Service Based Costing: Get There in 5 Steps

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Service Based Costing: Get There in 5 Steps

 

Here's a path to service based costing for your IT products and services.  Yes, you must go in order!Service Based Costing

 

1.  Identify Core Business Processes:  You must know what business processes you are supporting in order to recommend any kind of technology to support it, right?

2.  Identify IT Services that Support Business Processes:  You must now look at your IT services that support those.  If you have an IT product or service that doesn't map to a core business process, you may want to consider repurposing, archiving, donating or selling that offer.

3. Identify IT Systems that Support IT Services- Go through each of your services and determine what systems support them.

4. Identify IT Components that Make Up IT Systems - Go through each system and determine what hardware and other resources support that system, including human resources.

5. Identify Cost of Services - Once you've organized this information in this way, you are easily able to plop costs right against the service.

Let's practice.  Your business comes to you and says, "Hey, IT department, we need you to cut your budget by 10%."  You do which of the following?

A. Say "OK" and get to work determining what you can cut.
B. Say "OK" and fire the people who have been annoying you lately.
C. Pull out your service catalog, complete with costing and say, "Ok, so let's figure out which services you'd like us to cut or remove completely."
D. Log onto Twitter to look for a new job.

Of course, the answer is C. Service based costing will completely change the conversations you have with the business about spending.  In a good way.

And by the way, did you know that by breaking down each service in this manner, you are making a good start at identifying configuration items?

Get the paper "6 Steps to IT Chargebacks" and get an extra step!

6-steps-toit-chargebacksgtgtdownload

Photo Credit:  Rhoit Mattoo

 

Comments

Nice quiz question. In practice, I have seen two extreme approaches to cost cutting. One involved removing a coffee vending machine from the office and declaring a success. Another one involved looking at headcount. I am yet to see option c) in practice, but I don't lose hope.
Posted @ Sunday, June 19, 2011 2:08 PM by Piotr Chec
Thanks for the comment, and YES, remain optimistic.
Posted @ Monday, July 11, 2011 10:55 AM by Julie Montgomery
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