Training for IT March 1, 2006 Cost Transparency Operating Model CLIENT.

Training for IT

March 1, 2006

Cost Transparency Operating Model

CLIENT

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Scope of the cost transparency operating model

Changes to the cost transparency reports

Overview of the operating model

Flow of chargeback information

Impact to IT

Calendar of Activities

Ground Rules

Expectations for the initial release

Product pricing process overview

Objectives

The objective of today’s discussion is to help you understand…

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Scope of the IT CT Operating Model

The cost transparency reports are currently being distributed to our customers. Initially we will focus on legacy Client Organization. Moving forward we will evaluate additional businesses.

Future Scope

As the impact of the bank integration initiative is determined, the following business units will be evaluated for future action:

Legacy Private Bank Legacy Asset Management

For the initial release the following legacy Client business units are in scope:

Fixed Income Equities Investment Banking Division A Division B Shared Services

Operations Product Control Credit Risk / Market Risk Financial Control Financial Control (BASEL II) Legal and Compliance division (LCD) Human Resources (HR)

Scope

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Background On IT Cost Transparency

IT Cost Transparency chargeback reports have been modified to give the business a better understanding of their consumption of IT products and services. Reports will enable constructive dialogue and rational choices to be made by both the business and IT.

Billing Methodology: Chargeback reports will provide more comprehensive application charges (e.g. infrastructure charges will be incorporated into application costs)

Report Presentation Process: The Application Development Group (ADG) RM will present chargeback reports with support from the Financial reporting RM

Inquiry Process: The report inquiry process has been streamlined to direct all inquiries through a central point of contact

Broader Audience: Chargeback reports will be presented to the Desk COOs and shared services

What Is Changing?

Greater Transparency: Business will have a greater understanding of technology consumption and cost

Improved Attribution and Accuracy of Consumption: IT charges are directly linked to Application-Infrastructure and End-User Technology consumption

Improved Planning: Business and IT will have the ability to better plan consumption of IT products and services

Competitiveness: Migrating IT from a support organization to a service model

Improved Customer Support: Inquiries will be tracked and the cost transparency operating model will be continually improved

Upstream Costs: Application Development Group (ADG) and Infrastructure Technology Group (ITG) will approach the business with a picture of total application costs that are inclusive of labor and infrastructure expenses

Improved Governance: IT will be accountable for all technology related costs pertaining to their business partners

What Are The Benefits?

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Overview of the Operating ModelO

bjec

tives

Key

Act

iviti

es

Develop an itemized report of IT products and services consumed by the business during the previous fiscal month

Consolidate end user and infrastructure consumption data

Apply appropriate unit cost /rate card to consumption

Allocate charges to cost centers

Generate itemized report

Report Production

Report Analysis

Report Presentation

Report Inquiry

ReportCorrection

Perform analysis of consumption trends, significant deviations on the chargeback reports

Analyze report and determine cost saving opportunities

Validate findings Append report with

analysis and status of previous inquiries

Generate predefined views of report

Present report and analysis to the business

Review report with ADG RM

Send monthly high level view to Business COOs

Present detailed report to the Desk COOs

Send detailed report to business accounting

Provide a mechanism for clients to raise questions about the report and to request correction

Forward inquiries to “Central Inquiry Tracker”

Capture inquiries Communicate status to

the business

Determine and implement appropriate action to reports that require adjustment

Forward inquiries to appropriate ADG RM or ITG RM

Investigate inquiries and determine action

Make corrections and update the Central Inquiry Tracker

Track issue and close the loop with business

The chart below outlines the operating model for the IT Cost Transparency process. This new process will minimize confusion and overlap of roles and ultimately result in a faster resolution of billing issues, improved customer satisfaction and ultimately improved control of costs.

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ITG RM

ITG Inventory Manager Person…

Financial Reporting RM GroupPerson…

IT Chargeback Information Flow in Equities

Equities Division

Equ

ities

Con

trol

lers

– P

erso

n…

Equities COOPerson…

Prime Services COO

Cash COO

Derivatives COO

Other Desk COOs

Cost Transparency GroupPerson…

End User Technology

Market Data

Other IT Towers (App driven)

2 4

Client Coverage Team

3Validate report

Recommend changes

Financial Reporting RM Group

1

Application-Infrastructure consumption

EUTconsumption

ADG RM

Chargeback information flow will be standardized across other divisions to ensure consistent chargeback report production and presentation.

