Session

Management, Business and Economics

Description

IT has a high share of the total costs at information processing companies. Though not only minimal IT costs are relevant, but also effective use of IT from the long term business perspective. Decisions on IT investments are made based on information about costs and benefits commonly provided by controlling in-struments. To identify direct and indirect costs of IT services, an internal IT cost allocation (IT activity allocation or IT chargeback) is being used by the vast ma-jority of companies, especially in IT-related industries. The allocation of shared IT infrastructures and overhead costs to IT services, as well as of IT services to service recipients, is based on simplified allocation keys. Allocation keys are commonly built use-based, per revenue share or per employee. For example allo-cation per CPU or RAM for servers and per Gigabyte of disk space for central storage systems is commonly being used. Nowadays those rarely are relevant cost drivers, except for extreme increases in usage intensity, which raise jump-fixed costs to a higher level. As a consequence service recipients lack the possi-bility and incentive to control the real costs and to optimize the cost/benefit ratio. Furthermore allocated costs, especially for shared services, do not represent cor-rectly the real cost situation and product pricing and business cases based on those costs are not accurate. As a constraint information cost to gain data to build allocation keys have be reasonable. The question is, how to build allocation keys as accurate as possible to apportion ‘real’ IT costs with reasonable effort. The pa-per at hand describes the internal IT cost allocation and its allocation keys based on main actual cost drivers by means of a case study at a typical medium-sized Austrian financial service provider. This approach yields a more accurate alloca-tion of actual IT costs.

Keywords:

Controlling, IT Cost Management, Internal Cost Allocation, Allocation Keys, Financial Service Provider

Session Chair

Ylber Limani

Session Co-Chair

Nehat Dobratiqi

Proceedings Editor

Edmond Hajrizi

ISBN

978-9951-550-19-2

First Page

58

Last Page

64

Location

Pristina, Kosovo

Start Date

26-10-2019 1:30 PM

End Date

26-10-2019 3:00 PM

DOI

10.33107/ubt-ic.2019.347

Download

Included in

Business Commons

Share

COinS
 
Oct 26th, 1:30 PM Oct 26th, 3:00 PM

Cost Driver Based Internal IT Cost Allocation: A Case of a Medium-Sized Austrian Financial Service Provider

Pristina, Kosovo

IT has a high share of the total costs at information processing companies. Though not only minimal IT costs are relevant, but also effective use of IT from the long term business perspective. Decisions on IT investments are made based on information about costs and benefits commonly provided by controlling in-struments. To identify direct and indirect costs of IT services, an internal IT cost allocation (IT activity allocation or IT chargeback) is being used by the vast ma-jority of companies, especially in IT-related industries. The allocation of shared IT infrastructures and overhead costs to IT services, as well as of IT services to service recipients, is based on simplified allocation keys. Allocation keys are commonly built use-based, per revenue share or per employee. For example allo-cation per CPU or RAM for servers and per Gigabyte of disk space for central storage systems is commonly being used. Nowadays those rarely are relevant cost drivers, except for extreme increases in usage intensity, which raise jump-fixed costs to a higher level. As a consequence service recipients lack the possi-bility and incentive to control the real costs and to optimize the cost/benefit ratio. Furthermore allocated costs, especially for shared services, do not represent cor-rectly the real cost situation and product pricing and business cases based on those costs are not accurate. As a constraint information cost to gain data to build allocation keys have be reasonable. The question is, how to build allocation keys as accurate as possible to apportion ‘real’ IT costs with reasonable effort. The pa-per at hand describes the internal IT cost allocation and its allocation keys based on main actual cost drivers by means of a case study at a typical medium-sized Austrian financial service provider. This approach yields a more accurate alloca-tion of actual IT costs.