IT services can be defined and classified to understand their essential nature. Defining services involves outlining the capabilities that enable business processes, which can include activities like application development, operations, and facilities management. Classifying services involves differentiating them as technical or professional and grouping them as core, subscription-based, or discretionary. Modeling services involves using configuration management to map IT systems and components to the services they support through object and data modeling. This helps present the business and technology relationships between services and allows for activity-based costing that accounts for direct, indirect, and unabsorbed costs to derive the total and unit costs of delivering each service. Evolving technologies and business models are disrupting traditional IT cost structures

1. Mathan Anto Marshine

2. Define IT Services
One or more IT or professional capabilities that enables a business process. It could be Application Development,
Operations, Facilities Management, IT Support, Hosting, Security, Service Delivery, IT or Architectural Planning Etc.
Classify Services
Classification in IT needs to be done at various levels. Differentiate system and service separately. Service can be
further classified into two types as Technical or Professional Services.
Also it is necessary to understand services from three different classifications 1. Core Services 2.Subcription/License
based services & 3. Discretionary Services.
Model (System &
Service)
Services and system enabling a business process is defined and classified, next critical step is to model those
services using Configuration management process. Through object and data modeling techniques database of CI ,
its attributes and relationship that connects them to be created to present business and technology view/
ABC Costing
Derive all related costs and expenses at a defined IT activity or service. Further all costs needs to be accounted. i.e.
direct cost: one which could directly attributable to IT activity or service, indirect cost/shared cost: Cost which
needs to be shared across number of customers & Unabsorbed costs: Ex: General administrative expenses.
Drivers & Allocation
Methodology
Define drivers for each category of cost. Particularly shared cost and follow a business relevant allocation
methodology.
Total Cost <-> Unit Cost
Break down the Total Cost of a service into small unit. Cost Unit is breakdown of entire service cost into a unit
which could be allocated to a consumer.
Overview
Overview Define Classify Model ABC Unit Cost Conclusion

3. Will Cost Structure of IT Industry undergo drastic
change?
Overview Define Classify Model ABC Unit Cost Conclusion
• Emerging Social Media, Analytics, Mobility and Cloud
disrupted in service costing in two ways. One consumer
business process touched by one of these forces in
SMAC leading different cost structure of IT services.
Second, re-skilling of workforce to adapt to newer
technologies.
Disruptive
SMAC
• Though non-linear business talked in Indian IT context
for decades, TCS, Infosys & Polaris seems to be early
entrant with right focus on long term cost structure.
Product business follow different investment and return
cycle and strategies compared to service line of business.
TCS planned investments in digital space and Infosys
and Polaris opened separate subsidiary to focus
products.
Non-Linear
Model
• Global slow down pushed governments in west towards
more localization of IT, leading VISA restrictions,
incentive of local hiring. Thus traditional cost structure
oriented around global delivery model needs a relook
Global
Geopolitical
Changes
Comprehensive
IT financial
management
with new set of
relevant metrics

4. It’s often said “In order to improve something first
define it.”
Overview Define Classify Model ABC Unit Cost Conclusion
• One or more IT or professional capabilities that enables a business process is called IT
Services. Often IT Service is beyond a enabler of a business. It cut across organizational and
functional boundaries.
•Common categories of services Application development, Operations, Facilities Management,
IT Support, Hosting, Security, Service Delivery, IT or Architectural Planning.
•Definition will be the first and foremost step as these services needs to be clearly defined in
SLA and agreed between two parties.

5. Classify to understand the Service lines in depth
Overview Define Classify Model ABC Unit Cost Conclusion
IT
Services
Software
Hardware
Facilities
Technical
Professional
Core i.e. service required by all
business stake holders
Subscription i.e. Service utilized
by particular business functions
Discretionary i.e. pay-you-as-you-
go basis, charged only if client
request for special activity
IT System
IT Services

6. IT Service Model
Overview Define Classify Model ABC Unit Cost Conclusion
• Map IT Systems to IT Services: IT system is collection of components, map each and every component
to the corresponding services.
Example: For IT service “Email”, IT systems “MS Exchange”, “Lotus notes” to be mapped
• Map IT Components to IT Systems: This step is the function of ITIL configuration management process
and this step serves as a hub for information sharing and processing. Each Configuration item(CI) is an
asset. Following are the classification of basic components
Physical CI: Server, Switch, Application, database, documents etc
Logical CI: IT Services, Systems, etc
CI Attributes: CPU Speed, Memory, Version, Author, Purchasing date etc
CI Relationships: Parent-Child, hosts, Installed-on, provides data feed etc

7. Configuration Management – ITIL Framework
Overview Define Classify Model ABC Unit Cost Conclusion

8. Service Model Diagram
Overview Define Classify Model ABC Unit Cost Conclusion
Enterprise Business
Process
Ex: Credit Processing
IT Infrastructure
Ex:
1.Webserver
2.Application
server
3.Network Layer
IT Data Layer
Ex:
1.Application
database
2.Dataware
house
3.Report Server
IT Application
Layer
1. Core banking
system like
Finacle etc
2. ERP GL System
Common Process & Services (Like Security Layer, Communication Layer etc)
IT enabler

9. Service Based Costing
Overview Define Classify Model ABC Unit Cost Conclusion
All IT Costs
Cost Elements
Costing Model Unit
Total Cost
Of IT
Services
Customer? Location? Service?
Direct Costs Indirect Costs Unabsorbed Costs
External
Service Software People Transfer Hardware Facilities
•Direct Cost: Cost which could be directly
attributable to the services
Example: MS Exchange server Software License
cost for “Email Service”
•Indirect Cost: Cost which incurred on behalf of all
or a number of services. Cost of which has to be
apportioned and shared.
Example: Internet Usage cost for “Email Service”
•Overhead Cost: Cost which could not be directly
attributable to the services
Example: General Administrative expense

10. Service Based Costing
Overview Define Classify Model ABC Unit Cost Conclusion

11. Conclusion
Overview Define Classify Model ABC Unit Cost Conclusion
Yes, Approach to
Service based
costing need
drastic change
No
•Software/hardware as Service: Pay as you Use: Infrastructure as
service, Software as Service has shifted the cost structure from fixed
to variable based on usage.
Example: From MS Exchange server Software License cost for “Email
Service”, Now MS 360 on cloud where in Organization pay for only
usage in a given period.
•Non-Linear business model: Focus on Non-linear business models to
have own IP has changed the cost structure on investment as well as
operations side.
Example: Good IP needs at least 1-2 years from R&D division before
it hits the market for revenue generation unlike services where
revenue generation based milestone billing.
Hence, Cost drivers for various underlying cost elements have
undergone change. Organizations needs to adapt quickly to these
new drivers to stay relevant and efficient to have better financial
control over cost.

12. THANK YOU