Thavron: Service Costing for the Board Room to Finance

Translating IT to Finance Language
Allocations and Reporting Service Costing
How to keep everyone happy without pulling your
hair out……
ITFMA Spring 2016 Chicago
Copyright 2016 Thavron Solutions, LLC

Types of Reporting
• Financial by Cost Type
• Opex/CapEx
• Scenario
• Run/Grow/Transform
• Build/Run
• The Things that IT/Technology does
• Application TCO
• The Things that the Business Consumes
• Business Unit allocations
• Location
• By Headcount
• By Company/Division
• Etc….

Data Structure and Design hold the Key
It is all about Linkages….

Data Structure and Design hold the Key
It is all about Linkages….
…………….. And meta data

Design Linkages & Meta Tags before you start to build…

It all starts with Financial Data
Depreciation/
Amortization
Hardware
Expense
Software
Expense
Maintenance Labor Other
Facilities/Power Outside Services G&A

High Level Cost Model Hierarchy
Business Unit
Business Service
Applications/Projects/TCO
Things IT Does

The Things that IT/Technology Does
Application Development
Support & OPS
LoB Software
Cloud Apps
Storage
Tier 1-4
Cloud
Cloud Archive
Remote Backup
End User
Mobile Device
Workspace
Deskside Support
Communication
Circuits
Usage
Network
Lan
Wan
Voice
Other Network
Cloud Network
Data Center
Enterprise
Other Facilities
Security & Compliance
Security Policy
Compliance
Disaster Recovery
Compute
Windows
Linux
Mainframe
Database
Delivery
Proj Mgt
Client Mgt
Ops Center
Cloud Ops

Cost Drivers: Network
Depreciation: Per
Asset/Spread to
Port
Hardware:
Per Asset/Spread
to Port
Software:
Per Site/Spread to
Ports
Maintenance:
Per Site/Spread to
Ports
Labor:
Per Site/Spread to
Ports
Other:
Spread to Port
Unit Cost:
Per Port or Per
Site

Cost Drivers : Security & Compliance
Depreciation:
N/A
Hardware:
Per Asset/Site -
Spread
Software:
Per license/Site-
Spread
Maintenance:
Per license/Site-
Spread
Labor:
Total - Spread
Other:
Total- Spread
Spread over all
services

Cost Drivers : Data Center
Depreciation:
Per Site/Per
Asset - Spread
Hardware:
Per Site/Per
Asset - Spread
Software:
Total or Per Site-
Spread
Maintenance:
Total or Per Site-
Spread
Labor:
Total or Per Site
- Spread
Other:
Total or Per Site-
spread
Cost per R/U,
Cost per Site

Cost Drivers : Communication
Bandwidth:
Total per
Connection/Site
Depreciation:
N/A
Hardware: N/A
Software:
Total or Per Site
Maintenance:
Total or Per Site
Labor:
Total or Per Site
Other:
Total or Per Site
Percentage
split to DC and
Sites

Cost Drivers : Storage
Depreciation:
Assigned to
appropriate
hardware-
Hardware: Per asset
Spread over class of
hardware by usage
Software: total or by
Platform
hardware
Maintenance: total
or by Platform
hardware
Labor: total spread
Per class of hardware
supporting/by Tier
Other:
Total- Spread Evenly
Unit Cost per
Tier or Platform

Cost Drivers : Compute
Depreciation:
Assigned to
appropriate
hardware
Hardware: Per Asset-
hardware
Software: Total per
OS or Class
hardware
Maintenance: Total
per OS or Class
hardware
Labor: Total
Per class of hardware
supporting
Other:
Total Spread
Unit Cost per
Class of logical
instance ( Virtual
Wintel Instance,
Physical Solaris
Instance, etc..)

Cost Drivers : Application Development
Depreciation:
N/A
Hardware:
N/A
Software:
Spread unless application
specific
Maintenance:
Software Maintenance
Costs Spread unless
application specific
Labor:
Total Per Activity Group,
spread to Application
Type or Family
Other:
Total Spread
Cost per
Application
impacted, cost
per Application
Family or Type

Cost Drivers : Delivery
Depreciation:
N/A
Hardware:
N/A
Software:
Spread or per Activity
Group
Maintenance:
Software Maintenance
Costs Spread or Per
Activity Group
Labor:
Spread or per Activity
Group
Other:
Total Spread
Cost per
Activity Group

Cost Drivers : End User
Depreciation:
To Appropriate
Hardware Class
Hardware:
To Appropriate
Hardware Class
Software:
Spread across
Hardware Class
Maintenance:
Spread across
Hardware Class
Labor:
Per Activity
Group
Other:
Total Spread
Cost per
delivery unit,
Cost per class
of Hardware

PC Service Cost Modeling
GL Account
6879099
GL Account
6879123
GL Account
6879224
Service Desk
OnSite
Support
PCs
PCXX23
PCXX34
PCXX45
PCXX56
PCXX67

Labor
Software
Hardware
Service Desk
OnSite
Support
PCs
PCXX23
PCXX34
PCXX45
PCXX56
PCXX67

Labor
Software
Hardware
Service Desk
OnSite
Support
PCs
PCXX23
PCXX34
PCXX45
PCXX56
PCXX67
1: 1 per PC

Labor
Software
Hardware
Service Desk
OnSite
Support
PCs
PCXX23
PCXX34
PCXX45
PCXX56
PCXX67
1: every up to 10 PCs

Labor
Software
Hardware
Service Desk
OnSite
Support
PCs
PCXX23
PCXX34
PCXX45
PCXX56
PCXX67
Tickets of type “PC” spread evenly

