Building an Effective Service Catalog - Nicus Software · Building an Effective Service Catalog • Session Abstract One of the first steps in implementing a cost model and a show-back

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ITFMA 2018 San Francisco

Building an Effective Service Catalog


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Building an Effective Service Catalog

• Session Abstract

▪ One of the first steps in implementing a cost model and a show-back or chargeback process is

to define the services that IT provides to customers and how that data will be socialized in

reporting and invoices. In this session, we will provide some basic foundational information

about service costing and chargeback. We will also discuss the pros and cons of various

approaches and the impacts of various levels of granularity.

• Outline

▪ ITFM Framework

▪ Service Catalog Definition, Objectives, Examples

▪ ITSM versus ITFM – A sometimes competing and overlapping focus

▪ Service Catalog Development – Collaborative between IT and Finance

▪ Managing Complexity


ITFM 101:

▪ ITFM is basically allocated views of IT

spend

▪ Each view is generated by a separate

module

▪ Each view provides value to key

stakeholders

▪ Services View: Provides insight into

technology service costs and unit rates.

Enables Service managers to drive

down unit rates and benchmark against

outside suppliers and piers

▪ Consumer View: Provides insight into

what organizational entities benefit

from IT and helps the CIO demonstrate

value

▪ Application View: Provides the Total

Cost Ownership (TCO) of Applications

and enables application rationalization

exercises

▪ Business Capability View: Provides

insight into costs to support business

capabilities. Helps the CIO align

existing spend and new IT investments

more directly to business functions

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IT Financial Management – Practitioner's Framework


IT Services are consumed directly by End Users or by Applications

End Users, Applications,

or Direct

Storage

Databases

Data Center

Compute

NetworkManaged

Work Station

Security

Disaster Recovery

Direct to Consumer

What is an IT Service Catalog

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IT Service Catalog

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IT Service Catalog Example

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IT Service Costing

• Service Definition Requirements

▪ Measurable – Services must be reasonably easy to measure (consumption)

▪ Pricing – Services should be reasonably easy to price and establish cost

▪ Understandable - Services should be meaningful to consumers

▪ Enable Change – Consumers should be able to change their consumption


Service Catalog

Salads

• Create salad offerings

• Can have higher prices for

special toppings or protein

Salad Bar >

• Charge out individual

salads depending on the

ingredients

• Users know they can

reduce their price based

on toppings

< Menu

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Service Catalog

Unix Servers are often broken out

separately due to higher acquisition and

maintenance costs. They can also

require higher rates of data center

power.

Unix Servers

• Avoid going to extreme of treating

all servers equally

• Group similar assets into services

• Allow for cost components to be

layered in based on the type of

asset

Asset-level >

• Allocate D&A, power, labor to

individual assets

• Assets are charged to

consumers

• Effectively, each asset is

treated like a separate service

< Services

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Service Catalog

Tableau

• Bundle common or non-material software packages into End User

Services or a Desktop/Laptop service

• Avoid long, itemized bills

Software-level >

• Charge out individual

software packages that

are highly specialized or

material in cost

• Educate users on how to

return unused licenses

and reduce their bill

< Services

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ITSM versus ITFM

ITSM

IT ServiceManagement

ITFM

IT FinancialManagement

ITFM Focus:

• Service Costing & TCO

• Transparency

• Enable Cost Allocation,

Chargeback or Show-back

• Benchmarking

• Application Rationalization

ITSM Focus:

• Service Strategy

• Service Design

• Service Transition

• Service Operation

• Continual Service

Improvement

IT Service

Catalog

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Client 1 Client 2 Client 3 Client 4

IT Spend $ $100M $385M $190M $400M

Model Type Decentralized Centralized Centralized Centralized

# of Services

(Distinct Approved

Rates)

76 50 100 450

# of Budget Lines <2,000 <2,000 <1,000 1,800

Steps in Cost Model ~100 ~25 ~50 ~100

General

MethodologyDouble Step Down Layered Layered Layered

Business Functions

• Budget Collection

• Demand Forecast

• Service Costing

• Rate Setting

• Invoice

• Actual Service

Cost/True-Up


• Service Costing

• Rate Setting

• Invoice

• Actual Service

Cost/True-Up

• Invoice

• Actual Service

Cost/True-Up


• Demand Forecast

• Service Costing

• Rate Setting

• Invoice

• Actual Service

Cost/True-Up

Real World Examples – Service Catalogs

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• Service Definition Questions & Discussion Items

▪ Collaborative exercise between IT and Finance

▪ Price & Measure - Remember that for every IT Service you define, you will need to be able to

map costs to it and choose a reasonable metric to develop rates and bill consumers

▪ Verify Finance can measure (or reasonably allocate) the costs that are incurred by IT to deliver

the service

▪ Verify IT can measure the consumption of the service

▪ Both are needed in order to produce Cost of Service, Set Rates, and Bill Consumers

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• What Drives Complexity?

▪ Every force in your universe drives you toward greater complexity – only you can police it

▪ Desire to make it a science instead of an art/desire for accuracy – Personalities…

▪ IT – will focus on technical accuracy

▪ Finance – will focus on financial accuracy

▪ Consumers – are often in a position to “insist” upon a great deal of granularity

▪ Forces impacting service catalog development (different audiences/different perspectives)

▪ How granular should you get? Use a phased approach for expansion

▪ What’s the sweet spot?

▪ Data availability & quality

▪ Directionally Correct versus Precisely Wrong

▪ Break out detailed services only when the cost differential is material – or will influence the

decision maker

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IT and Finance often have different perspectives on the service

catalog and service costing methodologies.

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SIMPLICITY COMPLEXITY

• Easier to digest, more actionable

• Easier to maintain & repeat

• Management gravitates toward simplicity

SIMPLICITY

• Accuracy often drives complexity up; lack of

accuracy can damage credibility

• Poor data quality can drive complexity

• Accountants and IT gravitate toward complexity

COMPLEXITY


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IT Finance should take the following items into consideration to strike

a balance and avoid alienating stakeholders

Credibility

Materiality

Thresholds

Fit with

StrategyDesired

Behavior


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• Service Definition Questions & Discussion Items

▪ Many organizations have some form of a Service Catalog

▪ Use of Service Catalog is more than just for Service Costing and Chargeback (ITFM and ITSM)

▪ Should you use the Services already defined?

▪ What if your company doesn’t have a service catalog?

▪ What if the service structure doesn’t “work”? Why would it not work?

▪ Focus today on how to determine the best list of services for Costing and Chargeback

purposes…

▪ May be a subset or summarization of a formal IT Service Catalog

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Q&A

Documents

Building an Effective Service Catalog - Nicus Software · Building an Effective Service Catalog • Session Abstract One of the first steps in implementing a cost model and a show-back