Accounting and Allocation
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).