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Accounting and Allocation

AA

The Accounting and Allocation (AA) capability is the ability to define and manage the policies, processes, and tools used for calculating the costs of IT and distributing them across the organization.

Structure

AA is made up of the following Categories and CBBs. Maturity and Planning are described at both the CC and the CBB level.

AModel Development

A1Cost Coverage

Determine the scope of IT services (for example, essential, subscription, and discretionary services) whose costs are allocated to business units.

A2Accounting Policy and Cost Recovery Model

Develop policies for calculating costs associated with the consumption of IT services, and develop a model for cost allocation and recovery.

BDeployment

B1Decision-Making Transparency

Manage data on usage volumes and associated costs to provide visibility to inform decision-making across business units.

B2Governance and Communication

Apply appropriate oversight and communication approaches to ensure that business unit stakeholders understand and have buy-in to cost allocation and recovery policies.

Overview

Goal & Objectives

An effective Accounting and Allocation (AA) capability aims to:

  • Promote better understanding of the cost drivers for IT services.
  • Enable business units to fund directly the provision of new IT services that might not otherwise have occurred because of a limited IT budget.
  • Motivate managers across the organization to make sound economic decisions — for example, by subsidizing newer systems and imposing additional charges for the use of legacy systems.
  • Encourage users to avoid expensive IT activities when slightly less convenient but far cheaper alternatives are available.

Scope

Definition

The Accounting and Allocation (AA) capability is the ability to define and manage the policies, processes, and tools used for calculating the costs of IT and distributing them across the organization.

Improvement Planning

Practices-Outcomes-Metrics (POM)

Representative POMs are described for AA at each level of maturity.

2Basic
  • Practice
    Apply a cost allocation model to a prioritized list of IT services.
    Outcome
    Resource management is improved since IT accounting can track IT assets, expenses, and capital expenditures using transparent accounting logic.
    Metric
    Percentage of IT services covered by the cost allocation model.
  • Practice
    Introduce governance of IT costs in collaboration with the Finance function.
    Outcome
    The IT function benefits from the Finance function's expertise.
    Metric
    IT function participation in an IT–Finance forum or governance body.
  • Practice
    Report costs associated with the consumption of IT services.
    Outcome
    Business units can begin to understand usage patterns and cost drivers.
    Metric
    Percentage of IT costs that are covered by IT cost accounting and the cost allocation model.
3Intermediate
  • Practice
    Expand the tracking and reporting of usage statistics to a wider scope of IT services using the accounting and cost allocation model.
    Outcome
    Business units gain better understanding of the relationship between IT consumption and IT costs when usage trends and unit costs are visible. Users are encouraged to adopt sustainable usage behaviours.
    Metric
    Percentage of IT costs charged back (or shown back) to business units.
  • Practice
    Promote a standardized IT accounting and cost allocation model for formal adoption by corporate Finance.
    Outcome
    IT cost control can be more readily managed within existing corporate financial systems.
    Metric
    Yes/No adoption by corporate Finance.
  • Practice
    Promote participation of stakeholders from IT, Finance, and other business units in governing cost accounting and the allocation model.
    Outcome
    Individual business units have a better understanding of IT consumption costs.
    Metric
    Percentage of business units represented in the governance forum.
4Advanced
  • Practice
    Promote responsible business unit behaviour by incentivizing desired IT service consumption patterns.
    Outcome
    Business units have more control over managing the costs of their IT service usage.
    Metric
    Percentage of IT services whose consumption patterns are influenced by incentivization schemes.
  • Practice
    Make accounting and cost allocation a key component of the IT services catalogue, providing customers with full visibility on all charges.
    Outcome
    Business units are fully able to steer IT service usage based on price and on the required quality and volume of service.
    Metric
    Percentage of services in the IT service catalogue for which unit service costs are provided.
5Optimized
  • Practice
    Continually optimize cost accounting and allocation to ensure that it covers all IT services and their associated costs.
    Outcome
    The organization can continually evaluate and compare the costs of providing IT services.
    Metric
    Percentage of relevant costs charged back (or shown back) directly to business units.
  • Practice
    Continually ensure that cost accounting and allocation forms a key input to operational and strategic decision-making regarding IT services.
    Outcome
    Investments to optimize the costs of various IT services will remain aligned to changes in business priorities.
    Metric
    Percentage of the discretionary IT budget devoted to cost optimization initiatives.

Reference

History

This capability was introduced in Revision 18.10 as an update to Accounting and Allocation (16).