Transitioning to an IT as a Service (ITaaS) model will have far-reaching effects on how IT Finance structures, analyzes and manages costs and resources. It will also open up new communications between IT Finance and controllers in individual business units to optimize EMC’s IT investments, shape new priorities and create new cost efficiencies.
ITaaS essentially requires that we shift from a centralized, cost-center-based budget to a service-cost-based, financially-transparent system. In other words, rather than using siloed categories, we need to reshuffle how we group and apportion IT costs around the ITaaS offerings and how they are consumed. In this way, we will be able to share with business units exactly what it costs to provide services, so they can make their own IT expenditure choices.
Under the traditional IT model, Finance administers a lump-sum budget for IT operations and oversees employee, capital and operating expenses by breaking them down into 60 to 70 separate cost centers based on function. For instance, costs for Telecom falls into one cost center; Help Desk falls into another; and Database another.
But this doesn’t work for charging each individual business unit for the IT services they consume because costs for providing an ITaaS service offering, such as email or TelePresence spans multiple cost centers, including Telecom, Help Desk, and Network.
To accomplish this, IT Finance organizations need to use a service-based cost strategy to map all the costs associated with each ITaaS service offering across functions and IT groups. Read our recently-published Financial Transparency white paper to see how EMC IT tackled this.
To visualize this new costing approach, picture how an electric utility apportions costs to calculate each customer’s monthly bill. The utility’s finance department might oversee the costs for the operation of each individual power plant much like IT Finance does for individual cost centers. To bill each customer for their monthly power consumption, the utility needs to calculate a price based on the amount of power drawn from multiple sources and the amount of power the customer consumed.
This is similar to how we approached charging back ITaaS services to each business unit. When all is said and done, this has many advantages for IT Finance organizations and controllers:
• Financial transparency enables us to have more value-added conversations with our business users based on their new visibility into service costs.
• While business units will not be able to choose the core IT services they use, the consumption information and dialogue we have with them will enable us to renegotiate service contracts based on our users’ needs and preferences.
• IT Finance employees have an opportunity to expand their roles with regard to mapping resources to ITaaS offerings; benchmarking our performance; and with pricing services, billing clients, and administering and maintaining cost models.
• We’ll still be controlling a gross IT spend, but our net budget will be much smaller as we cross charge the business units for services consumed.
• Last, but not least, through standardized service offerings, we expect to gain substantial cost efficiencies and have an IT investment more tailored to the needs of the business.
We are breaking new ground and learning as we go along. Central to this is keeping the lines of communication open to allow the business units and all of IT to help guide the financial transparency process that is essential to IT as a Service.Tags: private cloud