Commonwealth of Massachusetts

Statewide Strategic IT Consolidation (ITC) Initiative

Chargeback Long-term Vision and Maturity Reference Model

Deloitte Consulting LLP

September 25, 2009

DRAFT – FOR DISCUSSION PURPOSES ONLY

 Table of Contents
1 Executive Summary
Vision 4
Summary of Key Findings 5

2 Assessment of Chargeback Maturity in Five Dimensions

Dimension 1: Service Maturity 7
Dimension 2: Service Usage Management 8
Dimension 3: Service Cost Management 9
Dimension 4: Chargeback Administration 10
Dimension 5: Service/Cost Management 11

3 Roadmap for Improvement 13-15

Short Term Roadmap for Chargeback Improvement
Long-term Roadmap for Chargeback Improvement
Assumptions

4 Maturity Model Overview

Capability/Maturity Scoring 17
Chargeback Maturity Model Definitions 18

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

DRAFT FOR DISCUSSION PURPOSES ONLY - 22 --

 Components of ITIL: Service Desk

1.0 Executive Summary

DRAFT FOR DISCUSSION PURPOSES ONLY - 33 --

 Chargeback Vision

• 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

• Chargeback Administration that is streamlined, automated, and documented;

customers can easily access their usage data and receive error-free invoices

• 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

DRAFT FOR DISCUSSION PURPOSES ONLY - 44 --

 Summary of Key Findings

Dimension Assessment Findings (Gap) Recommendations

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
Management managing pool costs and developing their services
• Rate modeling and assumptions are not well
documented
• Customers do not feel valued
DRAFT FOR DISCUSSION PURPOSES ONLY
• Provide role-specific training on Chargeback to
Product Managers;
• Establish protocols for Product Managers to manage
costs and service evolution
• Establish protocols for SAMs to proactively discuss
services and costs with their customers
- 55 --
 Components of ITIL: Service Desk

2.0 Five Dimension Assessments

DRAFT FOR DISCUSSION PURPOSES ONLY - 66 --

 Dimension 1: Service Maturity
Category Capabilities Gap SCORE
1# # # # # # # # 2# # # # # # # # 3# # # # # # # #4 # # # # # # # # # # # # # # # 5

Service Definition 1.0

CGGGGGGGGGT

Service Maturity Service Catalog 2.0

C GGGGGGGGGGGGGGGGGGGT
Service Management and
1.0
Communications CGGGGGGGGGT

Capabilities Description of Gap Recommendation

Service Definition • Services are now formally defined. Changes to the
definition should be under Change Control.
• The standardization and specificity of the services vary,
with some, such as those for hosting, are relatively open-
ended.
• A customer with simple, low-cost needs, pays the same
rate as a high-cost customer
• Increase the standardization of the services, with defined
segmentation and service level tiers to accommodate the
different requirements of customers with individual rates
by segmentation and service level to better reflect the
relative cost of the customer’s usage. (See page 20)

Service Catalog • The Service Catalog is newly published and is a
significant achievement.
• Each Catalog entry is a description of the family of
services, with a listing of the specific services and rates •
where these exist. It is not designed to facilitate ordering,
but rather to explain the background to the service.
• Improve catalog with feedback from customers on what
would better help them in planning, budgeting, and
ordering the service.
The structure could be changed, with a more tiered
structure created for the catalog “pages”. (See page 21)

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.

DRAFT FOR DISCUSSION PURPOSES ONLY - 77 --

 Dimension 2: Service Usage Management
Category Capabilities Gap SCORE
1# # # # # # # #2# # # # # # # #3# # # # # # # 4# # # # # # # # # # # # # # # # 5

Usage Measurement 2.0

C GGGGGGGGGGGGGGGGGGGT
Service Usage
Usage Reporting 1.0
Measurements C GGGGGGGGGT
Usage Management and
2.0
Communications C GGGGGGGGGGGGGGGGGGGT

Capabilities Description of Gap Recommendation

Usage Measurement • Usage for some services is derived, the units cannot be • Address the allocated usage to find a means for directly
measured directly. measuring by customer, or institute a process to revisit
• The units of measure are frequently technology-based, the allocation methodology regularly to ensure continued
reasonableness.
• Allocations are sometimes used to apportion use of a
resource, rather than direct usage, or costs are bundled • Consider whether services whose usage is derived
together and the rate is based on only one cost should really be independent services, or rather ,bundled
together.
• Review whether bundled costs should be charged
separately (See page 22)