Inventory Manager Consolidates end-user technology and application infrastructure consumption data.

Cost Transparency Group sends an interim chargeback report to the Financial Reporting RM Group.

Financial Reporting RM Group presents the bill to the IT Coverage Team for validation.

ADG RM and the Financial Reporting RM Group present the chargeback report to the business (ITG RM joins as needed).

PART C Allocate costs in PART B to the divisions.

PART D Allocate labor costs to the divisions.

PART E Perform trend and anomaly analysis

Generate report from PARTS A,C,D,E

PART A Calculate end-user product costs

PART B Calculate infrastructure costs

1 2

3 4

Support as needed

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IT Chargeback Inquiry Flow in Equities

Central Inquiry Tracker

IT 1,2,3,4,5

There will be a Central Inquiry Tracker function that would be responsible for tracking and forwarding the different inquiry types.

Business COOS and Desk COOs forward allocation related inquiries (IT 1, 2) to the Business Controller.

Inquiry Type Framework

IT 1 Incorrect application cost allocation at cluster level

IT 2 Incorrect application cost allocation at division level

IT 3 Incorrect End User Technology item (Desktops, Blackberry’s etc)

IT 4 Excessive application development charges (labor costs)

IT 5 Excessive application infrastructure costs

NOTE: A detailed view of this framework is available in the Appendix.

Business and Desk COOs forward all other inquiries (IT 3,4,5) to the Central Inquiry Tracker.

Equities Division

Equ

ities

Con

trol

lers

– P

erso

n…

1

Central Inquiry Tracker logs inquiries and forwards them to the correct contact

IT 3,4,5

2

3

Business Controllers forwards progress of allocation inquiries (IT 1, 2), and any additional inquiries to the Central Inquiry Tracker.

ITG RMPerson…

ADG RMPerson…


Person…

ADG Application Managers

4

2

1 3 4

IT 3

IT 4,5

IT 1,2

IT 4,5

IT 3,4,5

IT 4,5

ITG Inventory Manager Person…

Equities COOPerson…

Prime Services COO

Cash COO

Derivatives COO

Other Desk COOs

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The Impact on IT

Relationship Management Inquiry Response Financial AnalysisWhat Changes About My

Role?

ADG

Lead meeting with the business to present chargeback reports

Assume responsibility for chargeback items that correspond to applications and projects

Participate in the Coverage teams

Analyze inquiries and route them to the appropriate contact

Track status and follow up until resolution is achieved

Report progress to the business client and manage their expectations

Validate the periodic chargeback reports created by the Financial Reporting RM Group

Support the Financial Reporting RM group to identify cost drivers, trends, and key performance indicators

ADG will own the relationship with the business

ADG will own their application charges


Partner with the ADG RM to meet with the business


Support the ADG RM in inquiry resolution

Report progress on financial reporting inquiries to the business client and manage their expectations

Lead the development of chargeback reports and vet them with ADG

Lead analysis of cost drivers, trends, and key performance indicators

Financial Reporting RM Group will support ADG in their relationship with the business

Financial Reporting RM Group will no longer be the funnel of inquiries from the business

ITG

Assume responsibility for items on the chargeback report that correspond to infrastructure


Analyze infrastructure inquiries and route them to the appropriate contact

Report progress to the business client and manage their expectations

Support ADG and Financial Reporting RM Group with cost drivers, trends and key performance indicators for infrastructure

ITG will support ADG in their relationship with the business

ITG will attend meeting with the business to review the report as needed

Understanding and acting in your roles assures better coordination, improved interaction, and ultimately better service to the business.

