Cost Redux

Blog Queries: Why are my IT costs seemingly so difficult to capture and explain, especially in the context of business drivers and consumption?

 This is what I’ve heard a number of executives refer to as the “black hole” phenomenon. IT seems to be a great hole of expense where little or nothing quantifiable in terms of information as to what is produced for it comes out. The Managed Services model for IT is neatly addresses this issue.

 Simply put, in this model instead of managing itself by technology, IT manages itself by services, recognizable and purchasable by the customer. These services may be sourced internally, externally or in some combination that helps to optimize its value proposition (check FAQ’s for Value Proposition).

 Once the Managed Services model has been operationalized, IT is running like a business, where customers buy services at a certain service level and cost. Whether or not the company chooses to institutionalize a chargeback mechanism for services used by each business unit or not, the information will be available for a business unit leader to see how much of what services their business is using and respond appropriately to manage the cost.

 Related follow-on question: What about new solutions – like projects? How does that work in a Managed Services model?

 In the Managed Services model, delivery of projects (delivery of business solutions) is a service, like the delivery of a desktop computer. There are different processes for the creation of requirements, estimation of cost, business case development and delivery, but it is an IT service nonetheless (including performance metrics and measures).

 Please refer to the diagram on “Basics” for a high-level visual.