I suppose that all of us go to a restaurant with friends or colleagues. And after a fun time, the waiter brings the check. Further, the issue can be resolved in several ways:
- Method one, "gentleman's". 10–15% is added to the amount of the check “for tea” to the waiter, and the resulting amount is divided equally among all males.
- Method two, "socialist". The check is divided equally among everyone, regardless of how much they ate and drank.
- Method three, "fair". Everyone turns on the calculator on their phone and begins to calculate the cost of their meals plus a certain amount "for tea", also individual.
The restaurant situation is very similar to IT spending in companies. In this post, we will focus on the distribution of costs between departments.
But before diving into the abyss of IT, let's go back to the restaurant example. Each of the above methods of “cost allocation” has its pros and cons. The obvious disadvantage of the second method: one could eat a vegetarian Caesar salad without chicken, and the other a rib eye steak, so the amounts can vary significantly. The disadvantage of the “fair” method is a very long calculation process, and in the amount of money it always turns out less than in the check. Common situation?
Now let's imagine that we were having fun in a restaurant in China, and the check was brought in Chinese. All that is clear there is the amount. Although some may suspect that this is not an amount at all, but the current date. Or, suppose the case takes place in Israel. They read from right to left, but how do they write numbers? Who can answer without Google?
Why allocation is necessary for IT and business
So, the IT department provides services to all divisions of the company, in fact, sells its services to business divisions. And, although there may not be formal financial relationships between divisions within a company, each business division must at least understand how much it spends on IT, how much it costs to launch new products, test new initiatives, etc. Obviously, it is not the mythical “modernizer, patron of system integrators and equipment manufacturers” who pays for the modernization and expansion of infrastructure, but business, which must understand the effectiveness of these costs.
Business units vary in size as well as the “intensity” of IT resource use. Thus, dividing the costs of modernizing the IT infrastructure equally between departments is the very second method with all its disadvantages. The "fair" method in this case is more preferable, but it is too labor-intensive. The most optimal option looks like a “quasi-fair” option, when costs are allocated not to a penny, but with some reasonable accuracy, just as we use the number π as 3,14 in school geometry, and not the entire sequence of numbers after the decimal point.
Estimating the cost of IT services is very useful in holdings with a single IT infrastructure when merging or separating part of the holding into a separate structure. This allows you to immediately calculate the cost of IT services in order to take these amounts into account when planning. Also, understanding the cost of IT services helps to compare different use cases and ownership of IT resources. When men in multi-thousand-dollar suits talk about how their product can optimize IT costs, increase what needs to be increased, and decrease what needs to be reduced, assessing current IT service costs allows the CIO not to blindly trust marketing promises. , but to accurately assess the expected effect and control the results.
For business, allocation is an opportunity to understand the cost of IT services in advance. Any business requirement is measured not as an increase in the total IT budget by so many percent, but is defined as the amount for a specific requirement or service.
real case
The key "pain" of the CIO of a large company was that it was necessary to understand how to distribute costs between business units and offer participation in IT development in proportion to consumption.
As a solution, we developed an IT service calculator that was able to allocate total IT costs first to IT services and then to business units.
There are actually two tasks: to calculate the cost of an IT service and to allocate costs among business units using this service, according to certain drivers (“quasi-fair” way).
At first glance, this may look simple if, from the very beginning, IT services have been properly described, information has been entered into the CMDB configuration database and ITAM IT asset management system, resource-service models have been built and an IT service catalog has been developed. Indeed, in this case, for any IT service, you can determine what resources it uses and how much these resources cost, taking into account depreciation. But we are dealing with ordinary Russian business, and this imposes some restrictions. So, CMDB and ITAM are absent, there is only a catalog of IT services. Each IT service in the general case is an information system, access to it, user support, etc. IT service uses infrastructure services such as "Database Server", "Application Server", "Data Storage System", "Data Transfer Network", etc. Accordingly, to solve the tasks it is necessary to:
- determine the cost of infrastructure services;
- allocate the cost of infrastructure services to IT services and calculate their cost;
- determine the drivers (coefficients) for distributing the cost of IT services to business units and allocate the cost of IT services to business units, thereby distributing the amount of IT department costs among the rest of the company.