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Calendar of Activities: Targeted BAU Process for March and onward

Business Days in the Average Month

1 2 3 4 5

6 7 8 9 10

11 12 13 14 15

16 17 18 19 20

21 22

Report Production

Report Production Report Analysis

Report Presentations, Report Inquiry, Report Correction

Cost Transparency Group and Financial Reporting RM Group develop an itemized report of IT products and services consumed by the business during the previous fiscal month

Financial Reporting RM Group and the ADG RM meet to vet analysis of business consumption trends, and of significant deviations on the chargeback reports

Client Coverage Team presents the report and analysis to the business. The business clients can then formally raise questions about the report. Finally, the Inquiry Coverage Team determines and implements appropriate action to items that require adjustment.

Chargeback Reports begin to be released to the business client

Reports are released to Financial Reporting RM Group

Accounting books are closed for prior month

Financial Reporting RM Group begin to meet with ADG RM

Presentations of reports to the business begin

NOTE: The units are business days.

The BAU process will take several cycles to reach target dates.

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Ground Rules

Supply application usage metrics to the business controller for making allocation decisions

End User Product (desktops, Blackberry) consumption

Application-related infrastructure charges

Application labor costs

IT Chargeback trend analysis

Areas Where We Can Help

Request to upgrade or downgrade application infrastructure (i.e. IT Standards and Architecture are the purview of IT)

Financial data without review in the Cost Transparency process

Request to change rate card; current rate card is consistent with the Global Allocation Committee (GAC) guidelines

Areas Out Of Scope

The IT COO has setup some ground rules to streamline the operating model across all divisions and ensure a consistent service level.

Triage issues within your own division before escalating to IT

All allocation inquiries will be forwarded to the business controller; business controller will address the inquiry and update the Central Inquiry Tracker

All other inquiries will be forwarded to the Central Inquiry Tracker

Initiating Inquiries

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What to expect from the initial release?

What to Expect? How to Manage It?

Increase in the volume of inquiries

Request business to direct request through business controller so that inquiries can be prioritized

Manage business expectations around resolution timeframe Use contact list to forward queries to the appropriate personnel Refer to the “Ground Rules” in the Appendix

Inquiries are received directly from the business

Clients will be encouraged to funnel inquiries through business controller and subsequently through the Central Inquiry Tracker

If you get direct queries, forward them to the Inquiry Tracker so that they can be captured in the tracking tool

The expectation has been set with the business that the initial roll out will have limited capacity to address inquiry requests. All inquiries will be captured, but not all inquires will be responded to.

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Expectations set with the business

Our goal is to continually improve the process and incorporate lessons learned from this initial release.

Cost Transparency Expectations

Because we anticipate a high volume of inquiries, we will prioritize responses; retroactive adjustments will be made

We expect the accuracy of allocation and infrastructure charges to improve as reports are reviewed in detail

- The business must focus on improving data integrity

- The business must demand higher accountability from IT

Responses to initial inquiries will be prioritized as follows:

- Frequency of reporting errors and inquiries

- Materiality of inquiries

IT and the business are learning together in this process; our ability to respond to your inquiries will improve as training is rolled out and enhanced

We are in the process of implementing the Central Inquiry Tracker position; this may not be fully operational by the time of this initial release

IT will get your feedback to improve this process

Activities during the rollout include:

- Communication about the operating model

- Chargeback reports will be released with limited analysis

- Meetings with the Financial Reporting RM Group will start to take place

- Inquiries to the report will start to be raised

Product Pricing Process Overview

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Overview of Current Product Pricing Process

ITG uses a rate card to charge the business for the consumption of infrastructure and technology services. The product prices in this rate card are reviewed on a periodic basis and updated to reflect changes to costs and inventory.

Cost Recovery: As a cost center, IT aims to minimize under (over) recovery for costs that are charged to the business

Drivers

Estimate the inventory of “billable” products

Determine direct, centrally planned and indirect expenses for each product

Calculate unit price per product

Key Activities

In 2006, product pricing will occur in Q1 and Q2, and can conceivably result in lower unit prices for the year

Beginning with 2007, product pricing will occur annually at the beginning of the year

Timing

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Steps in the Product Pricing Process

Product Pricing entails three high level activities.

