What you can do with Billing Standard

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Typically, business leaders have limited to no visibility into their cost and consumption of IT services. As IT makes the transition into being a true service provider, it becomes imperative to provide the business with insights into the cost, quality, and value of the services they are consuming. Cost and value transparency provide the foundation for a relationship between IT and the business, where both are equal partners with mutual accountability.

Billing Standard delivers reports summarizing the quantity, unit price, and cost of the services consumed by the business. Billing Standard , like a cell phone bill, details the services that are consumed and the cost of those services in a language the business units understand.

Billing Standard requires Cost Transparency and takes advantage of the service costs calculated by Cost Transparency.

Using Billing Standard , you can accomplish a wide range of goals:

  • Enable chargeback and showback processes and provide business unit managers with a Billing Standard - Apptio supports hundreds of allocation strategies and can provide granular activity-based costing to customize charges to your environment.

  • Manage demand - By establishing a service catalog of the costs of the products and services that IT offers, IT can clearly identify the services they offer and the price of those services.

  • Change behavior - By providing the business units with an itemized view of the services they consume, and the cost of those services, the conversation shifts. Business unit owners can both understand and act on the levers they control, which can directly impact their cost of IT. In addition, IT can use price discrimination to influence the use of a particular service.
    For example, to promote a service you can subsidize the service. Or, to retire a service, you can inflate the price to discourage business units from using the service.

  • Analyze cost recovery - IT Service Providers can analyze the level of recovery of their costs and where necessary use this to have conversations with the business about changing the pricing of service.

  • Present information about the quality of the services - You can incorporate support response time, server uptime metrics, and other metrics, and report these metrics side-by-side with service costs.

  • Integrate Billing Standard with Costing Standard - By taking advantage of the service costs generated in the Apptio Costing Standard application, you can use Billing Standard to implement activity-based costing. Activity-based costing enables IT to identify and assign the cost of each activity to an IT service. Activity-based costing gives IT the ability to determine the fully loaded true cost of IT services.

Billing Standard allocation strategies

Allocation strategies determine how costs flow through your model. The simplest allocation strategy is price (unit cost) X quantity. For example, if a business unit has 10 servers and each of those servers costs $500, then this allocation strategy charges $5,000 to that business unit.

More sophisticated allocation strategies are available.

Financial process strategies: showback or chargeback

A Billing Standard can be delivered to your business units in showback or chargeback mode. The showback process designs a Billing Standard that the business units receive, but there is no change in corporate financial processes. The showback process is informational only.

The chargeback process designs a Billing Standard that the business units are expected to pay and it involves financial processes.