What Is Service Cost?
Service Cost information is
determined by the wants
and needs of the business.
Each business has their
own set of requirements,
and these metrics expand
and mature with increased
use. It is simply the
apportioned cost of IT
operations to the business
consumers and service
products.
Need to Know
Many businesses do not
understand there are
different perspectives
regarding Service Cost.
They try to “force” IT cost
into a single metric often
times using methods that
do not fairly allocate or
measure cost to the
business.
Manage Costs
To manage costs, you
need to understand them.
This requires different cost
perspectives linked to the
business processes, fair
and equitable cost
allocation, and measures
expressed in business
terms.
IT Cost Transparency:
Service Cost
"You can't manage what you don't measure." -- Peter Druker
Cost Perspectives
As with any type of cost, there are
different perspectives as to how the cost
is viewed. For Service Cost, there are
many different perspectives as well, but
they are basically two groups: Internal
(letter A in the diagram) and External
(letter B in the diagram). The Internal
perspectives deal with the costs related to
IT, and External perspectives deal with
the costs to the business. Internal IT
costs have generally been easy to
determine in that IT makes investments
in equipment, software, and has an
annual operational budget.
What is difficult is how these internal
IT costs “map” to the external (from IT)
business costs. The reason for this
difficulty is that almost all IT resources
(human and physical) are shared. Even in
the instance that a single server is
dedicated to one type of service; the
costs that would be attributed to the
server are most likely all shared with
other servers. This situation is further
complicated in a modern web services
environment where a server is also using
other servers for its information.
Linking IT Costs
The linking of IT costs to the business depends on business knowledge, sensitive internal information
regarding IT costs, and the ability to map costs to the external (from IT) business. This is not a
process that can be automatically done by any product; it requires designated information from the
business. What is needed is a product that is capable of blending business, technical, and cost
information in a manner that is easy to use and business friendly.
RG Solutions® knows that every business situation is unique and was designed for the rapid and
consistent formation of business costs based on the IT operational cost. It understands that servers
are not composed of just one measured cost, but rather a mixture of shared costs that must be fairly
and consistently allocated to the business processes. It also knows that servers usually do not stand
alone but use other servers to form its service offering.
Cost Transparency Process
It is not possible to define a single cost transparency method that can be used for each business.
Each business is unique and will not only have different reporting structures, but will also have the
need of different cost perspectives for its internal consumers and service products. However, each
business will use the same approach to achieve IT cost transparency.
RG Solutions® knows how to identify the usage of each server and how that server is shared with
others. This identification is based on the operational processing and external business structures that
have been provided by the business. When given the appropriate cost information about IT shared
resources, RG Solutions® is able to fairly and consistently allocate these costs to the internal
consumers and service products, and this will result in the linking of IT operations to the business
processes.
