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5 Appendices
A: Selected Examples from the Assessment 20-24
B: Chargeback Cost Framework 25
C: Detailed Maturity Definitions 26-30
D: Challenges for Chargeback 31
• Services that are standard, formally defined in a Service Catalog that customers can use
for planning and ordering, segmented to accommodate different cost and service level
expectations
• Usage measurements and reporting that are fair, accurate and readily available; usage
units that are effective in managing demand and encouraging cost-conscious
consumption
• Product Managers that take responsibility for the management of costs and the quality
and evolution of their Services, able to adjust to changing demand while maintaining or
reducing rates
• Costs that provide the customer the best value for the services provided, comparable to
other states
• Customers feel valued, and understand their services and costs, with the assistance of
Service Account Managers
Service Maturity • Services are broadly defined /not segmented by cost • Provide standard offerings ,with standard options and
drivers or service levels additional costs for those who want more than the
• Catalog is newly published base standard
Service Usage • Usage collection is too manual outside of MF • Establish Product Managers as responsible for the
Management • Inaccuracies are common in usage reports to Finance accuracy of usage for their services
• Customers only see their usage on the invoice • Push electronic copies of standard usage history
reports to customers
Service Cost • Cost allocations are often not well-documented • Update the Chargeback Process Manual for allocation
Management • Single-customer costs are sometimes included in cost rules and assumptions
pools • Invoice customer-specific costs directly to that
• Cost pool information does not identify the costs customer
controllable by the Product Manager - information is • Create a log of allocation decisions
confusing for a Product Manager • Organize costs using Chargeback Cost Framework
Chargeback • Overly manual back-office operations • Automate manual activity or standardize to make
Administration • Customers perceptions of the quality of information repeatable
and service are low • Identify customer data needs and provide appropriate
information monthly
Service/Cost • Product Managers do not take responsibility for • Provide role-specific training on Chargeback to
Management managing pool costs and developing their services Product Managers;
• Rate modeling and assumptions are not well • Establish protocols for Product Managers to manage
documented costs and service evolution
• Customers do not feel valued • Establish protocols for SAMs to proactively discuss
services and costs with their customers
DRAFT FOR DISCUSSION PURPOSES ONLY - 55 --
Components of ITIL: Service Desk
Service Catalog • The Service Catalog is newly published and is a • Improve catalog with feedback from customers on what
significant achievement. would better help them in planning, budgeting, and
• Each Catalog entry is a description of the family of ordering the service.
services, with a listing of the specific services and rates • The structure could be changed, with a more tiered
where these exist. It is not designed to facilitate ordering, structure created for the catalog “pages”. (See page 21)
but rather to explain the background to the service.
Service Management • Posting the Service Catalog on Mass.Gov is a major • Make specific improvements, such as creating a hotlink
and Communications accomplishment. It will facilitate customer understanding for going directly from the specific service to the service
of the services and the costs. request system (E2E) and pre-populating the request, to
• More communication is necessary to educate customers make ordering easy.
about the services, the Catalog, and the rates they are • SAMs meet with their leading customers to see how best
charged. to increase awareness and use of the catalog and ITD
services.
Usage Reporting • Usage reporting to Finance is often inaccurate or • Perform a Pareto-type analysis of the cost and accuracy
incomplete, requiring checking or corrections of the reporting which requires manual handling, to
• Usage data is available in the ICANN system for prioritize resolution
customers to review, to answer their questions about • Push electronic copies of standard reports that answer
their billed usage, but it isn’t taken advantage of. common questions, rather than expecting users to log in
and create the reports themselves
Usage Management • Usage is not reviewed regularly by the Product Managers • Provide the Product Managers with training on
and Communications to ensure accuracy Chargeback: costs, cost pools, usage, rate calculations
• Customers report not having enough information about • Formalize policy that the Product Manager is responsible
their services and service usage, aside from the invoice. for the accuracy of the reported usage.
