Three steps to make IT run like a business

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For example: The cost of an email service includes hardware, software, facilities, labour, and possibly external services. Some of these are direct costs while others are indirect.

Once the total cost of providing email has been determined, it can be divided by the cost driver, in this case number of users, to come up with the unit cost for email. This framework is illustrated below (see Figure 1).

Step 3: Invoicing customers
The final step in cost transparency is invoicing customers for their consumption of IT resources.

This enables IT customers to link their IT consumption directly to business value and make intelligent decisions about their demand.

Each month, cost center managers should each receive a line-item invoice that details their consumption of IT resources and outlines their actual costs for the month by service.

This information can be checked against the budgeted amounts for the services to determine any variance.

Together, the service catalogues and invoices become extremely valuable components for IT demand management because they enable business executives and managers to have detailed discussions with their IT relationship or account managers about their requirements for IT services.

CIOs are also able to quickly determine the optimum strategy for delivering shared IT capabilities.

At budgeting time, rather than looking at last year's expense plus some growth factor, managers can look at specific demand and cost drivers and make rational decisions about future demand.

This all leads to more accurate forecasting and planning and enables business managers to look at the business value of each service.

This IT-as-a-service approach provides customers with a detailed understanding of the costs of products and services.

Craig Symons is vice president and principal analyst serving CIOs at Forrester Research

Pic: Jenni from the bloccc2.0

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Copyright © 2012 IDG Communications, Inc.

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