Step Responsible

Inventory Collection

1. Provide inventory usage detail ITG Product Owners

2. Vet the inventory data and provide the cost transparency group an estimated global volume for all products that have a billing target

ITG Inventory Manager

3. Run the global inventory through the financial model to determine a more accurate estimate of volume for products that have a billing target

Cost Transparency Group

Inventory Spend Calculation

4. Verify the direct, centrally planned, and pass through expenses associated with each product


5. Verify the application, direct infrastructure, and indirect infrastructure expenses associated with each product


Unit Price Calculation6. Calculate unit price by dividing the total product cost by the

volume of billable productCost Transparency Group

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Product Pricing Process flow

ITG Product Owners


Cost Transparency

Group

Calculate estimated volume of products with billing target

Provide product Inventory

Inventory volume

discrepancy?

N

Y

Run volume through financial model

Verify volume discrepancy SS

Verify direct, centrally planned,

pass through expenses

Verify the application, direct infrastructure, and

indirect infrastructure expenses

Calculate unit price by dividing the Total Product Cost by the

product volume

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Total Product Cost Breakdown

Labor Cost: Costs for FTEs that book time to support a product

Telecommunication: Communication and WAN usage (provided by external vendor) required for a product

Depreciation: Software and hardware depreciation required for a product

Machinery / Expenses: Costs for software, hardware and service vendors that are required for a product

Application: Costs associated with applications that are used by the product

Infrastructure: Infrastructure costs consumed by the product

GTI Personal Consumption: Infrastructure costs consumed by direct labor

Indirect Expense

Centrally Planned

Direct Expense

TOTAL PRODUCT COST

Ope

ratin

g E

xpen

ses

Allo

catio

ns

Total product cost consists of three types of expenses that are each made up of different components. Direct and centrally planned expenses are accounted as operating expenses, while indirect expenses are allocations of internal costs.

NOTE: These are all of the possible components that can go into a product’s cost, but not all of them are necessarily included.

Appendix

Report Presentation Process Flow

Report Inquiry & Correction Process Flow


Coverage Teams (Inquiry Response Coverage Teams, Client Coverage Teams)

Roles and Responsibilities for the Operating Model

Participants in the Cost Transparency Process

Example: Calculation of the unit price for “Email”

Roles and Responsibilities in the Product Pricing Process

For more information:

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Report Presentation Process flow

Business Controller

Central Inquiry Tracker (CIT)

Financial Reporting RM

Group

IT PL Community

ADG RM

ADG Application Manager

ITG RM


Review and verify the report

Create Report

Recommend changes

N

Y

Present report to clients

Review and verify the report

Make changes to the report

S

S

Review and verify the report (as needed)

Business COO or

Desk COO

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Signs off on re-allocation requests

Allocations

Report Inquiry & Correction Process flow

Business COO or

Desk COO

Business Controller

Central Inquiry Tracker (CIT)

Financial Reporting RM

Group

IT PL Community

ADG RM

ADG Application Manager

ITG RM


Report Inquiry

Logs InquiryInquiry Type

Forwards to the desk or business COOs for

signoffs

Forwards updated allocation to Financial reporting RM via CIT

Logs and closes inquiry

Reviews and forwards to ITG Inventory

Manager

Inquiry Valid ?

EUT

Updates database & ITG RM

Y

N

Updates business on inquiry status

Reviews and forwards to ADG Application

Manager

Application

Infrastructure related

Updates ADG RM


N

Reviews and forwards to ITG Inventory

Manager

Y

Updates ADG RM


Updates ITG RM




Updates allocations table

Report Inquiry

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Description Raised By Currently Directed To Proposed Directed To Requirements

IT 1Incorrect application cost allocation at cluster level

Desk COOs Division Controller

Step 1: Central Inquiry Tracker (logs it)

Step 2: Business Controller

Allocation details. Reasoning for re-allocation request. Effective dates Signoffs from necessary personnel

IT 2Incorrect application cost allocation at division level

Desk COOs Business Heads



Step 2: Business Controller

Allocation details. Reasoning for re-allocation request. Effective dates Signoffs from necessary personnel

IT 3

Incorrect End User Technology item (Desktops, Blackberry’s etc)

Desk COOs Division Controllers


ITG Inventory Manager Infrastructure Finance group


Step 2: ITG Relationship Manager Step 3: ITG RM will forward the

query to ITG Inventory Manager

Product type being inquired.