• SAMs review the usage reports with their customers
quarterly
Cost Identification • Some costs are not granular or specific enough to be • Identify costs that are allocated and, unless applicable to
identified to the cost pool or pools where they belong, a broad range of services, determine how they can be
and so have to be allocated independent of utilization – specifically identified to a service – including how they
based on assumptions about where the cost should be are identified when procured.
applied. • Worse case - document the allocation
• It is difficult to identify costs to their purpose, or to explain
• Align costs to the Cost Framework, identifying which are
how much is spent on an area like Security
controllable by Product Managers, and the purposes of
the costs. (See Page 25)
• Costs that are more appropriate to another Service
should be moved to that Service’s Cost Pool
Cost Documentation • Cost allocation rules are not documented • Document the rules and assumptions governing all the
and Communications • Product Managers are not provided with their pool costs allocations. Build on the foundation provided by the
regularly existing Chargeback Process Manual.
• Product Managers should be provided with monthly
financial statements showing Actual to Budget for their
individual pools.
• Review financial status monthly in the Portfolio
Management subcommittee of the ISB.
Usage Collection / • Much of usage collection requires manual adjustment by • Automate usage collection, where possible.
Reporting Finance, there are inaccuracies and incomplete reports. • Establish Product Managers as responsible for the
accuracy of the usage reported for their services.
Invoice Management • Invoices are difficult to prepare and issue, due to the • Increase the accuracy of the customer and service usage
problems with reported usage reported to Finance
• Customers do not believe that they have all the • Determine the key additional information customers
information they need to understand their invoice, believe they need for backup explanation, then create a
including backup detail material. standard report or reports to provide that information
• The relationship between charging information and each month, along with the invoice.
services is complicated, potential exists for incorrect • Review mapping of accounting information across
accounting information and rates to be applied to a BARs, E2E Service Requests, and Chargeback Accounts
service request. to Services/SLOs.
Service Management • Modeling of service rates, and the assumptions utilized, • Explore use of TUAM tool as the foundation for modeling
are not well documented. chargeback rates – Finance & Operations share use. (See
• Accuracy of cost and usage for each month is not page 24)
reviewed • Product Managers maintain plans for the evolution of their
• Few indications of multi-year planning for service services, including technology upgrades, investments, actions
improvements to increase efficiencies, etc.
• Product Managers manage capacity with flexibility
Customer • Customers are not satisfied with the information, costs, or • Determine the information that customers need, and the
Relationship treatment they receive. format that works best for them, and provide it in that format
• Information provided is from the perspective of ITD, rather • Provide customers with planning tools to help them
than designed for the questions customers want to understand the services and control their costs.
answer • SAMs proactively discuss services and costs with their
• Customers complain that it is difficult to get answers to customers, as well as treat complaints as incidents.
questions
Dimension 2 3 4 5
2.7 3.5 4.0
• Automate/standardize usage reporting • Improve usage measurement for • Usage information is available in real-
• Product Managers review and are
allocated/derived usage time
responsible for reported usage • Continue to automate/standardize • Customers access their real-time
Service Usage • Provide usage history online for easy
usage reporting, tie into modeling tool usage via the web
Management customer access and invoices • Usage units are business-based
• SAMs review usage with customers at
least quarterly
• Align costs to standard cost framework
• Remove customer-specific costs from • Review allocated, non general
• Product Managers can see real-time
pools overhead costs, to determine how to
summaries of costs-to-date, as they
Service Cost • Document rules and assumptions link to specific services
• Ensure procurement procedures and are incurred
Management governing allocations • Specific purposes or subsets of
• Monthly reports of pool cost coding of supply requisitions identify
services can be identified separately in
budget/actual provided to Product the specific service or services
cost data
Managers
he general guidelines for scoring the maturity of Chargeback follow the standard CMMI
structure, aligned with the nature of the Chargeback activities
Score Description
3 Chargeback processes and activities are stable and repeatable, with formal
definitions of activities and roles, performed to a schedule, supported by models
and documentation, well-supported by automation.
