Journal Article - ABC Applied on IT - mihut_tomai.pdf

Journal Article - ABC Applied on IT - mihut_tomai.pdf -...

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Software Analysis 358 A COST MODEL FOR THE IT DEPARTMENT Marius MIHUT 1 Economic Informatics Department, Babe ş -Bolyai University of Cluj-Napoca, Cluj-Napoca, Romania. E-mail: [email protected] Nicolae TOMAI 2 Economic Informatics Department, Babe ş -Bolyai University of Cluj-Napoca, Cluj-Napoca, Romania. E-mail: [email protected] Abstract: Traditionally, it is believed that a busy IT Department (Information Technology Department) of an organization, with many services offered for other departments is very profitable, or at least “cost-effective”. A real and precise calculation of costs per product or service have unveiled that the above is not necessarily true. Activity-Based Costing is a costing model that could assign precise costs to products and services. The combination of this method with the model for calculating the total cost of an IT Department, proposed by HP Laboratories in [1] is a powerful tool for improving IT services. Keywords: Cost model; IT Department cost model; Activity-Based Costing; Cost Object; Cost drivers 1. Introduction The need for a cost model is given by the fact that it is necessary to identify the cost for each product or service in order to identify the profitability of IT activities and processes. The objective of this paper is to introduce a precise method for calculating the costs of operating an IT Department. The method described in this paper extends the cost model proposed by HP Laboratories [1] with the Activity-Based Costing method to determine the real cost for each product or service. Practically, the costs calculated using HP method are tracked in activities and work processes. 2. The HP cost model for planning, development and operation of a Data Center The cost model proposed by HP Laboratories take into account all costs which are involved in operating the data center of an organization: cost of power delivery, cost of cooling, cost of space and cost of operation. For many organizations, data centers are their own IT department. The total cost of ownership of an IT department is summarized in [1]as follows: Cost total = Cost space + Cost power the hardware + Cost cooling + Cost operation (1)
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Software Analysis 359 Each of these costs express the “amount” of correspondent resource, consumed by the data center in a specific period of time. The methods for calculating them are detailed in [1]: - Typically, the cost of space includes the cost of real estate necessary for the data center, for power generation systems and other auxiliary subsystems. It is considered that operating income is realized only in that portion of the data center space which is populated with computing equipment; - Cost of power delivery includes conditioning, battery back-up, on-site power generation, and redundancy in both delivery as well as generation; - Cost of cooling is the cost of power consumed by the cooling resources; - Cost of operation includes personnel costs, depreciation of IT Equipment, software and licensing costs.
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