Service Based Costing - Practitioner Radio Episode 45
Troy’s thunderbolt tip of the day:The moment you begin your journey towards Service orientation start preparing for the next question - it’s about Service Based Costing. It’s just a matter of time.
- Service Based Costing – touched on in Ep 8 in March 2011 talking about financial management. Today focusing in on when you define ‘services’ what does that cost?
- If you look at what you pay for services you realise they’re often tied to other parts of services which means you need one for the other so it’s hard to cut costs
- What’s the trigger for asking questions about budget? Usually a crisis or a pain
- No-one wants to talk financial transparency when the money is freely flowing
- Looking at decade of trending revenue is flat (investment in IT)
- IT budget tends not to go granular enough when looking at where costs go
- Need to compare what outsourced services /processes can do for cost next to internal IT – can’t do without knowing cost of each part of internal IT functions
- As markets get tighter have to do better accounting in order to make decisions
- Can’t make decisions about where to cut back without knowing what each part costs and what else it’s linked to
- Today we have fragmented processes everywhere. Could we centralise groups and gain efficiencies? To work this out you need to know cost breakdowns.
- Some services are core or direct some are indirect which you have to overlay
- It’s an Art but have to have logic behind it
- Where do you get the data to do this?
- Is there a general template to help people can get started? In ITIL kit at high level, also recent paper in PinkLink “defining, modelling and costing in IT Services”
- Accuracy of data is now the question (we have lots of data)
- Still having to ‘bucket’ very difficult to get completely granular but more buckets better than 1 or 2
- Technology is no good often without the associated services so cost has to take all into account
- Culturally this may not be welcomed – exposing true costs. People don’t like transparency
- It’s only a matter of time ‘til you’ll need to provide these figures though
- Troy’s Thunderbolt Tip of the Day: The moment you begin your journey towards Service orientation start preparing for the next question - it’s about Service Based Costing. It’s just a matter of time.