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Cor Winkler Prins
CEO
cor.winklerprins@4me.com
Service Cost Tracking & Internal Chargeback
Elements to track for each service:
▪ Cost of time spent
▪ Cost of assets
▪ Cost of underpinning services
Service Costs
▪ Requires time tracking capability
▪ Should cover 100% of time spent by people in IT department,
including, time spent in...
▪ Cost of assets should reflect depreciation of assets
▪ Must include amortization of maintenance/support contracts
Cost o...
▪ Typically for application services
▪ Covers cost of the capacity of infrastructure services
they use, such as:
▪ Servers...
Cost of Underpinning Services
Service Costs
ERP (SAP)
Personal Computing
Network Printing
CRM (Salesforce)
SLA Support User
Service Targets Satisfaction...
EMA Study Highlights
Asked about IT Service Cost Tracking, respondents answered:
▪ 92% - Significantly improves relationsh...
Cost Tracking White Paper
https://www.4me.com/white-papers
▪ To enable chargeback (or showback) the costs of an IT
department need to be attributed to a service, as well as
a custom...
1. For each service, register each customer’s consumption
2. Extract the costs related to both a service and a customer, t...
Example
▪ Customers:
▪ Sales
▪ Marketing
▪ Services:
▪ Email
▪ CRM
Service Cost per Customer Calculation
Step #1
Service Unit Sales Marketing
Email # of Employees 40 20
CRM # of Licenses 30 10
Determine service consumption by c...
Step #2
Service Sales Marketing Shared
Email 15,000 8,000 12,000
CRM 50,000 25,000 30,000
Unspecified 20,000 40,000 200,00...
Step #3
Service Sales Marketing
Email
15,000 + (12,000 * 40) / (40 + 20) =
23,000
8,000 + (12,000 * 20) / (40 + 20) =
12,0...
Step #4
Service Sales Marketing
Email
23,000 + 20,000 *
23,000 / (23,000 + 72,500) =
27,817
12,000 + 40,000 *
12,000 / (12...
Step #5
Service Sales Marketing
Email
27,817 + 200,000 * 27,817 /
(27,817 + 87,683 + 22,787 + 61,713) =
55,634
22,787 + 20...
Service Cost per Customer Calculation
Consumption Email CRM
Sales 40 30
Marketing 20 10
Email CRM Unspecified Customer Cos...
Cor Winkler Prins
CEO
cor.winklerprins@4me.com
Service Cost Tracking & Internal Chargeback
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2021 09-30 service cost tracking and internal chargeback Slide 1 2021 09-30 service cost tracking and internal chargeback Slide 2 2021 09-30 service cost tracking and internal chargeback Slide 3 2021 09-30 service cost tracking and internal chargeback Slide 4 2021 09-30 service cost tracking and internal chargeback Slide 5 2021 09-30 service cost tracking and internal chargeback Slide 6 2021 09-30 service cost tracking and internal chargeback Slide 7 2021 09-30 service cost tracking and internal chargeback Slide 8 2021 09-30 service cost tracking and internal chargeback Slide 9 2021 09-30 service cost tracking and internal chargeback Slide 10 2021 09-30 service cost tracking and internal chargeback Slide 11 2021 09-30 service cost tracking and internal chargeback Slide 12 2021 09-30 service cost tracking and internal chargeback Slide 13 2021 09-30 service cost tracking and internal chargeback Slide 14 2021 09-30 service cost tracking and internal chargeback Slide 15 2021 09-30 service cost tracking and internal chargeback Slide 16 2021 09-30 service cost tracking and internal chargeback Slide 17 2021 09-30 service cost tracking and internal chargeback Slide 18 2021 09-30 service cost tracking and internal chargeback Slide 19
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Ideally, the ITSM application should be able to offer senior management an overview of the cost of each service that the organization makes available to its employees. These services are, after all, the tools that the employees rely on to be successful and a lot of money is spent on them. Being able to generate a breakdown of the costs by service is an important first step toward controlling these costs. How this can be done in a service management application is explained in the first part of this presentation.
The second part focuses on the next step: breaking down the service costs by customer. This allows an organization to charge back the costs of services to the departments that use them. Most organizations struggle with internal chargeback, but it is relatively straightforward to do this efficiently and more precisely using the service management application.

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2021 09-30 service cost tracking and internal chargeback

