DS6  Identify and Allocate Costs
Control over the IT process of ...
identifyimg and allocating costs
    with the business goal
    of ensuring a correct awareness of the costs attributable to IT services
     
      is enabled by
      • a cost accounting system which ensures that costs are recorded, calculated and allocated to the required level of detail and to the appropriate service offering

        and takes consideration

        • Critical Success Factors that leverage
        • specific IT Resources and is measured by
        • Key Performance Indicators

Record of Assessment
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  Control Objective:

Define and manage service levels. 
CRITICAL SUCCESS FACTORS
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Description
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End-users, business process owners and the IT organisation share a common understanding of costing requirements and cost allocation
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Direct and indirect costs are identified, captured, reported and analysed in a timely and automated manner
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Costs are charged back on the basis of utilisation and recorded in charge-back principles that are formally accepted and regularly re-assessed
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Cost reporting is used by all parties to review budget performance, to identify cost optimisation opportunities and to benchmark performance against reliable sources
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There is a direct link between the cost of the service and the service level agreements
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The results of cost allocation and optimisation are used to verify benefit realisation and are fed back into the next budget cycle
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KEY GOAL INDICATORS
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Continued cost optimisation of information services by the IT function
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Continued cost optimisation of information services by users
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Increased ratio of proven benefits to actual costs of IT services
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Index of efficiency, based on a comparison of internal with external provider costs
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Business management understanding/acceptance of IT costs and service levels
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KEY PERFORMANCE INDICATORS
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Percentage of variance between budgets, forecasts and actual costs
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Percentage reduction in information service rates
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Percentage increase in optimisation of user service requests
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Percentage increase in optimisation of IT resources usage
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Number of cost optimisation initiatives
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  Conclusions:
* Non-existent 
There is a complete lack of any recognisable process for identifying and allocating costs with respect to information services provided. The organisation has not even recognised that there is an issue to be addressed with respect to cost accounting and there is no communication about the issue.
* Optimised 
Costs of services provided are identified, captured, summarised and reported to management, business process owners and users. Costs are identified as chargeable items and support a charge-back system that appropriately bills users for services provided, based on utilisation. Cost details support service level agreements. There is strong monitoring and evaluation of costs of services, where variances from budget amounts are identified and discrepancies are detailed and appropriately acted upon. Cost figures obtained are used to verify benefit utilisation and are used in the organisation's budgeting process. Information services cost reporting provides early warning of changing business requirements through intelligent reporting systems. A variable cost model is utilised, derived from volumes processed for each service provided. Cost management has been refined to a level of best practices, based on the result of continuous improvement and maturity modelling with other organisations. External experts are leveraged and benchmarks are used for cost management guidance.
* Managed and Measurable 
Information services cost management responsibilities and accountabilities are defined and fully understood at all levels and are supported by formal training. Direct and indirect costs are identified and reported in a timely and automated manner to management, business process owners and users. Generally, there is cost monitoring and evaluation, and actions are taken when processes are not working effectively or efficiently. Action is taken in many, but not all cases. Cost management processes are continuously being improved and enforce best internal practice. Information services cost reporting is linked to business objectives and service level agreements. There is involvement of all required internal cost management experts.
* Defined Process 
There is a defined and documented information services cost model. The model is institutionalised and communicated, and informal training is established. An appropriate level of awareness exists of the costs attributable to information services. An automated cost accounting system exists, but is focused on the information services function rather than on business processes.
* Repeatable but Intuitive 
There is overall awareness of the need to identify and allocate costs. Cost allocation is based on informal or rudimentary cost assumptions, e.g., hardware costs, and there is virtually no linking to value drivers. Cost allocation processes are repeatable and some of them begin to be monitored. There is no formal training and communication on standard cost identification and allocation procedures. Responsibility is not assigned.  
* Initial / Adhoc 
There is a general understanding of the overall costs for information services, but there is no breakdown of costs per user, department, groups of users, service functions, projects or deliverables. There is virtually no cost monitoring, with only aggregate cost reporting to management. There is no charge-back process or system in place to bill users for costs incurred in delivering information services.
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