2 Chargeback processes and activities are formalizing, provide basic capability and
are beginning to be repeatable, though still with limited documentation and
excessive manual attention
1 Chargeback processes and activities are in their initial stages, rudimentary and
largely ad hoc, with work largely manual and not produced on a regular schedule.
Maturity Dimension 1 2 3 4 5
Service Maturity - Service definition is rudimentary - Services are broadly defined and - Services are formally defined, and - Services are standard, stable, and - Services are business-based, and
- Lack of Service Catalog published, with year-to-year changes subject to change control repeatable not technology-based
- Limited customer awareness on common - Service Catalog is used by - Services levels are tiered (e.g., Gold, - Continuous improvement activities to
The service is well-defined and services offered - Basic Service Catalog exists customers in spend planning and Silver, Bronze) improve service quality and lower cost
standardized; not subject to - Services exist more to organize - Service definitions are adjusted budgeting discussions - Proactive communications between - Service Account Manager actively
Chargeback billing, they have limited reactively to map to customer - Service Catalog and detailed service customer and Service Account guides the relationship between
changes in definition independent reality requirements description available on Web Manager customers and IT
Service Usage Measurements - Usage is rarely measured, more - Usage is often estimated based on - Usage units are based on metered - Usage units are used to influence - Usage units are business-based
frequently it is derived assumptions or allocations usage; not on estimated or calculated consumption behavior, help manage rather than technology-based (e.g.,
- Data is scattered across various - Usage units are technology-based usage demand, and encourage lowest cost number of application users vs.
Ability to identify incremental sources (e.g., spreadsheets, Access (e.g., # of servers) - Usage reports are available to consumption number of licenses)
usage and relate it to customers databases, etc.) - Usage reports are not widely customers on an as-needed basis - Usage reports are automatically - Usage information is available in
available. Reports need to be using minimal automation available real-time through customer portals
and service produced manually every time. - Usage reports are proactively
reviewed by Service Account Managers
with customers on a monthly or
quarterly basis
Service Cost - Assignment of costs to Services/Cost - Multiple views of service costs exist - Standard and documented cost - Costs formerly allocated are now - - Costs can not only be identified to a
Pools in accounting system is (e.g., two sets of books for allocations) allocation methodology is used separately identified to each Service specific Service, but also to the
Granularity/Identification rudimentary or absent - Costs can be assigned to specific - Costs are allocated to specific when incurred purpose or function in the Service
- Costs used for rate-setting are often Cost Pool services or customers, with the use of - Few costs are allocated unless they - The accounting system fully supports
Ability to identify costs to approximations or estimates - Costs specific to a single customer assumptions are broad-based overhead expenses and automates cost granularity
are shared by the pool rather than - Fixed vs. variable costs are identified
specific services and/or invoiced to that customer and understood
customers
Chargeback Administration - Customer invoicing is rudimentary - Customer invoices are issued based - Customer invoices are issued every - Customers can track usage more - Real time usage costs available to
- Inaccurate information is often primarily on estimated usage month based on actual usage frequently than monthly, and change customers
reported for customer usage and - Invoices rely on manual calculations - Service Pool Costs can be generated consumption behavior to manage
The collection of cost & usage, invoicing and cleansing of data from the accounting system budgets - Cost Pool Managers can obtain near-
and invoicing to customers - Significant discrepancies can exist - Only reporting of Service usage is - Minimal discrepancies exist between - Custom, ad hoc modeling of new real time reports of Service cost
between costs invoiced/recovered vs. the invoice costs invoices/recovered vs. spent services and rates is supported - Continuous improvement analysis is
what is spent - Cost reporting by service is not done - Customers can review invoice with - Automation of usage collection and applied to administration practices
every month little assistance invoice preparation makes invoices
100% accurate
Service/Cost Management - Finance sets rates with little input - Finance is relied on to manage the - Cost Pool Managers are from - Cost Pool Managers are Product - Product Managers can support
from Operations cost pools, receiving limited Operations and review costs and Managers, planning investments to service segmentation with detailed
information and support from usage for accuracy maximize capability, efficiency, and forecasts and segment-specific costs
Process to review costs, - Cost Pool is not actively managed, Operations - Cost Pool Managers perform monthly lower unit costs
perform variance analysis, take - Very rough modeling of forecasted variance analysis - Product Managers research customer - Continuous improvement programs
service costs and usage to set rates - Assumptions for pool costs and needs with SAMs. enhance service quality and lower unit
corrective action, so the rate is - Analyses of pool cost and usage are usage are modeled and documented - Trends in costs and usage are costs
protected quarterly. - Work processes to produce services analyzed and quick corrective actions
- Little review of accuracy of cost are standardized and documented taken when necessary
allocation and usage - Product Managers maintain plans for
quickly modifying capacity (up or down)
5.0 Appendix
Example • Massmail service today is segmented into two rates, • Segmentation Possibilities:
based on whether the mailbox is under or over 500 MB in • Base service with 500 MB mailbox
size.
