Questions That Result in Actionable Cost Analyses

 
 
By Karen A. Frenkel  |  Posted 01-16-2015 Email
 
 
 
 
 
 
 
 
 
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    Capturing What You Need
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    Capturing What You Need

    How much of what you capture is what you intend to measure? Are you getting 100% of IT costs per the general ledger? Does it include cost drivers for an application, such as software licenses and development projects? If not, you could understate your cost and that can lead to misguided decisions within IT and over-consumption by the business in general.
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    Level of Detail and Drill Down
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    Level of Detail and Drill Down

    Can you drill down from the total cost of an application to arrive at total server costs? Can you then see unique costs for each server? This matters because some stakeholders want proof of what is driving costs and specifics about where to focus further investigation.
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    Slicing and Dicing What You Measure
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    Slicing and Dicing What You Measure

    Can you project spend regarding growth versus transforming the business? Can you project server costs by size, platform and location? Dimensionality can increase understanding, context and specifics for action.
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    Interplay of IT Costs
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    Interplay of IT Costs

    To help manage different functional areas' impact on each other in the applications and services to deliver, ask: Which vendors are driving costs to what projects? And which applications drive costs to which business units?
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    Costs in Context
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    Costs in Context

    Are you showing costs in contexts that matter to your stakeholders? Can you show development and run costs to application owners?
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    Reconciling Back to Systems of Record
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    Reconciling Back to Systems of Record

    Can you demonstrate how your cost analysis reconciles back to systems of record? It's important to show that your cost analysis ties to the total for IT cost centers in the general ledger. Which general ledger transactions are included in hosting costs for each app?
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    Factors Your Stakeholder Can Control
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    Factors Your Stakeholder Can Control

    Are you modeling costs so that what you show a stakeholder includes factors within their control? Other questions to ask: If the business unit changes consumption, will its allocated costs change? If an application owner correctly estimates storage and server capacity, will they reduce the reported total cost of ownership?
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    Help Stakeholders Understand Cost Drivers
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    Help Stakeholders Understand Cost Drivers

    Can you show stakeholders how you arrived at your costs? What weightings did you use to distribute data center power costs to servers? What data did you use to derive those costs?
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    Up-to-Date Data
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    Up-to-Date Data

    Timely data is crucial. How old is the IT asset data you are using? Is your analysis updated each month? This matters because static data points lose their impact over time and you might make decisions based on data that describes the previous situation.
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    Frequency and Consistency of Measures
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    Frequency and Consistency of Measures

    Are you consistently measuring the same costs? How often? Frequently what matters more than the absolute cost of something is a trend, so think movie versus snapshot. Trends can reveal the cost impact of goals you set for decisions you make. Also, being consistent in what you measure can help distinguish actual cost changes from changes in corporate accounting.
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    Correlating Cost Data With Other Metrics
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    Correlating Cost Data With Other Metrics

    Most decisions are not made on the basis of cost alone. Can your cost data be correlated with other metrics, such as the cost of allocated but unused storage? What about the cost of virtual servers with less than 5% peak CPU utilization over the past three months?
 

All IT organizations perform current cost analyses, but what value do they really provide? Favorable outcomes of IT cost analysis can include better decisions, accelerated decision making, changing the conversation with the business department, influencing behavior, and improving reporting by making it more efficient, according to technology business management firm Apptio. These results involve persuasion–getting people on the same page and inciting action. "Persuasion may depend on how well others understand the information, trust it, find it relevant and see specifics they can use," said Dave Wilt, senior director of products at Apptio. "The more your IT cost and analytics can help you persuade others, the more value it can provide to you." The completeness, granularity, dimensionality, context and many other aspects of your cost analysis can have a huge impact on the way you do business. A server owner's eyes may glaze over when looking at a general ledger cost center and account categories, for example, so it is important to show stakeholders costs in the context that matters to them. Here are questions to ask yourself to ensure that your cost analysis is relevant and actionable.

 
 
 
 
 
Karen A. Frenkel writes about technology and innovation and lives in New York City.

 
 
 
 
 
 

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