IT 4Excessive application development charges (labor costs)



IT COO Project Managers Equity IT CIO ITG RM


Step 2: ADG RM Step 3: ADG RM will contact the

respective project manager.

Query definition (excessive work hours, vendor costs, infrastructure)

Signoffs from necessary personnel

IT 5Excessive application infrastructure costs



IT COO Equity IT CIO ITG RM ADG RM


Step 2: ADG RM Step 3: ADG RM will contact the

respective application manager. Step 4: If infrastructure related

issue then ADG Application manager will forward app requirements to ITG RM

Step 5: If infrastructure related issue then ITG RM will get answer from ITG Inventory Manager.

Query definition (excessive work hours, vendor costs, infrastructure)

Signoffs from necessary personnel

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Coverage Teams: Inquiry Response Coverage Teams for Equities

Inquiry Type Originator Step 1 Step 2 Step 3 Step 4 Step 5

IT 1

Incorrect application cost allocation at cluster level »

Desk COO

Person X »

Business Controller

Person X»


»


Person X

IT 2

Incorrect application cost allocation at division level »

Desk COO

Person X »

Business Controller

Person X»


»


Person X

IT 3Incorrect End User Technology item (Desktops, Blackberry’s etc)

»Desk COO or Business Controller

Person X

»Central Inquiry Tracker »

ITG RM

Person X »ITG Inventory Manager

Person X

IT 4

Excessive application development charges (labor costs)

»

Desk COO or Business Controller

Person X»


»

ADG RM

»


IT 5Excessive application infrastructure costs »


Person X


ADG RM

»ADG Application Managers »

ITG RM

Person X »ITG Inventory Manager

Person X

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Coverage Teams: Inquiry Response Coverage Teams for Fixed Income

Inquiry Type Originator Step 1 Step 2 Step 3 Step 4 Step 5

IT 1Incorrect application cost allocation at cluster level »

Desk COO

Person X »Business Controller

Person X



IT 2Incorrect application cost allocation at division level »

Desk COO

Person X »Business Controller

Person X



IT 3Incorrect End User Technology item (Desktops, Blackberry’s etc)

»Desk COO or Business Controller

Person X


ITG RM

»ITG Inventory Manager

IT 4

Excessive application development charges (labor costs)

»


Person X»


»

ADG RM

»


IT 5Excessive application infrastructure costs »


Person X


ADG RM

»ADG Application Managers »

ITG RM

»ITG Inventory Manager

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Coverage Teams: Client Coverage Teams for Equities

MEETING 1 MEETING 2

Business Unit/Desk ADG RMFinancial Reporting RM Group

ADG RMFinancial

Reporting RM Group

Business COO

Business Controller

Desk COO

Equity Division (Global) U Person names U NA

Equity Division (Americas) U In all columns U

Equity Division (Europe) U cleansed U

Equity Division (Asia) U U

Prime Banking U U

Equity Proprietary Trading (Americas)

U U

Equity Proprietary Trading (Europe) U U

FID Proprietary Trading (Americas) U U

Cash Business (Americas) U U

Cash Business (Europe) U U

AEP US U U

AEP UK U U

Research U U

Equity Derivatives (Europe) U U

Equity Derivatives (Americas) U U

Convertibles (Europe) U U

Convertibles (Americas) U U

MEETING 1 - Monthly validation of application data in chargeback

MEETING 2 - Presentation of chargeback report to the business at various levels: Business COO, Business Controller, Desk COO

NA – Not applicable

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Coverage Teams: Client Coverage Teams for Fixed Income

MEETING 1 MEETING 2


ADG RMFinancial Reporting RM Group

Business COO

Business Controller

Desk COO

Fixed Income Division (Global) U Person names U NA

Fixed Income Division (Americas) U In all columns U

Fixed Income Division (Europe) U cleansed U

Fixed Income Division (Asia)

