Five Best Practices Service Costing

A service costing catalog helps the IT organization communicate the services and solutions that are available to business users. Understanding the strategic benefits of technology decisions and having access to information that empowers managers to make informed decisions are critical, especially as organizations weigh seemingly attractive alternatives such as cloud computing solutions. Businesses that understand the full cost of IT products and services, and then communicate that information throughout the enterprise can more accurately plan, budget, benchmark, and manage demand of technology investments.

To ensure a best practice approach to service-based costing, take these steps:

Know your audience. Understand the needs of both camps – the IT department and the business user. The catalog should provide a complete overview as to the services IT delivers, where IT investments are made and how it allocates its resources. For IT, this creates a comprehensive system of record that supports transparency efforts and enables consumption control. Business users want to know what technology is available to them and how much does it cost.

Keep it simple. Creating a published list of services enables business departments to identify available IT services and associated costs as well as facilitate conversations with the IT department because users have insight into the cost drivers associated with IT services. If you’re unsure where to start, begin with an estimated allocation for each business unit and as your process matures, move to more complex consumption metrics.

Articulate services from an end-user perspective. Don’t create a catalog peppered with IT terminology. Instead, speak to business users in the non-technical terms that are more readily recognizable to them so they’ll understand their options in the context of business outcomes.

Tie the business value to the service. Rather than viewing services in isolation, help the business user understand total cost of ownership. Provide specific details so they understand the value of services IT delivers. For example, rather than just a line item that says “PC and connection, $450 per month,” include visibility into the IT cost  categories such as PC acquisition costs, capacity planning, security, help desk support etc, so users understand they are purchasing an entire suite of services.

Skip the spreadsheet. Excel spreadsheets become quickly outdated and are cumbersome to maintain. A Web-based service catalog integrated with an IT Financial Management Solution allows for feature-rich functionality such as enabling users to order services, measure consumption or forecast budgets.

Through a hybrid mix of allocations and activity-based costing, organizations can gain much greater insight into how technology is used and consumed, which technology solutions deliver the greatest profitability and enhance business performance, as well as ensure that future technology plans and decisions support strategic business goals and outcomes.