Business Procedures
A cost management
process that deals with the
IT resources used for
service delivery must
incorporate methods based
on established business
practices. These methods
can include but are not
limited to budgets,
forecast, and cost/price
analysis.
Solid Information
The data needed for
effective IT service cost
management must be
based on methods that
accurately represent the
usage of resources by the
business consumer. The
only effective means to do
this comes from a usage
based metering system,
and the use of any other
type of system leads to
consumer frustration,
disenchantment, and an
unwillingness to
participate.
Assigned Accountability
While IT directly controls
the cost of service
delivery, they are a
service that only exists for
the business consumer.
That is to say, if the
business consumer where
not there, there would be
no need for IT. Linking IT
costs to the business
forces the business
consumer to become an
active participant in the
effective cost management
of IT resources.
Usage Based Metering
There are several methods that are available for the allocation of IT costs to the business, but only
one is fair and consistent in its approach to cost allocation: Usage Based Metering. A metering system
not only determines who is using what when, but also allows for the fair and consistent allocation of
the associated costs to the processing.
RG Solutions® incorporates a robust usage based metering framework that use ABC methods for
the usage allocations to the various business processes using IT resources. For some processing, it is
necessary to incorporate other usage(s) to ensure that an accurate cost picture is maintained. The
result is the ability to identify and understand usage and costs with different business and IT
perspectives.
Unit Cost
In order to have a good understanding of the costs for any processing, there must be two things
provided to the business consumer: Quantity and Unit Cost. For the quantity consideration, RG
Solutions® uses the metering framework to deliver the number of Standard Months of processing
provided to the business consumer. A Standard Month is a measure of power over time, and is
similar to the kilowatt hours that are used by electric companies.
For the Unit Cost, RG Solutions® uses either a user supplied unit cost, or it uses a calculated unit
cost as determined by usage forecasts and the contents of the Cost Pools (in the Resource Catalog).
Regardless of the method used, there can be many different unit costs that apply to the used
processing. The product not only determines the correct unit cost to be used, but incorporates that
cost information directly into the resulting data. Itemized costs are directly tracked along with all
usage values for each business process.
Better Business Control
In the past, many costing systems provided information to the business processes. That is to say,
they would use business techniques such as budgets, forecasts, and such for the control and use of
the information. The problem was that in most cases the information being provided to the business
systems were not based on a solid allocation method such as metering, and as a result the
information was often misleading, not appropriate, and generally ignored.
RG Solutions® provides information that is consistent, fair, and most of predictable. It does its
calculations based on long term predicators that result in unit costs that do not vary much with time.
The result is a stable process that has the confidence of the business consumers and promotes the
active participation of both the consumer and IT.
