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Consolidated Chargeback for a Consolidated World Sidney Finehirsh cmxgroup

2002 Demand Technology. Consolidated Chargeback for a Consolidated World Sidney Finehirsh www.cmxgroup.com. THE CMX GROUP, INC 65 BROADWAY SUITE 1806 NEW YORK CITY NY 10006 (212) 346-7560. The 90’s: Motivation to Decentralize.

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Consolidated Chargeback for a Consolidated World Sidney Finehirsh cmxgroup

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  1. 2002 Demand Technology Consolidated Chargeback for a Consolidated World Sidney Finehirsh www.cmxgroup.com THE CMX GROUP, INC 65 BROADWAY SUITE 1806 NEW YORK CITY NY 10006 (212) 346-7560

  2. The 90’s: Motivation to Decentralize • Application development logjam in IT • Unreliable response • Control of critical business systems • High cost of central IT

  3. The 90’s: Economies of Scale • Duplication of effort • Low utilization • Hidden costs • systems support • outside services • Absence of standards and procedures • Inability to negotiate volume discounts • Administrative chaos

  4. The 00’s: Cost Does Matter • Downsizing organizations • Driving to efficiency • Lowering growth of IT budgets • Moving to centralization

  5. The Shift to Centralization

  6. Consolidation: As New Technology • Better, faster, cheaper networks • Central support • Rapid application development

  7. Consolidation: “The Utility” Model • Plug on the wall • Always available • Always responsive • Commoditization of IT Services • Demand management • Measure of success • “The Venture Partner” Model

  8. Consolidation: Opportunities • Physical co-location • Server sharing • Centrally managed networks • Storage networking

  9. Consolidation:Systems Management down on the Server Farm • Quality assurance • Change control • Security and fraud detection • Backup and disaster recovery • Chargeback

  10. Consolidation:Why do Chargeback ? • An expensive shared resource • It’s unavoidable • Provide management information • cost of production • cost of doing business • Control the demand for services • IT financials for scorecards

  11. Consolidation: The Cost Accounting Challenge • Asset cost transfer • Need for a standard costing model • Usage Based Billing (UBB) • Activity Based Costing (ABC)

  12. Consolidation: The Technical Challenge • Spanning the number of server and and network technologies • Identifying business owners • Standardizing units of measures in a diverse world • Mixing dedicated and shared servers

  13. EffectiveCapacityLimit U1 U2 U3 U4 U5 U6 Un Consolidation: Costing Dedicated n-way Shared n-way Billable Units = Σ (Un x N) Billable Units = C x n x N User1 C = Effective Capacity % n = Number of Processors N = Normalization Factor Un = Measured Usage Per User N = Normalization Factor

  14. Yankee Group Report – Oct. 2002 The most important chargeback qualification for a vendor solution is that it conforms and adapts to the IT cost structure to properly distribute the financial aspect of service usage. Without an appropriate understanding of the cost structure, the ultimate goals of chargeback (allocating costs to users) will be lost.

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