IT as a profit Center

IT as a Profit CenterImplementation of Charge back MechanismAksam Dar (aksamdar@gmail.com)

AgendaWhat Business Units perceive about IT Department a Cost Center perspective

Disadvantages of treating IT as a cost centerboth for business and IT

Design of a Chargeback Model using ITIL and Best Practices

Benefits of Chargeback Model revisiteda more clear picture

Question & Answer Only in the end

PerceptionTransformation of IT as a profit centeror you can say a Value Center

Why NotWhat to doHow to do itBenefitsQ & A

Perception about IT

What Business Units perceive about ITA Cost CenterA burden on income statementsTaking away a big chunk of budget.Geeks sitting with no idea of how business worksRevenue eatersSecurity Maniacs hurting business by putting restrictions on PCs and IT services.I dont care whatever they say or do. I am the business and I run the show.There are so many people working over there yet noone bothers to answer the phone when I call Service DeskThough its not their fault

Why Not to Use Cost Center Approach

Free It services to business In-accurate financial analysis. Ignoring high cost IT equipment (routers, switches, firewalls, load balancers, Racks, SAN Storage, cables, bandwidth, leased lines, vendor support services, license renewals), Depreciation of IT assets as per share of services consumed.Cost of IT services not included in P&L of profit centers.Cost of IT Payroll not allocated to profit centers.In-correct pricing for products offered to the customers because of missing cost components.

We are over worked.They always come up screaming. Its users fault. We resolve in 2 working days. They have same problem every time. They can even fix it themselves.

Poor quality It servicesDisadvantages of Cost Center approachA second line of text could go here

Missing Cost components.. These may be included as Administrative overheads in the income statement. But are these really been allocated to the product? Is Business overcharging or undercharging from ADMC customers? Does it effect market positioning or competitiveness of ADMC products in the market?6

Transformation of IT Service Management

Different pricing structures for different servicesOne time fixed feeMonthly fixed fee per departmentMonthly fixed fee per user of the serviceFee per incident / callBenefits of ChargebackTrue picture of Business performance.Measurement for ITs performance on objective basisMonthly/Quarterly/yearly revenueProfit & Loss

Chargeback Model Start charging for IT services

Service CatalogueInternetemailOracle FinancialOracle HRMSRapid BrowserNetworkPrint ServicesSLAsNew Hire24 X 7 InternetCharged per employee per month24 X 7 email Charged per mailbox per monthHelp Desk Printing ServiceWork Order / Ticket based on SLA.

How it WorksWork Orders / tickets charged against SLAs

Work orders is issued by Business Unit (BU). The Work order identifies the SLA against which the work order is issued and that becomes the basis for charge back.New HireHardware RequiredSoftware RequiredService RequiredTickets are also issued by BU in the same pattern of as a Work Order identifying the SLA.IncidentsChange RequestsHow it WorksWork Orders / tickets charged against SLAs

What is for sale?A sample list of servicesNew Hire | DELL PCNew Hire | iMAC24 X 7 internet24 X 7 premium internet (No restriction on gmail etc. More expensive than normal internet service)24 X 7 emailCorporate LAN AccessCorporate LAN premium Access (With Local Admin rights)Help Desk SupportBackup & Recovery servicePrinting ServiceOnsite dedicated Support ResourceSAN Storage spaceFTP accountsAnd lots more

Some sample Bundled packagesNew hire | macbook pro + blackberryNew hire | Dell laptop + blackberryNew hire | macbook pro + iPhonePerformance measured by ProfitLets launch some sales campaigns also to increase revenue

How Business units are billedA Sample Invoice

Building a proper CMDB is very important.

Configuration Items should be classified.

Connections between Linked Items will help to track every single asset.

How to keep trackConfiguration Items

Sample revenue break down from SAN Storage

The Pricing structureCalculate Total Cost of Ownership (TCO)Direct CostsHardware SoftwareLicenseSupportIndirect CostsAdministrative Overheads (e.g. Indirect Payroll Cost)Include reasonable Profit MarginHow to calculate the reasonable price

Benefits of Chargeback (Revisited)

IT is not a show stopper. You will get what you will ask for by paying for it.IT is not a burden on budget. We are making profit. Business is the one who incurs expenses on IT services.No extra cost to Group. Intra company transactions eliminated in consolidated financial statements.BUs in full control of their IT expenses.Benefits of Chargeback (Revisited)

Question & Answer

Thank you That was IT