Simple Ideas to Determine Usage-Based Cost Allocation Keys

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One of the most important aspects of every business is allocating costs. Cost accounting has increasingly become the key focus where IT infrastructures are being constructed. For example, keeping sight of budget limitations, funds allocated to computers, networking and communication hardware make up almost one-third of the IT budget. 

It is normal for infrastructure costs to be determined by the number of units a business has and how they are placed in the cost allocation plan (CAP). All assets are used according to roles of the business units, so a simplified cost allocation plan is implemented in which servers and networking infrastructures are allotted accordingly. The latest technology now enables user-based cost accounting using enterprise software that leads to pricing bliss.

IT infrastructures, especially enterprise software architecture, are designed to use multi-tier client-server applications. With such a vital and complex need for essential software, determination of allocating costs becomes perplexing. Once assets are inducted into a business unit, the costs of both hardware and software are dedicated and preserved as direct costs. Using the asset in a shared environment per resource capability has been seen through business today. DCHP, ISA, Database, Application, email, hosting, cloud servers are among many. In such environments, the cost driver is determined by workload produced by clientele and consumption of resources in IT infrastructure for cost accounting.

For instance, an application server can host dozens of applications but there are other scenarios where the same server would host two or three applications according to the function it carries out, like email servers. As servers are part of a solution and not a standalone product, it is a layer of a larger IT system.

Usually, all such software and hardware come within tiers and one is needed to run the other within the IT infrastructures. A cost accounting method would diminish major problems and obstacles while providing other assets more resources to utilize. For instance, 3-tier database applications consist of three servers, i.e. web, application, and database servers which can all be shared to perform various duties for different applications.  This does bring up concerns like application owners would have to handle most of the costs as direct costs while other users would be utilizing them as well. Therefore, a usage-based model would be advantageous to implement as costs can be allocated to owners or even users to produce more transparency. It may even determine consumption-based cost accounting keys for allocation in any IT infrastructure.

Simple Ideas to Determine Usage-Based Cost Allocation Keys


Identification of costs is an organizational practice that distributes cost allocation. This focuses on making IT costs identifiable and ensures proper assignment to accounting objects, for instance, IT services. It also makes assessment and evaluation easier. Forecasting and decision making is also somewhat straightforward and simplified. Also, it helps with cost recovery which is the process of setting prices of IT Services and charging the units using it. One objective is set to determine incentives, for instance, to regulate supply, cost-conscious behavior, and IT services demand.

Resources Profiles for Cost Accounting in IT infrastructures

From the customer’s point of view, (business units, users) the complex software and hardware integration is not truly understood in some cases. They view it as a box which uses GUI software providing services. Categories used can include execution of the transaction such as stock or order and information access like retrieve, store details. There could be several selections of one or more of such services and some services consist of several applications thereby resulting in similar resource consumption in an IT infrastructure. 

Resource Estimation

For significant cost accounting purposes, existing tools needed for profiling resources in the heterogeneous environment have drawbacks. Firstly, performance diagnostic problems and, secondly, technology and vendor-specific tools which do not cover all resources. The service profiler tool is a load generator which uses standard monitoring tools of UNIX, Linux and Microsoft Windows. These OS Tools help in detailed monitoring. There are a number of other tools used for resource profiling which help prepare an overview of resource consumption expectations for various kinds of user behavior patterns.

Evaluating Queuing Network Theory

For cost accounting allocation keys using resource profiles, profiles have to be independent of workload or services being utilized in the system. To validate assumptions, these are excellent tools. By accurately predicting resource utilization, it is safe to assume that estimates are accurate but also that it is independent of system workload.

Other Vital Work

Service-level resource profile needs are well substantiated in areas of cost accounting. There are individual works by Funke, Scheeg, Nagaprabhanjan, and Apte in the field of cost accounting and IT Controlling.

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