Europe Interest Rate Products U U

US Interest Rate Products U U

Exotics U U

Europe Repo U U

US Repo U U

CDO U U

CMBS U U

Research U U

Listed Derivatives U U

Leverage Finance U U

RMBS U U

Coverage (Europe) U U

Coverage (Americas) U U

Fund Linked Products U U




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Coverage Teams: Client Coverage Teams for IB, Division B and Division A

MEETING 1 MEETING 2



Business COO

Business Controller

Desk COO

IBD (Global) U Person names U

IBD (Europe) U In all columns U

IBD (Americas) U cleansed U

Division B U U

U

Division A U U

Legal and Compliance U U




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Coverage Teams: Client Coverage Teams for IB Support and CFO

MEETING 1 MEETING 2



Business COO

Business Controller

Desk COO

IB Support Person names

Corporate U In all columns U NA

Complex Product Support U cleansed U NA

Executive U U NA

Human resources U U NA

CFO U U NA

Operations U U NA

CFO

Financial Accounting U U NA

Global Treasury U U NA

Group Controlling U U NA

Investor relations U U NA

New Business U U NA

Product Control U U NA

Shared Services Controlling U U NA




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Coverage Teams: Client Coverage Teams for COO and CRO

MEETING 1 MEETING 2



Business COO

Business Controller

Desk COO

COO Person names

Audit U In all columns U NA

Business School U cleansed U NA

Corp Development U U NA

Corporate Real Estate U U NA

Human Resources U U NA

Market Info Business Mgmt U U NA

Public Policy U U NA

CRO

Credit Risk U U NA

Risk Measurement & Mgt U U NA

Operational Risk Management U U NA

Strategic Risk Management U U NA




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Roles and Responsibilities in the IT Cost Transparency Process

Report Production

Consolidate end-user technology and application infrastructure consumption data

RA

Apply rate card against end-user product consumption RA

Apply rate card against application infrastructure consumption RA

Allocate application charges (infrastructure) to divisional cost centers RA

Allocate application development charges (labor) to the divisional cost centers

RA

Report Analysis

Perform trend analysis for the past 12 months of IT chargeback C RA C

Perform chargeback anomaly analysis C RA C

Determine cost saving opportunities C R AC C I C I

Coordinate with IT to validate the anomaly analysis and cost saving suggestions

R RAC C C C

Incorporate suggested changes (requested by IT PL Community) into the summary of observations

RA I I I I I

Append report with the status of previous report inquiries RA C C C C C

Generate predefined views for different audiences (e.g.. Newsletter for Business COO etc,)

RA

Bus

ines

s H

ead

Bus

ines

s/D

esk

CO

O

Bus

ines

s C

ontr

olle

r

Cos

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y G

roup

Fin

anci

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epor

ting

RM

Gro

up

Glo

bal D

ivis

ion

RM

AD

G R

M

AD

G A

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anag

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ITG

RM

ITG

Inve

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anag

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Cen

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Inqu

iry T

rack

erA = Accountable (makes decision) R = Responsible (does the work) C = Consulted (provides input) I = Informed (told of decision)

Note: Activities and roles in bold italics are proposed

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Roles and Responsibilities in the IT Cost Transparency Process - 2

Report Presentation

Send high level monthly chargeback view and summary of observations (e.g. Newsletter) to the Business COO, Controller and Desk COO

I I I RA I I I I I

Meet with, and present detailed reports to the Controller and Desk COOs according to client needs

I I I R RA R C

Gather feedback during meeting C C C R RA

Create action items based of feedback C RA C C C

Issue responses to the business I I I I I RA I I I

Report Inquiry

Client identifies a problem or is not satisfied with explanation and formally questions an chargeback item

R R RA I I I

Record the question in the tracking tool RA

Determine the inquiry type and forward to the appropriate contact for investigation. Use contact list

RA I I I I

If it’s an allocation related inquiry, resolve it on the business side RA I I

Investigate the inquiry and determine an explanation R RA R R R

If item can be explained, communicate the response to customer. Close the issue

I I I R RA R

If item requires correction, provide update to customer, update status

I I I R RA R

Bus

ines

s H

ead

Bus

ines

s/D

esk

CO

O

Bus

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s C

ontr

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Cos

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Fin

anci

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epor

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RM

Gro

up

Glo

bal D

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RM

AD

G R

M

AD

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anag

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ITG

RM

ITG

Inve

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Cen

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Inqu

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Roles and Responsibilities in the IT Cost Transparency Process - 3

Report Correction

Get business sign offs for all application re-allocation related inquiries and forwards it to the Financial Reporting RM Group, and notifies the Central Inquiry Tracker.

