Follow this model for effective IT cost
management Page 2 of 2
Bringing cost management into play
Answering the three questions above leads to the following additional questions that ultimately produce cost management actions:
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If organizations address these questions on an ongoing basis, coherent cost management actions result. Developing those actions relies on the information that the category view provides.
The implementation process
The functional and category cost views drive a basic IT cost model. That model may not address all the cost management challenges presented. You may face the need to view IT cost information on a project, application, business process, or fixed/variable basis. Although this model doesn’t specifically address those needs, it does provide the foundation required to address them.
Even more importantly, it does so in a manner that is easily implemented in most organizations. Most standard financial reporting systems can provide functional and category cost views; consequently, implementing the cost model presented is not complex.
The chart of accounts is the key to implementing the category view. Work with your organization’s finance group to expand the chart to meet your needs. Most financial systems allow for expansion of the standard chart, and the process for doing so should be fairly simple.
The functional view often closely matches the IT organizational structure, so the pertinent financial system data element is the cost center or department. First, design your structure to meet your needs, and then work with finance to establish the cost center/departments in the financial systems. This process is also straightforward.
Once you’ve made the changes to your financial systems, you must take the necessary steps to ensure that expenses are correctly coded according to your new cost structure. At a minimum, this will require documentation of the changes and some degree of training. At most, it may require you to review and possibly modify your current expense-handling processes.
Final thought
No CIOs want to overly focus on the cost view of their organization, but business reality dictates that CIOs must manage their costs at least as effectively as any other operating unit.
A simple cost model that provides actionable information provides the basis for effective cost management. If such a model isn’t in place, implementing one will allow you to reap benefits far outweighing the effort it requires.
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This article sounds like it was written by a college professor with absolutely no real life business experience.
Posted by anonymous on Thursday, November 06 2003 05:54 PM