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IT Service Pricing Implementation

By shaline ·
I would like to know whether anybody can assist me on the IT service pricing implementation i.e the charged-back of IT services used by other departments within the company? What is the market benchmark on IT service pricing? Any guideline to implement it?

Currently we provide IT services to all departments free of charge as all or most organisations do. However, we wish to implement IT service pricing as an inter-department charge-back for the IT services utilised. Therefore, we would like to hear from various company on their pricing strategy and implementation strategy for this.

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by bmacarthur In reply to IT Service Pricing Implem ...

I have heard of other companies charging a fee to the other departments. The fee would be based on a pricing scheme of some percentage off what the SME would normally be billed to third parties. The department using the SME can then determine if they want to pass the cost along to the customer "at cost" or with a mark up.

Using this methodology would give you a better understanding of what your ROI, revenue, expense, and billables components are under your financial statements.

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by JamesRL In reply to IT Service Pricing Implem ...

Activity based costing.

I have gone through the laborious exercise of calculating the costs of providing services - email for example. There is the cost of HW and software (amorized over the expected life) both initial and maintenance costs. There is the labor costs(including benefits, the cost of providing a desk, computer, phone and other infrastructure). Add it all up and divide by the number of users for an "average" per user cost of the service. But be warned it doesn't progress in a straight line, if the next 100 users cause you to need a new server, everyone's cost goes up.

Then there is management overhead. While some may argue the point, the "doers" need supervisors, planners, people who monitor the budget etc. We put them all in the management overhead bucket.

At the end of the day, we had a list of the services we provided and what they cost to provide.

James

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by ananthap In reply to IT Service Pricing Implem ...

Basis can only be cost.

2 scenarios.

(1) Whole time deputation to a department. Say for 6 months. Transfer the entire cost of the deputee.

(2) Job based. Say support. Run it like a true outsourced organisation - except that there is no profit margin and probably no call based incentive. Maintain a time sheet for each person including time spent in moving from spot to spot. Give an efficiency margin - say 1 hour out of 8. Thus you can fix a standard rate for each person/level. Apply this rate for direct staff. For other expenses like your administration, secretarial, group benefit scheems etc apportion monthly based on a discussed standard.

HTH
End
PS: I do this as head of a software team. The only issue is sometimes I am required to take up some assgignments where I know the "script" is written for "non success".

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IT service costing software

by jeff_day In reply to IT Service Pricing Implem ...

Old thread, but since it keeps coming up in Google alerts, maybe people are searching on it.
Apptio provides software to help you automate the process of IT services costing and chargeback.
James makes a great comment that this is normally an arduous and manual effort. We have developed software to make this much easier, and in many areas, automated.
To the pricing question, we have customers doing it all ways; pure chargeback based on allocated usage, activity based costing, flat rates, to margin based pricing. Most customers baseline IT costs to understand the operating cost, and then provide some price (not exactly equal to cost) in order to provide stability in business budget planning. IT is then responsible for managing to that price.
If you are interested or want to know more, find us at www.apptio.com or blog, LeanIT.apptio.com.
Thanks

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IT Service Pricing Advisory Guide

by stuartt In reply to IT Service Pricing Implem ...

We have written a free advisory guide for IT Service Pricing available for download at http://4slgroup.com/advisory_guides.aspx

I hope you find it useful.

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