I I RA I I

Central Inquiry Tracker forwards Application issues to the appropriate ADG RM and Inventory issues to the ITG RM

RA I I

ADG RM reviews the issue and forwards it to appropriate ADG Application Manager

RA C

ADG Application Manager forwards Application Infrastructure related issue to the ITG RM

A R CI

ITG RM reviews the issue and forwards it to the ITG Inventory Manager

RA CI

Inventory Manager investigates the issue and determines appropriate action

RA

Inventory Manager makes correction and communicates the change via ITG RM to the single point of contact

I I RA

Central Inquiry Tracker tracks issue and closes the loop on the inquiry

RA I I I I

Communicate the resolution to the client I I I I RA

Bus

ines

s H

ead

Bus

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s/D

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CO

O

Bus

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Fin

anci

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epor

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RM

Gro

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IT P

L C

omm

unity

AD

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M

AD

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ITG

RM

ITG

Inve

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Key Contacts Involved in the Cost Transparency Process for Equity

EQUITY - Global Person names

Equity Division (Americas) In all columns

Equity Division (Europe) cleansed

Equity Division (Asia)

Prime Banking

Equity Proprietary Trading (Americas)

Equity Proprietary Trading (Europe)

FID Proprietary Trading (Americas)

Cash Business (Americas)

Cash Business (Europe)

AEP US

AEP UK

Research

Equity Derivatives (Europe)

Equity Derivatives (Americas)

Convertibles (Europe)

Convertibles (Americas)

Bus

ines

s C

ontr

olle

r

Cos

t T

rans

pare

ncy

Gro

up

Fin

anci

al

Rep

ortin

g R

M

Gro

up

Glo

bal D

ivis

ion

RM

AD

G R

M

AD

G

App

licat

ion

Man

ager

*

ITG

RM

ITG

Inve

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y M

anag

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Cen

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Inqu

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Tra

cker

Bus

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s/D

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CO

O

* The ADG Application Manager will depend on the application that is in question. The ADG RM will be able to route the issue to the appropriate ADG Application Manager.

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Key Contacts Involved in the Cost Transparency Process for Fixed Income

FIXED INCOME - Global Person names

Fixed Income Division (Americas) In all columns

Fixed Income Division (Europe) cleansed

Fixed Income Division (Asia)

Europe Interest Rate Products

US Interest Rate Products

Exotics

Europe Repo

US Repo

CDO

CMBS

Research

Listed Derivatives

Leverage Finance

RMBS

Coverage (Europe)

Coverage (Americas)

Fund Linked Products

Bus

ines

s C

ontr

olle

r

Cos

t T

rans

pare

ncy

Gro

up

Fin

anci

al

Rep

ortin

g R

M

Gro

up

Glo

bal D

ivis

ion

RM

AD

G R

M

AD

G

App

licat

ion

Man

ager

*

ITG

RM

ITG

Inve

ntor

y M

anag

er

Cen

tral

Inqu

iry

Tra

cker

Bus

ines

s/D

esk

CO

O


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CLIENT

Key Contacts Involved in the Cost Transparency Process for IBD, Division B and Division A