All annual IT costs can be represented as a bag of money. From this bag, something is spent on equipment, migration work, upgrades, licenses, support, employee salaries, etc. However, the complexity lies in the accounting procedure for accounting for fixed assets and intangible assets in IT.
Consider, for example, a project to modernize the SAP infrastructure. As part of the project, equipment and licenses are purchased, work is carried out with the help of a system integrator. When closing the project, the manager must draw up paperwork so that accounting equipment gets into fixed assets, licenses into intangible assets, and other design and commissioning work is written off as deferred expenses. Problem number one: when registering as fixed assets, the customer's accountant does not care what it will be called. Therefore, in fixed assets, we get the asset "UpgradeSAPandMigration". If, within the framework of the project, a disk array was upgraded, which has nothing to do with SAP, this further complicates the search for cost and further allocation. In fact, any equipment can be hidden behind the “UpgradeSAPandMigration” asset, and the more time has passed, the more difficult it is to understand what was actually bought there.
Similarly, with intangible assets, which have a much more complex calculation formula. Additional complexity is added by the fact that the moment of launching the equipment and putting it on the balance sheet may differ by about a year. Plus, depreciation is 5 years, but in fact the equipment can work more or less, depending on the circumstances.
Thus, it is theoretically possible to calculate the cost of IT services with 100% accuracy, but in practice it is a long and rather meaningless exercise. Therefore, we chose a simpler method: costs that can be easily attributed to any infrastructure or IT service are immediately attributed to the corresponding service. Distribute the remaining costs among IT services according to certain rules. This will allow you to get an accuracy of about 85%, which is quite enough.
At the first stage to allocate costs for infrastructure services, financial and accounting reports on IT projects and “common voluntarism” are used in cases where it is not possible to attribute costs to any infrastructure service. Costs are either directly related to IT services or infrastructure services. As a result of the distribution of annual costs, we get the amount of costs for each infrastructure service.
In the second stage distribution coefficients between IT services are determined for such infrastructure services as "Application Server", "Database Server", "Storage", etc. Part of the infrastructure services, for example, "Jobs", "Wi-Fi access", "Videoconferencing" are not distributed among IT services and are allocated directly to business units.
At this stage, the most interesting begins. As an example, consider such an infrastructure service as "Application Servers". It is present in almost every IT service, and in two architectures, with and without virtualization, with and without redundancy. The simplest way is to allocate costs in proportion to the cores used. In order to count in “identical parrots” and not confuse physical cores with virtual ones, taking into account oversubscription, we assume that one physical core is equal to three virtual ones. Then the formula for the distribution of costs of the infrastructure service "Application Server" for each IT service will look like this:
,
where Psp is the total cost of the "Application Servers" infrastructure service, and Kx86 and Kp are coefficients denoting the share of x86 and P-series servers.
The coefficients are determined empirically based on the analysis of the IT infrastructure. Cluster software, virtualization software, operating systems, and application software are priced as separate infrastructure services.
Let's take a more complicated example. Infrastructure service "Database servers". It includes the cost of hardware and the cost of database licenses. Thus, the cost of equipment and licenses can be expressed in the formula:
where PHW and PLIC are the total cost of hardware and the total cost of database licenses, respectively, and KHW and CLIC are empirical coefficients that determine the share of costs for hardware and licenses.
Further, with hardware, similarly to the previous example, and with licenses, the situation is a little more complicated. A company landscape may use several different kinds of databases, such as Oracle, MSSQL, Postgres, etc. Thus, the formula for calculating the allocation of a specific database, for example, MSSQL, to a specific service looks like this:
where KMSSQL is a factor that determines the share of this database in the company's IT landscape.
The situation is even more complicated with the calculation and allocation of a storage system with different array manufacturers and different types of disks. But the description of this part is a topic for a separate post.
The result?
As a result of such an exercise, you can get an Excel calculator or an automation tool. It all depends on the maturity of the company, running processes, implemented solutions and the desire of management. Such a calculator or data visualization tool helps to correctly allocate costs between business units, show how and what the IT budget is allocated to. The same tool can easily demonstrate how improving the reliability of a service (redundancy) increases its cost, and not by the cost of the server, but taking into account all associated costs. This allows the business and CIO to "play on the same board" by the same rules. When planning new products, you can calculate the cost in advance and evaluate the feasibility.
Igor Tyukachev, Jet Infosystems Consultant
Source: habr.com