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Troy DuMoulin, VP, Research & Development

Troy is a leading ITIL® IT Governance and Lean IT authority with a solid and rich background in Executive IT Management consulting. Troy holds the ITIL Expert certifications and has extensive experience in leading IT Service Management (ITSM) programs with a regional and global scope.

He is a frequent speaker at IT Management events and is a contributing author to multiple ITSM and Lean IT books, papers and official ITIL publications including ITIL’s Planning To Implement IT Service Management and Continual Service Improvement.

 

The Guide

"This blog is dedicated to making sense out of the shifting landscape of IT Management. Just when we thought we had a good handle on managing technology, the job we thought we knew is being threatened by strange acronym’s like ITIL, CMMI, COBIT, ect.. Suddenly the rules have changed and we are not sure why. The goal of this blog is to offer an element of sanity and logic to what can appear to be chaos."


Hitch Hiker's Guide to the Galaxy

"In many of the more relaxed civilizations on the Outer Eastern Rim of the Galaxy, the Hitch Hiker’s Guide has already supplanted the great Encyclopedia Galactic as the standard repository of all knowledge and wisdom, for though it has many omissions and contains much that is apocryphal, or at least wildly inaccurate, it scores over the older more pedestrian work in two important respects.

First, it is slightly cheaper: and secondly it has the words DON’T PANIC inscribed in large friendly letters on its cover."
~Douglas Adams

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Thursday, August 22, 2013

Practitioner Radio 45 - Service Based Costing

In The End It All Comes Down To A Simple Question, “How Much Does It Cost?”

As we work with our customers to define their services in support of strategic and tactical goals for Service Management a lot of focus is placed on understanding how to define value in the form of outcomes. Often the basis for this work is to enable processes such as Request Fulfillment, Portfolio Management, Service Level Management and Business Relationship Management.

All of these practices are important for improving the Customer Experience and to define IT value from a customer / consumer perspective. However, they each depend on a critical data point “The Cost” as a basic input for making strategic decisions.

In fact it is difficult to get very far on working on your Service Catalog or standing up a Business Relationship Management function before someone asks this very relevant and practical question. I am sure you would agree that a key premise of effective IT Management is understanding and managing the cost of Service Delivery.

Join Chris and I as we delve into this interesting by elusive topic.

Show Notes:

  • Service Based Costing – touched on in Ep 8 in March 2011 talking about financial management. Today focusing in on when you define ‘services’ what does that cost?
  • If you look at what you pay for services you realize they’re often tied to other parts of services which means you need one for the other so it’s hard to cut costs
  • What’s the trigger for asking questions about budget? Usually a crisis or a pain
  • No-one wants to talk financial transparency when the money is freely flowing
  • Looking at decade of trending funding is flat (investment in IT)
  • IT budget tends not to go granular enough when looking at where costs go
  • Need to compare what outsourced services /processes can do for cost next to internal IT – can’t do without knowing cost of each part of internal IT functions
  • As markets get tighter have to do better accounting in order to make decisions
  • Can’t make decisions about where to cut back without knowing what each part costs and what else it’s linked to
  • Today we have fragmented processes everywhere.  Could we create enterprise IT groups and gain efficiencies? To work this out you need to know cost breakdowns.
  • Some services are core or direct some are indirect which you have to overlay
  • It’s an art but have to have logic behind it
  • Where do you get the data to do this?
  • Is there a general template to help people can get started? In ITIL kit at high level, also recent paper in PinkLink “defining, modelling and costing in IT Services”
  • Blog Article: Developing A Service Based Cost Model
  • Accuracy of data is now the question (we have lots of data)
  • Still having to ‘bucket’ very difficult to get completely granular but more buckets better than 1 or 2
  • Technology is no good often without the associated services so cost has to take all into account
  • Culturally this may not be welcomed – exposing true costs. People don’t like transparency
  • It’s only a matter of time ‘til you’ll need to provide these figures though

Additional Resources

ROI of ITIL? - Practitioner Radio Episode 29 - Justifying Service & Process Improvement

Troy’s Thunderbolt Tip of the Day: “The moment you begin your journey towards Service orientation start preparing for the next question - it’s about Service Based Costing. It’s just a matter of time.”

Troy’s and Chris’s Thoughts What Are Yours

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” ~Henry Ford


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Posted by Troy DuMoulin on 08/22 at 06:09 PM
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Don't Panic

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