IBD (Global) Person names

IBD (Europe) In all columns

IBD (Americas) cleansed

Division B

Division A

Legal and Compliance

Bus

ines

s C

ontr

olle

r

Cos

t Tra

nspa

renc

y G

roup

Fin

anci

al R

epor

ting

RM

Gro

up

Glo

bal D

ivis

ion

RM

AD

G R

M

AD

G A

pplic

atio

n M

anag

er*

ITG

RM

ITG

Inve

ntor

y M

anag

er

Cen

tral

Inqu

iry T

rack

er

Bus

ines

s/D

esk

CO

O


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CLIENT

Key Contacts Involved in the Cost Transparency Process for IB Support and CFO

IB Support Person names

Corporate In all columns

Complex Product Support cleansed

Executive

Human resources

CFO

Operations

CFO

Financial Accounting

Global Treasury

Group Controlling

Investor relations

New Business

Product Control

Shared Services Controlling

Bus

ines

s C

ontr

olle

r

Cos

t Tra

nspa

renc

y G

roup

Fin

anci

al R

epor

ting

RM

Gro

up

Glo

bal D

ivis

ion

RM

AD

G R

M

AD

G A

pplic

atio

n M

anag

er*

ITG

RM

ITG

Inve

ntor

y M

anag

er

Cen

tral

Inqu

iry T

rack

er

Bus

ines

s/D

esk

CO

O


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CLIENT

Key Contacts Involved in the Cost Transparency Process for COO and CRO

COO Person names

Audit In all columns

Business School cleansed

Corp Development

Corporate Real Estate

Human Resources

Market Info Business Mgmt

Public Policy

CRO

Credit Risk

Risk Measurement & Mgt

Operational Risk Management

Strategic Risk Management

Bus

ines

s C

ontr

olle

r

Cos

t Tra

nspa

renc

y G

roup

Fin

anci

al R

epor

ting

RM

Gro

up

Glo

bal D

ivis

ion

RM

AD

G R

M

AD

G A

pplic

atio

n M

anag

er*

ITG

RM

ITG

Inve

ntor

y M

anag

er

Cen

tral

Inqu

iry T

rack

er

Bus

ines

s/D

esk

CO

O


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CLIENT

Example: Calculation of the unit price for “Email”

The total product cost is composed of direct expenses, centrally planned expenses, and indirect expenses.

Description Example Annual Expense Cost per unit

Direct Expenses

Labor Cost: Costs for FTEs that book time to support a product

People book their time in Project Web for “Email” support

$6,500,000

Centrally Planned Expenses

Telecommunication: Communication and WAN usage (provided by external vendor) required for a product

Telecommunication and WAN consumption costs for “Email”

$1,244,431

Depreciation: Software and hardware depreciation required for a product

Depreciation of software and hardware used by “Email”

$1855,024

Machinery / Expenses: Costs for software, hardware and service vendors that are required for a product

Cost of vendors supporting “Email,” e.g. IBM, Microsoft etc.

$3,788,123

Indirect Expenses

Application: Costs associated with applications that are used by the product

A percentage of the fully loaded costs of applications used by “Email,” e.g. FTP, Tumbleweed etc.

$2,077,981

Infrastructure: Infrastructure costs consumed by the product

A percentage of the infrastructure consumed by “Email,” e.g. servers, databases etc.

$6,000,000

GTI Personal Consumption: Infrastructure costs consumed by direct labor

Costs associated with desktops, Blackberry's, etc. used by direct labor associated with “Email”

$1,894,062

Total Product Cost $23,359,621

Volume of Email Accounts 35,244

Cost per account $663 /year

Email unit price $55 / month

NOTE: The figures in this chart are for illustrative purposes only.

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CLIENT

Roles and Responsibilities in the Product Pricing process

ITG Product Owners


Cost Transparency

Group

INVENTORY COLLECTION

Provide inventory usage detail RA I

Vet the inventory data and provide the cost transparency group an estimated global volume for all products that have a billing target

CI RA CI

Run the global inventory through the financial model to determine a more accurate estimate of volume for products that have a billing target

I CI RA

INVENTORY SPEND CALCULATION

Verify the direct, centrally planned, and pass through expenses associated with each product

I RA

Verify the application, direct infrastructure, and indirect infrastructure expenses associated with each product

I RA

UNIT PRICE CALCULATION

Calculate unit price by dividing the total product cost by the volume of billable product

I I RA

A = Accountable (makes decision) R = Responsible (does the work) C = Consulted (provides input) I = Informed (told of decision)

Training for IT March 1, 2006 Cost Transparency Operating Model CLIENT.

Documents

business review report

report inquiry process

cost transparency process

business accounting

business partners

model client slide

following business units

greater transparency