Here is what the customer is expecting….
$750/month

Here is what the customer is expecting….
$600/month

So when this happens…...
$750/month

And then this happens.….
$650/month

Or This Can happen……
Joe’s Windows Server : $400/month
Sue’s Windows Server : $400/month
Pat’s Windows Server : $400/month

Or This Can happen……
Joe’s Windows Server : $600/month
Pat’s Windows Server : $600/month

TCO Service Costing:
Facilities
Labor
Hardware
DataCenter
Storage
Server
hardware
SoftwareSoftware
Physical
Server TCO
Virtual
Server:
AAJoe123
AASue225
AAPat334$1200
$400/each

TCO Service Costing:
Facilities
Labor
Hardware
DataCenter
Storage
Server
hardware
SoftwareSoftware
Physical
Server TCO
Virtual
Server:
AAJoe123
AAPat334$1200
$600/each

Putting the pieces together…
Type of TCO Critical Linkage
Application • Application to Logical Server
• Logical Server to Storage
• Development Time to
Application
• Server and Storage to
Datacenter
• Software to Application
• Software Maint to Application
• Databases to Application
• Support Tickets to Application

Putting the pieces together…
Type of TCO Critical Linkage
Logical Server Class • Logical Server to Physical
Server Clusters ( if virtual)
• Depreciation per class
• Storage to Server Class
• Software to Server Class
• Build and Support labor per
Server Class
• Hardware Maint to Server Class
• Datacenter for Server Class
• Network per Server Class

What’s in a name?
Business Services are where the
conversation between IT and the
Business is framed.
Services should be defined so they
are descriptive to the usage and
not to the technology

Business Services
Client Computing
Basic Workspace
Technical Workspace
Shared Workspace
Traveling Workspace
Copy/Print/Fax/Scan
Desk Side Support
Connectivity
Network Access
Remote Access
Comm & Collab
Conferencing
Collab Workspace
Messaging
Email
Phone & Voicemail
Line of Business
Strategy & Plan
Design & Build
Market & Sell
Take Orders
Deliver Products
Service Customer
Mgmt & Support
Finance
HR
Legal
Facilities
Communications
Prof Services
Prog & Proj Mngt
Bus Process Mngt
Ent Architecture
Hosting
App Hosting
PaaS
DBaaS
CaaS
SaaS
App & Integration
App Design & Dev
App Support
Quality Assurance

Recipe for Service Success
• To Succeed you must:
– Know who your customers are
– Know what your customers goals are
• And enable them to complete them without being a burden
– Know what your customers problems are
• And solve them seamlessly

Exposing Actual Costs to Consumers is Dangerous
• Not all Cost components are on a 1:1 ratio
• Unit rates are the most important number for a consumer
• If you are doing show back or charge back, calculate the
Consumer cost based on a fixed unit rate- not on actual costs.
• Variance is for INTERNAL IT “run the business” decisions- not
for exposure to the external consumer.

A little on the planning and process…..

Preparing for the Service Costing process
• Documented Use Cases for the system
• Test Cases for model and reports
• 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

Socialization
• Communication Plan
• Communicate
• Share the end tie outs – no need to drag everyone through the
mud

Operationalizing Service Costing
• Regular governance processes
– Fallout
– Unexpected changes in source data
– Technical failure
– Include some feedback /corrective
mechanism

Hardware
Capital
Expense
Maintenance
Software
License
Maintenance
Labor
External
Internal Capital
Internal Expense
Services
Vendor
Cloud
Other
Gen Admin
Miscellaneous
Travel
Telecom
Network
Voice
Application
Development
Support & OPS
LoB Software
Cloud Apps
Storage
Tier 1-4
Cloud
Cloud Archive
End User
Mobile Device
Workspace
Service Dsk
Communication
Circuits
Usage
Delivery
Proj Mgt
Client Mgt
Ops Center
Cloud Ops
Network
Lan
Wan
Voice
Other Network
Cloud Network
Data Center
Enterprise
Other Facilities
Security & Compliance
Security Policy
Compliance
Disaster Recovery
App TCO
Compute
Windows
Linux
Mainframe
Database
Business Applications
Applications for End User Services Internal IT Applications
Finance
IT
HRSales Marketing
Line of Business
Strategy & Plan
Design & Build
Market & Sell
Take Orders
Deliver Products
Service Customer
Mgmt & Support
Finance
HR
Legal
Facilities
Communications
Client Computing
Basic Workspace
Technical Workspace
Shared Workspace
Traveling Workspace
Copy/Print/Fax/Scan
Desk Side Support
Connectivity
Network Access
Remote Access
Comm & Collab
Conferencing
Collab Workspace
Messaging
Email
Phone & Voicemail
App & Integration
App Design & Dev
App Support
Quality Assurance
Prof Services
Prog & Proj Mngt
Bus Process Mngt
Ent Architecture
Hosting
App Hosting
PaaS
DBaaS
CaaS
SaaS
Distribution Manufacturing
Business Services
Business Units
IT Services
Buckets
Service Cost Modeling

Discussion
Follow up questions?
Nan Braun
nbraun@thavronsolutions.com
(877) 462-6290 / http://thavron.com /@ThavronSol

Catalog &
Asset
Management
Service
Costing &
Billing
Product &
Project
Management
Supplier /
Vendor
Management
Service
Portfolio
A Framework for Business Service Success
Financial LifecycleProduct Lifecycle
TM

Thavron: Service Costing for the Board Room to Finance

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