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BVM - Value-Based IT Costing Strategies
   
Historically costing was used to determine how resources were consumed.  While the principle is the same today, the methods and approach have evolved significantly over the years. 

Historical approaches to gathering data proved labour intensive and timely. Manual efforts and complexities to capturing the data components meant this could only be done once a year. Volume and sales data was generally collected after the financial year-end results. The data was becoming increasing less relevant, not only were companies using last year’s data, they were doing so months after year end.
 
  
Baix IT Costing Overview and Strategy   
   
What would analyzing last years recourses, activities and costs do for a company?  Was predicting the future with the past significant?  Did the value of the data produced outweigh the effort to capture the data?  In many cases the answer to these questions was yes, but at what cost?

Determining IT costs and associating direct activity costs to a product or service was easy, but what do you do with the fixed costs attributed to running your business? These costs, referred to as overheads, were not easily allocated and if done so incorrectly could over burden the cost of a product or service. For some, the approach was to exclude these costs altogether, while others spread them arbitrarily over all products and services with little reference to what made sense.  Drivers were introduced to determine the logical method of how activities consumed resources. Allocation methodologies were born out of a need to assign the cost of a product or service to the specific user of the product or service.

Today, the evolution of costing has been infused with technology. Costing systems have been developed to link directly with general ledger and enterprise resource systems. Companies are able to capture both historical and current data. Drivers and performance measures can be built and automated into the systems with results produced to match financial reporting timeframes (monthly, quarterly and annually). Costing is no longer just reactive, it can now be proactive.
   
So where do you start?
   
You start by reviewing the manufacturing costing process.  The evolution of costing began with manufacturing where determining the exact cost or profitability of a product was the result of well managed expenses and detailed unit costing.  Manufacturing new that isolating material, production and overhead costs by each product, would allow them to determine the total value of producing that product. Using production volumes they could generate unit costs, while production times against the labour force available time, would determine capacity. Understanding unit cost and capacity enabled them to compare the profitability of one product over that of another, known, as product mix.

IT costing is not that different. Although capturing the data is more complex. Hardware and software are the materials, development and support are production and infrastructure, operations and shared services are the overhead. Clearly, that’s an overly simplistic view of IT costing, and reality would suggest that every scenario is unique.
   
IT Costing Methodology  
   
The Baix framework uses the traditional methods of yesterday tempered with the real-time allocation approach of today to deliver accurate, relevant and reliable IT costs and allocations.  We know how to be transparent, proactive and work collaboratively. We recognize the importance of costing in management decision making. We partner with our customers to develop models and methods that best meet the unique needs of their companies.
   
The Baix IT Costing Framework Focuses On:
  
  Building Transparency 
  Dynamic costing models
  Effective communication and execution strategies
  Analyze vender agreements and services
  Detailed analysis of your resources, activities and services
  “True” measurement of IT costs
  Accurate unit and relevant total service costs
  Total cost of ownership

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