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The New Star of IT Cost Allocation

Making sure business units understand what they're paying for can help drive IT cost control.

David McCann, CFO.com | US
April 28, 2010

The New Star of IT Cost Allocation

The hybrid model is a pragmatic approach indeed. However a granularity level of 25-50 just for IT services appears a bit overdose of details. In our advisory practice we choose to restrict cost drivers to a range between 5-15 at the best but use a hierarchical structure to capture details at different levels of management and responsibility.

Posted by Srinivasan Narayanan | September 28, 2010 04:41 pm

Managing IT Cost While Cutting Costs

I would first like to pat our collective IT staffs on the back for doing a difficult and thankless job as they are trying to meet the demands of their customers, deploy new technologies, maintain or replace existing infrastructure and stay on budget. With that said, the cost allocation "problem" typically stems from a lack of clarity and understanding the budgeting process has into IT requirements. If one could raise visibility with clear metrics by which to understand and manage the spend, then one could conceivably enforce best practices and provide the needed accountability. E.g. Many of us have experienced the EOFY IT spending trend to preserve forward budget and prevent its reduction or loss in the next cycle. I propose this is money poorly spent (not necessarily unnecessary) and often a severe waste. Tracking this and other cost trends and performing comparative data analysis in real time can help the CFO's staff change these trends by altering expectations and creating that needed accountability without specific knowledge of IT operations.

Posted by Peter Jackson | September 09, 2010 03:52 pm

IT Cost Measurement Challenge

Measuring IT cost is challenging because of the complex mix of fixed and proportional costs and the challenge of maintaining cause and effect relationships between the end service and the underlying support resources - infrastructure and services. Most cost methodologies are up to tracking this level of detail. One approach that provides this type of modeling and information is resource consumption accounting.

Posted by Larry White | May 20, 2010 09:05 am

Additional angle

We have seen a small number of IT organisations marrying their financials with their Capacity Management feeds. This provides an added dimension to cost optimization, as investment utilization becomes a primary vehicle to improved efficiency. http://bit.ly/aPqYb0

Posted by Robert Limbrey | May 11, 2010 10:11 am

IT Costs & Brand Profitability

Interesting article and an area that we think will continue to receive increased focus, especially as companies now grapple with the costs of public and private cloud computing. A company that has done a really nice job of understanding IT costs and their impact on brand profitability is 1-800-FLOWERS.com. In fact, they recently won a prestigious ITIL award.

Posted by Mike Siniscalchi | May 05, 2010 04:49 pm

Cummins Example

Excellent article. A few companies are already applying the principles your article describes. Cummins, Inc. is one that controls and optimizes IT costs by providing their global business units with the right visibility into their IT spend. http://bit.ly/bKF3T1

Posted by Tom Schaefer | May 04, 2010 06:13 pm

Nice article

Sounds like an ITIL implementations finance perspective. More articles on IT Fiance would be greatly appreciated.

Posted by Earl Butler | April 28, 2010 01:43 pm

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