drivers, which enabled further correlation between consumption and spend, leading to the control and reduction of costs.
• Improve mapping of cost allocations to appropriate business line products.
• Breakout fixed and variable cost components, to enable pricing decisions and help to build baseline projections.
• Identify and implement technology solutions to achieve partner requirements.
• Readily provide expense information that can seamlessly be adapted into the pricing equation for any product or service offered.

Reengineering effort focused on the architecture and blue print data requirements needed for a successful pilot. By utilizing industry practices and the client’s requirements for the cost models the project team focused on identifying activities, cost objects and volumes that supported the underlying technology spend.

Approach: Trusted project leader
The project was organized along three segments of work: Architecture blueprint, OROS Model building, and Essbase Reporting. Armada’s role in this project included team leadership for Architecture blueprint, Essbase Reporting, and advisory assistance for the OROS Model building segment.

Additional Armada processes included:
• Create an activity/process and data driver dictionary outlining the major processes and sub-processes to be used throughout the reengineering of ABC across the client LOBs.
• Coordinate with other bank initiatives to ensure cost development and recovery methodology implemented is consistent with the direction of the management reporting architecture.
• Develop and coordinate project work plan with the client including detailed task-level work plans that will outline the duration, key milestones and deliverables of all aspects of the project.
• Work with client to develop a formal communication plan for project purpose, goals, and approach to the end-user community.
• Identify and track issues that arise throughout the implementation of the project.
• Document all project steps, operation policies and procedures, decisions, meetings, deliverables, etc. during the project.
• Work with client to prepare documentation on business requirements definition, methodology, cost model architecture, data requirements, sustainability approach, and software selection.
• Work with client to document any data extract requirements that will need to be addressed by client IT resources.

Results: Control of cost drivers
• Implemented an Initial functionalized cost model.
• Developed an Essbase Reporting environment on client production server.
• Provided sufficient costing detail to support business group/units in evaluating business cases and making pricing decisions.
• Provided an understanding of cost structure and behavior with fixed, variable, and negotiable components.
• Provided documentation on recommended architecture design and sustainability approach.

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