01.02.2024

Understanding IT costs - with the aid of data analytics

"Why, why, why? If you don't ask, you stay stupid." The art of asking the right questions

You learn this from Sesame Street as a child and there is some truth to it. But whether you get a satisfactory answer or go in search of one depends heavily on asking the right question.

In the age of digitalisation and new technologies, IT costs play a central role for companies. When it comes to managing them, the most common question is probably: "Why does this IT service cost so much?" In order to have a well-founded answer to this question, a detailed analysis is necessary, guided by the right questions.

But why do we see in reality that the right questions to better understand IT costs are asked far too rarely? Our observations show that the information basis that raises the crucial questions is often missing - namely an overview of the total costs incurred per IT service - the so-called Total Cost of Ownership (TCO).

Orders from top management to identify potential savings in IT costs are becoming increasingly frequent, which requires an understanding of the structures of the actual costs. In addition, the increasing use of cloud technologies with complex, consumption-based billing models requires a continuous look at the costs incurred in order to avoid being overwhelmed by a non-transparent wave of costs.

 

Five overarching cost categories can be identified for IT services that are necessary for their provision:

In theory, the procedure for determining the total cost of ownership of one or more IT services sounds relatively straightforward - allocate the costs incurred to the IT services that cause them. Practice shows that knowledge of the costs and cost flows in the financial area and knowledge of the structure and (technical) dependencies in the production chain of an IT service is located in the IT department. Two fields that are thematically far apart, which leads to challenges. The interests of the employees in the respective departments have limited overlaps, the relevant data is managed in different systems and in the past, superficial collaboration was the rule in many companies. It is essential to identify the right knowledge carriers in the company and bring them together in order to be able to allocate them to the individual IT services in a way that is as fair as possible. Sufficient time and all relevant stakeholders should therefore be scheduled for the development of a cost allocation concept.

 

The use of data analytics tools such as PowerBI has decisive advantages when it comes to TCO:

This centralises the effort of collecting and preparing the necessary data, building an overarching bridge between finance and IT and relieving the individual specialist departments. Instead, they can focus on analysing the content of the figures from the dashboards and asking or answering the right questions to improve the company.

Keep an eye on your IT costs and make your company fit for the future. We are happy to support you with our experience on the subject of TCO in leveraging the potential of hidden data sets in your IT.

Your contact partners

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Dr. Johannes Engel

Partner
Dies ist ein Porträtfoto von Patricia Hardt.

Patricia Hardt

Manager