Copyright The Art of Service

to provide cost-effective stewardship of the IT assets and resources used in providing IT Services

Objectives
Budgeting

Determine budget method Determine the budget period Set up the budget fixed vs variable

Incremental budgeting: prior figures as basis Zero-based budgeting: basis of estimate for each item

Cost Models used for IT Accounting are too detailed, creating too much administrative overhead Not enough commitment from senior IT and Business management Process not how organisation manages its finances Charging policies not well communicated to customers, causing unwanted behaviour IT Accounting cost estimates actual costs cost estimates actual costs cost estimates actual costs cost estimates actual costs cost estimates actual costs asset and cost information asset value information (consider depreciation) cost estimates actual costs Customer cost constraints Pricing guidance cost estimates actual costs cost estimates actual costs cost estimates actual costs Out In Out In Out In Out In Out In Out In Out In Out In Out In Out In Out In Out IT Service Continuity Management Availability Management Capacity Management Service Level Management Security Management Configuration Management Release Management Change Management Charging Problem Management Incident Management Service Desk

Problems

straight line capital vs expense depreciation reducing balance by usage direct vs indirect Material Labour Accomodation Overhead transfer (other cost centres) Administration Cost Cost-plus Pricing going rate Market Price Fixed Price service cost info only (no charging) Billing service pricing info only (notional charging) service price billed (full charging) Direct Method Used resources Proportional Output-related Hardware Software

Cost type

Activities

Relationships

Financial Management for IT Services

Increased confidence in setting and managing budgets. More efficient IT resources use General Higher Customer satisfaction as they know what they pay for Investment decisions can be made on accurate information Increased professionalism of staff within the IT organisation Ability to estimate IT running costs Of Budgeting Reducing risk of overspending Comparison of actual costs to estimated costs Guarantee of money to provide agreed Service Levels

Benefits

Availability of IT Service costs Better IT and Business decisions give cost-effective outcomes Ability to account for all IT expenses Of IT Accounting Demonstrate under- or over-consumption of services in financial terms Maximising the value/cost of IT services Costs of NOT making specific investments visible

Oversee implementation of Financial Management process Assist in setting up the budgets and the accounting plans Assist with Budgeting, IT Accounting and Charging policies IT Finance Manager

Forms the basis to implement Charging

Roles
Of Charging

The ability to recover IT costs in a fair manner Method of balancing IT Services quality and quantity Customer needs Influence demand for IT Services and so behaviour of Customer

Framework where known costs are recorded and allocated to specific Customers, activities, or other categories net profit before tax and interest / total assets less current liabilities average increase in profit / investment

Cost Model Return on capital employed (ROCE) Return on investment (ROI)

Terminology KPIs

Performance against set targets How do the IT Customers perceive the Charging methods? Actual costs versus Budget Are all costs being accounted for?