Not knowing your costs is an expense you can’t afford.
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Not establishing a service-based costing model will lead to:
Difficulty demonstrating that IT service costs are competitive when compared to cloud-based alternatives and outsourcing.
Excessive consumption of IT services by business units because they perceive them as “free.”
Inability to project service costs for budgeting due to a limited understanding of service costs.
Obscured cost of delivering IT services due to inconsistent service definitions.
Inability to map expenses in the general ledger to services.
Difficulty managing the complexity of cost allocation.
Expensive and time consuming collection and analysis of data to accurately allocate costs.
Establishing a service-based costing model will:
Improve Transparency: Expenditures on IT resources can be directly linked to IT service delivery and business value, and IT investments can be targeted at specific service enhancements.
Increase Comparability: Cost to deliver services via internal resources is directly comparable to, and can be benchmarked against, service delivery via alternative sourcing options, such as outsourcing or cloud services.
Account for Consumption: Business units recognize the impact of their consumption and can adjust their usage patterns to make more efficient use of IT services.
Make Budgets Credible: Forecasting budget is closely tied to expected service demand and known service costs.
Improve Clarity: CFOs are able to identify how IT expenditures in the general ledger map to IT services delivered.
Optimize Costs: Costs are decreased through reducing cost drivers and improving service processes.
Fairly Attribute Costs: IT service costs can be fairly distributed among IT users, supporting chargeback or showback.
Module 1: Make the Case
The Purpose
Recognize the flaws in traditional costing methods.
Define the opportunities service-based costing can afford.
Explain the challenges of service-based costing.
Key Benefits Achieved
Understanding of service-based costing.
Knowing the benefits and risks of service-based costing.
Activities:
Outputs:
1.1
Define service-based costing.
Set a common foundation for why service-based costing can help your organization.
1.2
Identify benefits and risks.
1.3
Discuss the state of IT cost transparency in your organization.
Module 2: Assess Maturity and Need
The Purpose
Clarity regarding the Info-Tech Service-Based Costing Maturity Model and the capabilities required to achieve each level.
Certainty regarding your current service-based costing capability.
A decision regarding your target level of service-based costing maturity.
Key Benefits Achieved
Current level of maturity identified.
Target level of maturity identified.
Metrics to track success selected.
Defined metrics to track your progress.
Activities:
Outputs:
2.1
Identify target maturity.
Gap analysis of current and target state to identify service-based costing process.
2.2
Identify current maturity level.
2.3
Being practical in deciding attainable benefits.
Module 3: Target Service Category and Service
The Purpose
Determine the service and service category that service-based costing analysis should focus on.
Ensure that the service category and service are clearly defined.
Key Benefits Achieved
Targeted service category.
Defined service.
Activities:
Outputs:
3.1
Identify service category.
Targeted service category definition.
3.2
Define service category.
Targeted service definition.
3.3
Identify service.
3.4
Define service.
Module 4: Develop an Allocation Methodology
The Purpose
Develop an allocation methodology that fairly allocates general ledger line items to service categories.
Develop an allocation methodology that fairly allocates general ledger line items to services.
Document allocation methodology.
Key Benefits Achieved
A fair allocation methodology.
Identified cost drivers.
A documented allocation methodology.
Activities:
Outputs:
4.1
Develop your allocation methodology.
Cost model with allocation methodology defined.
4.2
Document your allocation methodology.
Documentation template with allocation methodology documented.
Module 5: Determine Costs
The Purpose
Determine your service-based costs at the service category and service levels.
Ensure the cost model is able to meet your needs in terms of accuracy and ease of use.
Key Benefits Achieved
Determined service category costs
Determined service costs
Cost model meets your needs.
Activities:
Outputs:
5.1
Identify service category costs.
Breakdown of service category costs.
5.2
Identify service costs.
Breakdown of service costs.
5.3
Ensure your cost model can meet your needs.
Report summary to measure accuracy and ease-of-use of the cost model.
Module 6: Use Service-Based Costing to Drive Business Value
The Purpose
Use service-based costing to establish business unit accountability.
Use service-based costing to make better decisions.
Use service-based costing for budgeting.
Key Benefits Achieved
Business unit accountability established using service-based costing.
Benchmarks obtained and validated.
Business decision making using service-based costing.
Best practices for budgeting with service-based costing.
Activities:
Outputs:
6.1
Use service-based costing for decision making
“What-if” scenario modelled using the Service-Based Cost Model Tool.
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