  1. 1. Cor Winkler Prins CEO cor.winklerprins@4me.com Service Cost Tracking & Internal Chargeback
  2. 2. Elements to track for each service: ▪ Cost of time spent ▪ Cost of assets ▪ Cost of underpinning services Service Costs
  3. 3. ▪ Requires time tracking capability ▪ Should cover 100% of time spent by people in IT department, including, time spent in meetings, training holidays, sick leave ▪ Requires project management functionality to track time spent on strategic initiatives Cost of Time Spent
  4. 4. ▪ Cost of assets should reflect depreciation of assets ▪ Must include amortization of maintenance/support contracts Cost of Assets
  5. 5. ▪ Typically for application services ▪ Covers cost of the capacity of infrastructure services they use, such as: ▪ Servers ▪ Databases ▪ Storage ▪ Datacenter Network Cost of Underpinning Services
  6. 6. Cost of Underpinning Services
  7. 7. Service Costs ERP (SAP) Personal Computing Network Printing CRM (Salesforce) SLA Support User Service Targets Satisfaction Rating Cost Risk 84% 78% 81% 87% 4.7 2.1 4.5 4.1 $54K $14K $127K $89K 3% 2% 1% 12% High None Low Medium
  8. 8. EMA Study Highlights Asked about IT Service Cost Tracking, respondents answered: ▪ 92% - Significantly improves relationship with business ▪ 81% - Significantly reduces IT service costs ▪ 83% - Increases IT budgets ▪ 60% - Best performed on a unified platform Source: EMA IT Service Cost Research Valerie O'Connell, Research Director ENTERPRISE MANAGEMENT ASSOCIATES (EMA) August, 2021
  9. 9. Cost Tracking White Paper https://www.4me.com/white-papers
  10. 10. ▪ To enable chargeback (or showback) the costs of an IT department need to be attributed to a service, as well as a customer ▪ The costs of an IT department can be related: 1. to a service and a customer 2. only to a service 3. only to a customer 4. neither a service or a customer Cost Attribution
  11. 11. 1. For each service, register each customer’s consumption 2. Extract the costs related to both a service and a customer, the costs related to a service but not a customer, the costs related to a customer but not a service, and the costs related to neither a service or customer (i.e. overhead) 3. Spread costs related only to a service over the customers of this service by % of usage by each customer 4. Spread costs related to only a customer over the customer’s services by % of the customer’s sub-total cost per service 5. Attribute overhead costs to a service and customer by % of each customer’s sub-total cost per service Service Cost per Customer Calculation
  12. 12. Example ▪ Customers: ▪ Sales ▪ Marketing ▪ Services: ▪ Email ▪ CRM Service Cost per Customer Calculation
  13. 13. Step #1 Service Unit Sales Marketing Email # of Employees 40 20 CRM # of Licenses 30 10 Determine service consumption by customer
  14. 14. Step #2 Service Sales Marketing Shared Email 15,000 8,000 12,000 CRM 50,000 25,000 30,000 Unspecified 20,000 40,000 200,000 Grand total: 400,000 Extract cost by service and/or customer where possible = Overhead
  15. 15. Step #3 Service Sales Marketing Email 15,000 + (12,000 * 40) / (40 + 20) = 23,000 8,000 + (12,000 * 20) / (40 + 20) = 12,000 CRM 50,000 + (30,000 * 30) / (30 + 10) = 72,500 25,000 + (30,000 * 10) / (30 + 10) = 32,500 Spread shared service costs over customers
  16. 16. Step #4 Service Sales Marketing Email 23,000 + 20,000 * 23,000 / (23,000 + 72,500) = 27,817 12,000 + 40,000 * 12,000 / (12,000 + 32,500) = 22,7867 CRM 72,500 + 20,000 * 72,500 / (23,000 + 72,500) = 87,683 32,500 + 40,000 * 32,500 / (12,000 + 32,500) = 61,713 Spread customer costs not related to a service over the customer’s services
  17. 17. Step #5 Service Sales Marketing Email 27,817 + 200,000 * 27,817 / (27,817 + 87,683 + 22,787 + 61,713) = 55,634 22,787 + 200,000 * 22,787 / (27,817 + 87,683 + 22,787 + 61,713) = 45,574 CRM 87,683 + 200,000 * 87,683 / (27,817 + 87,683 + 22,787 + 61,713) = 175,366 61,713 + 200,000 * 61,713 / (27,817 + 87,683 + 22,787 + 61,713) = 123,426 Spread overhead cost over the customer’s services Grand total: 400,000
  18. 18. Service Cost per Customer Calculation Consumption Email CRM Sales 40 30 Marketing 20 10 Email CRM Unspecified Customer Costs Total Sales 15,000 50,000 20,000 85,000 Marketing 8,000 25,000 40,000 73,000 Unspecified Service Costs 12,000 30,000 200,000 242,000 Total 35,000 105,000 260,000 400,000 Customer Overview - Sales Service Direct Service Costs Shared Service Costs Indirect Customer Costs Overhead Total Email 15,000 8,000 4,817 27,817 55,634 CRM 50,000 22,500 15,183 87,683 175,366 Total 65,000 30,500 20,000 115,500 231,000 Customer Overview - Marketing Service Direct Service Costs Shared Service Costs Indirect Customer Costs Overhead Total Email 8,000 4,000 10,787 22,787 45,574 CRM 25,000 7,500 29,213 61,713 123,426 Total 33,000 11,500 40,000 84,500 169,000 Grand total: 400,000
  19. 19. Cor Winkler Prins CEO cor.winklerprins@4me.com Service Cost Tracking & Internal Chargeback

Ideally, the ITSM application should be able to offer senior management an overview of the cost of each service that the organization makes available to its employees. These services are, after all, the tools that the employees rely on to be successful and a lot of money is spent on them. Being able to generate a breakdown of the costs by service is an important first step toward controlling these costs. How this can be done in a service management application is explained in the first part of this presentation. The second part focuses on the next step: breaking down the service costs by customer. This allows an organization to charge back the costs of services to the departments that use them. Most organizations struggle with internal chargeback, but it is relatively straightforward to do this efficiently and more precisely using the service management application.

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