OC CIO Minutes July 14, 2011

Southern California/Orange County CIO Breakfast Round Table
July 14, 2011 meeting

Present: Jennifer Curlee, Jim Sutter, David Mann, Sean Brown, Dave Phillips

The following is a list of future topics and speakers:

8/11/11 i-pad and mobility Ashwin Rangan

Please send me your suggestions for topics and speakers for September through December.

Topic: IT as a Service

Jennifer started by quoting IT costs as a % of revenue – Gartner states 3.5% (4.3% of operating expense) whereas Computer Economics states it’s more like 1.5% to 1.8% of revenue. IT costs per user are down from $8K in 2006 to $7K in 2010. Forrester claims that it would be much better if IT costs were stated in terms of service items users understand (like email, web hosting, etc.) rather than in IT units like servers, storage arrays, etc. Chargeback/allocation is useful because it helps contain cost, demand accountability, transparency, value and impact of IT. The challenge of establishing of a chargeback/allocation system is that what’s included as IT costs varies from company to company. What you might like would be simple to understand, accountable, fair, predictable and controllable. Various chargeback models are based on either or all of direct costs, % usage and/or subscription fees. Jennifer’s handout contained many examples of the different methods. If you want a service based pricing approach, it should be based on a measured unit of service, supports a price to value relationship, and requires a service catalog to provide a framework for IT as a business within a business. To get started you must produce a catalog of services, estimate TCO per unit and establish a pricing structure. Jennifer included samples of infrastructure chargeback from BizCloud catalog, and from Amazon. To support such a system you have to have chargeback tracking tools, which she also listed.

Thank you, Jennifer, for an excellent presentation and handout. We had a very interactive discussion throughout maybe because of rather than in spite of the small turnout. It’s a topic that we could revisit again soon. It certainly reminded us of the struggles we had in the past trying to implement such systems, whether to distribute costs, or at least control costs and/or influence usage.