• Option for additional 500MB mailbox storage
• But Massmail as a service includes Active Directory (closely tied to real cost of the additional storage)
services for the Massmail forest, plus mailbox and Public
• Option for email archiving
Folder restore services
• Option for email encryption outside of the
• Customer agencies are expected to manage their user
MassMail environment
accounts, distribution groups, and group policies.
• Option for providing full administration (managing
• A service was added, integrated electronic faxes, without
user accounts, etc)
a rate or fee specified.
• Charging for standard service requests like
mailbox restores, per request
• A more a la carte segmentation model could enable
• Charging by the hour for labor-intensive services,
customers with more costly requirements to be able to
such as collecting email for an investigation
get the service they want without forcing a base-bones
customer to incur additional cost.
• Can Active Directory support be charged by itself,
on a per individual basis?
Example • The Service Catalog pages are long documents that • What do customers want/need to see when they use the
provide a lot of information about each family of Services: catalog? Organize the pages to start with that
• Description of the overall Service information, then include links to more detailed
information
• Service Targets and Availability
• For Example:
• Service Reporting
• Short Description of the Service family
• Specific Service Requests – what customers can ask
for in E2E • List of the specific Services and their rates
• Customer Responsibilities • Each specific Service is a hotlink to a description
of that Service
• Chargeback Rate information: the cost pool for this
family of services • There can be a hot link from the Service family
description to a long description
• The specific Services and their Rates
Example • Sometimes several types of costs are added together • Ideally, the costs for a Service all move in the same
and then charged for using a rate that only measures one direction at roughly the same rate:
of the cost drivers • If the cost of one component increases, the costs of
• For example, Mass.Gov costs are primarily recovered the others should also increase, in roughly the same
through two rates, one for storage and one for bandwidth. proportion.
• But there are significant costs for calls from the public to • Then if only usage of one cost component is the
the CommonHelp Service Desk with questions about foundation for the charging, as when only the usage of
website navigation ,and server hosting costs, that aren’t storage is used to charge for the hosting costs of
directly related to these two usage measurements. Mass.Gov, it is still a fair apportionment of the cost by
• The danger is that a customer will seek to avoid a “high” customer.
cost rated service • However, where costs can move independently, and
• E.g., they could minimize the storage needs of their customers can affect their consumption of one
website to reduce their charges, component, such as storage, without affecting others,
such as the server hosting expense, then the pool is
• This would reduce Mass.Gov’s storage needs
at risk.
• But storage is only a portion of the cost recovered in
• With bundled costs, look for components that can
this rate, and those other costs are not reduced,
easily be identified and billed separately, such as
putting the rate at risk – it was calculated on a bundle
CommonHelp calls, and charge for them separately
of costs of which storage was only one.
• Or add more components to the rate, creating a
complicated formula (e.g., add server utilization)
Example • Of the 16 storage arrays, 3 are primarily utilized by HHS, • The cost for these three, plus a portion of the storage
• There may be other examples found through a close labor cost, could be billed directly to HHS,
examination of each cost pool. • If a customer’s requested service is not standard, it
should seriously be considered for separate billing