CIOs are frequently under pressure to justify expenditures on IT and demonstrate the value of IT. Business and financial leaders can see expenditures on hardware, software, contracts, and labor, but have difficulty correlating these expenditures with benefits to the business.

Service-based costing helps to translate expenditures into value through transformation of dollars into output. This research will help you:

  • Define the relevance of service-based costing to your organization.
  • Identify your current service-based costing needs and level of maturity.
  • Improve your service-based costing capability.
  • Determine the cost of your IT services.
  • Use costing information to drive business value.

However, service-based costing is extremely difficult to do. Costs can be difficult to identify, allocations are complex, data may not be available, and service definition may be insufficient. The Info-Tech approach allows you to “grow as you go,” making use of your existing service data and improving your service-based costing capabilities as the organization matures.

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Establish a Service-Based Costing Model

Not knowing your costs is an expense you can’t afford.

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Search Code: 75896
Published: September 5, 2014
Last Revised: September 5, 2014


  • Missing comment
    Mark Decker | 05-12-2015

    A pragmatic take on a complex topic. Wish I'd had access to this before I spent two years developing my own similar chargeback methodology in-house. The result (we're now at Level 2 SBC) is tailored to our organization and meets the need, but this solution set could have saved me some trial-and-error. One useful tool I don't see highlighted in your advice is the use of cost centers within the accounting system to track costs by service. In our accounting system, cost centers are called Business Units, and I have about 40 separate BUs within my department, each representing an IT service or set of services. This makes it easy to attach an expense to a particular service so you don't need a separate mechanism to allocate it. I find that the difference between a GL account and a cost center is poorly understood, and that cost centers are a powerful but underused feature. Why buy special SBC software when the accounting system you already have can do much of the heavy-lifting?

    • 432c05244a845caaca3b276adb15a11e comment
      Info-Tech Research Group | 05-19-2015

      Thank you so much for your feedback. We are very pleased that you like our blueprint on service-based costing.

      You have made a great point about some of the functionality within accounting systems. If the functionality you require is already built in to your accounting system, we would always recommend using existing systems instead of investing in new (and possibly functionally redundant) service-based costing software.

      For those who don’t have the required functionality built into their accounting systems, the Excel-based tools provided with the blueprint can help identify service costs.

      One of the challenges brought to our attention during our research is that sometimes the way costs of services are incurred is not directly related to the way that end clients prefer to consume services. Because this is such a complicated topic, we intend to build another blueprint focused exclusively on how to implement chargeback for IT services. The new blueprint should be available on our website in the next six to nine months.

      We hope you enjoy that one too.

      Best regards,



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