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Understanding Your True IT Costs

“Running IT like a business” is an idea that has been around for years. With the increasing integration of technology into the business, the expectations of how IT is managed are rising. In order to meet those expectations, IT management must understand their true cost of IT.

No surprises here – isn’t this the basis for running a business? Why, then, is it such a challenge? Here are the typical reasons why:

  • Many IT leaders make the mistake of treating IT costs as an annual budget exercise.
  • Too often, costs land in a particular budget for convenience more than logic. And costs, on their own, are of limited use for purposes of managing a service.

How can you begin to face this challenge? The first step in “running IT like a business” must be to align costs with the services provided.

  • Understanding the component costs of these services – server hardware, server management, service desk, desktop support, etc. – is necessary in order to build a reasonably accurate service cost.
  • It is important to understand that “the Business” has a fairly simplistic view of IT services; Applications, Service Desk, Collaboration capabilities (video conferencing, web conferencing, etc.), etc. Effectively describing what is in a service as well as the drivers of cost in that service is necessary for success in any business. IT is no different.

In order to remain relevant, the IT organization must begin paying more than simple lip service to the idea of “running IT like a business”. This begins with an understanding of its costs of services provided.

Learn more about WGroup's perspective on 5 disruptive trends impacting business and IT strategy

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John W. (Bill) Fowler, Principal Consultant at WGroup, works with some of the world’s largest Fortune 500 outsourcing agreements to ensure they are market competitive and supported by contractual language, pricing structures, and service quality.
 

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