Every Service Costing Model Has to change at some point. When and How to rationalize and socialize those changes are important points to consider before the project gets started

1. Rationalizing and Socializing Allocation
Changes
Copyright 2014 Thavron Solutions, LLC

2. Thavron Biases
• Systems Thinking
• Universal Business Service Model
• Manufacturing and Supply Chain roots
– Lean (MESA Lean Manufacturing Strategic Initiative Guidebook author, Toyota Method via GM/Delphi)
• Modeling/Frameworks
• Common Sense
Copyright 2015 Thavron Solutions, LLC

3. Every Model is a Chargeback Model
IT costs impact
everyone’s bottom
line. This makes
any change in IT
costs important.
Copyright 2015 Thavron Solutions, LLC

4. What Causes IT Costs to Change?
Consumption changes
Data Changes
Model/Allocation changes
Copyright 2015 Thavron Solutions, LLC

5. The Business Changes their Behaviors
• Changes in headcount
• M&A/Divestiture
• New products
• Retiring products
• Changes in process
• …
Copyright 2015 Thavron Solutions, LLC

6. When the Data goes bad
• Data Linkages
• Data Structure
• Data Corruption
Copyright 2014 Thavron Solutions, LLC

7. Validate with monthly processes
• Regular governance processes
– Fallout
– Unexpected changes in source data
– Technical failure
– Include some feedback /corrective
mechanism
Copyright 2014 Thavron Solutions, LLC

8. Every Model will Change
• Organizational Changes
• Philosophical Changes
• Infrastructure Type changes
– Not linkages in the data
• Service Lifecycle impact
• Fundamental changes in source
data
Copyright 2015 Thavron Solutions, LLC

9. Everyone has a model
Input Calculation Output
Copyright 2015 Thavron Solutions, LLC

10. Not every change is an event
• Define what is a material event for your company
– Any change to budgeted charges?
– Percent Variance tolerance ( 3-5% common)
– Street impact measures
Copyright 2015 Thavron Solutions, LLC

11. When it goes wrong……
• Business loses confidence in:
– Model
– Team
– Process
– IT
Copyright 2015 Thavron Solutions, LLC

12. Pitfalls
• Didn’t really understand the old
method
• Data changed between versions
• Don’t really understand the new
method
• Model implemented wasn’t
properly validated and was
wrong
Copyright 2015 Thavron Solutions, LLC

13. When It really is an event…….
Copyright 2015 Thavron Solutions, LLC

14. When It really is an event…….
Make it an Event!
Copyright 2015 Thavron Solutions, LLC

15. The Ugly
• Tedious
• Financial Validations
• Time/resource intensive if the changes are extensive
• Excel will be your best friend
Copyright 2015 Thavron Solutions, LLC

16. The Bad
• Almost always time constrained
• Finance Team does not have expertise to validate model code
logic
• People forget to budget for the staffing to test and validate
• Team has never built or executed test cases before
Copyright 2015 Thavron Solutions, LLC

17. The Good
Success Stories
– Change from no model , no services
to implemented service costing
– Change from infrastructure only
charges to Business Service charges
– Change from a “broken” model to
“fixed” model
– Migrate from one vendor system to
another
– Migrate from Excel to COTS package
Copyright 2015 Thavron Solutions, LLC

18. How to make it work
• Plan to Plan
• High level Plan before you budget
– How many moving pieces?
– Availability and Condition of the data?
• Be honest about the skills and capabilities of your own staff
• Leverage internal expert knowledge in IT System change where
possible
• Training
Copyright 2015 Thavron Solutions, LLC

19. What do you need?
• Documented Use Cases for the system
• Test Cases that are adaptable to work for before and after
– If it is a full system change, will have to duplicate and update the test
cases
• Validate both the model logic and the outcomes
• Have a plan and know what can be validated outside of the
system
• Socialization with the consumers
Copyright 2015 Thavron Solutions, LLC

20. Socialization
• Communication Plan
• Communicate
• Share the end tie outs – no need to drag everyone through the
mud
• Bundle it up and make it infrequent
Copyright 2015 Thavron Solutions, LLC

21. Keys to Success
• Clearly Defined Use and Test
Cases
• Plan for Testing and Validation
• Know yourself and be honest
about it
• Staff appropriately
Copyright 2015 Thavron Solutions, LLC

22. Discussion
Copyright 2015 Thavron Solutions, LLC
Follow up questions?
Nan Braun
nbraun@thavronsolutions.com
765.252.4509 / http://thavron.com /@ThavronSol