Cost Coverage
Determine the scope of IT services (for example, essential, subscription, and discretionary services) whose costs are allocated to business units.
Improvement Planning
Practices-Outcomes-Metrics (POM)
Representative POMs are described for Cost Coverage at each level of maturity.
- 1Initial
- Practice
- Monitor cost practices ad hoc, occurring on a best endeavour basis.
- 2Basic
- Practice
- Apply the accounting and allocation model to key IT projects.
- Outcomes
- Key IT projects are covered.
- The accounting model is applied to the key or most visible IT projects initiated by business units.
- Metric
- % of IT projects covered by the AA model.
- 3Intermediate
- Practice
- Use the AA model for IT essential services (email, telephony, etc.).
- Outcomes
- Essential IT services are covered by the AA model.
- IT and the rest of the business gain better understanding of the IT costs.
- Metrics
- IT Productivity: [Cost per standard IT output].
- % of IT costs charged back to business by projects and services.
- Practice
- Use the AA model to track key IT costs of all business units.
- Outcome
- Separation of project and infrastructure costs is established.
- Metrics
- IT Productivity: [Cost per standard IT output.]
- % of IT costs charged back to business by projects and services.
- Practice
- Apply chargeback accounting at the essential IT service level to standardize IT charges to all business units.
- Outcome
- The IT function is better able to control costs, as required by the rest of the business.
- Metrics
- IT Productivity: [Cost per standard IT output].
- % of IT costs charged back to business by projects and services.
- 4Advanced
- Practice
- Expand the AA model application to major subscription and discretionary services.
- Outcomes
- The IT function is better able to justify the introduction of innovative discretionary services for the business through confidence in cost recovery.
- The IT function is able to better plan the IT portfolio (e.g., “run the business” IT costs vs. “change the business” IT costs).
- Metrics
- Relative IT Intensity: [Ratio of IT inputs consumed to staff employed].
- Relative Value Added: [IT attributable Value Added per IT Resource Unit (VAITRU)].
- Business Productivity: [Cost per standard Business output].
- Practice
- Apply chargeback to all IT services.
- Outcome
- Chargeback is embedded as one of several ways that IT shares project and program level funding with other business units.
- Metrics
- Relative IT Intensity: [Ratio of IT inputs consumed to staff employed].
- Relative Value Added: [IT attributable Value Added per IT Resource Unit (VAITRU)].
- Business Productivity: [Cost per standard Business output].
- Practice
- Introduce incentives to business end users for demand management and cost reduction.
- Outcome
- The IT function is better able to justify the introduction of innovative discretionary services for the business through confidence in cost recovery.
- Metrics
- Relative IT Intensity: [Ratio of IT inputs consumed to staff employed].
- Relative Value Added: [IT attributable Value Added per IT Resource Unit (VAITRU)].
- Business Productivity: [Cost per standard Business output].
- Practice
- Apply all appropriate Global Accounting Alliance (GAA)and other appropriate best practice standards.
- Outcome
- The IT function is able to better plan the IT portfolio (e.g., “run the business” IT costs vs. “change the business” IT costs).
- Metrics
- Relative IT Intensity: [Ratio of IT inputs consumed to staff employed].
- Relative Value Added: [IT attributable Value Added per IT Resource Unit (VAITRU)].
- Business Productivity: [Cost per standard Business output].
- 5Optimized
- Practice
- Optimize the IT accounting model continually, to ensure that the full scope of IT services is always covered by the accounting model.
- Outcomes
- By having all IT services covered by the accounting model the organization can accurately quantify the value provided by IT.
- This comprehensive and accurate view of IT costs enables the IT function to continually support strategic decisions.
- Metrics
- % of relevant costs directly charged back to Bus.
- Absolute Value Added: [IT attributable Value created (ITVA) per IT Resource Unit (ITRU)].
- Net Present Value (NPV) of IT projects.