Usage Reporting • Usage reporting to Finance is often inaccurate or
incomplete, requiring checking or corrections
• Usage data is available in the ICANN system for
customers to review, to answer their questions about
their billed usage, but it isn’t taken advantage of.
• Perform a Pareto-type analysis of the cost and accuracy
of the reporting which requires manual handling, to
prioritize resolution
• Push electronic copies of standard reports that answer
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

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 Dimension 3: Service Cost Management
Category Capabilities Gap SCORE
1# # # # # # # # 2# # # # # # # # 3# # # # # # # #4 # # # # # # # # # # # # # # # 5

Cost Granularity 2.0

C GGGGGGGGGGGGGGGGGGGT

Service Cost Cost Identifiablity 1.0

CGGGGGGGGGT
Cost Documentation and
1.0
Communications C GGGGGGGGGT

Capabilities Description of Gap Recommendation

Cost Granularity • Costs specific to a single customer are sometimes • Remove customer-specific costs from the cost pools, bill
included in the pool and so shared by all those costs directly to the customers involved. (See Page
23)

Cost Identification • Some costs are not granular or specific enough to be
identified to the cost pool or pools where they belong,
and so have to be allocated independent of utilization –
based on assumptions about where the cost should be
applied.
• It is difficult to identify costs to their purpose, or to explain
how much is spent on an area like Security
• Identify costs that are allocated and, unless applicable to
a broad range of services, determine how they can be
specifically identified to a service – including how they
are identified when procured.
• Worse case - document the allocation
• Align costs to the Cost Framework, identifying which are
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.

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 Dimension 4: Chargeback Administration
Category Capabilities Gap SCORE
1# # # # # # # # 2# # # # # # # # 3# # # # # # # #4 # # # # # # # # # # # # # # # 5

Cost Collection / Reporting 1.0

C GGGGGGGGGT
Chargeback
Usage Collection / Reporting 1.0
Administration C GGGGGGGGGT

Invoice Management 1.0

C GGGGGGGGGT

Capabilities Description of Gap Recommendation

Cost Collection / • While MMARS provides reports of costs, there remains • Review the entries requiring manual action, determine
Reporting much manual work required to collect and assign costs the rules or actions required to eliminate the manual work
each month to the service pools. • Standardize and make routinely repeatable what cannot
be automated

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
problems with reported usage
• Customers do not believe that they have all the
information they need to understand their invoice,
including backup detail material.
• The relationship between charging information and
services is complicated, potential exists for incorrect
accounting information and rates to be applied to a
service request.
• Increase the accuracy of the customer and service usage
reported to Finance
• Determine the key additional information customers
believe they need for backup explanation, then create a
standard report or reports to provide that information
each month, along with the invoice.
• Review mapping of accounting information across
BARs, E2E Service Requests, and Chargeback Accounts
to Services/SLOs.

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10 --
 Dimension 5: Service/Cost Management
Category Capabilities Gap SCORE
1# # # # # # # # 2# # # # # # # # 3
# # # # # # # #4 # # # # # # # # # # # # # # # 5

Cost Management 2.0

C GGGGGGGGGGGGGGGGGGGT
Service Cost
Service Management 2.0
Management C GGGGGGGGGGGGGGGGGGGT

Customer Relationship 2.0

C GGGGGGGGGGGGGGGGGGGT

Capabilities Description of Gap Recommendation

Cost Management • The Product Managers from operations are not fully
taking responsibility for managing the service pool costs,
but instead rely on Finance.
• Costs are sometimes assigned to the wrong pool by
mistake and this is not caught
• Little evidence that Product Managers plan or take
corrective action when actuals diverge from what was
planned.
• Provide role-specific training on Chargeback to Product
Managers, to empower them with an understanding of their
financial responsibilities and the tools and capabilities they
need to control and manage costs.
• Product Managers review costs and usage each month
• Expect Product Managers to manage costs and take
responsibility for maintaining or lowering rates.

Service Management • Modeling of service rates, and the assumptions utilized,
are not well documented.
• Accuracy of cost and usage for each month is not
reviewed
• Few indications of multi-year planning for service
improvements
• Explore use of TUAM tool as the foundation for modeling
chargeback rates – Finance & Operations share use. (See
page 24)
• Product Managers maintain plans for the evolution of their
services, including technology upgrades, investments, actions
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

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 Components of ITIL: Service Desk

3.0 Roadmap for Improvement

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12 --
 Short Term Roadmap for Chargeback Improvement
Legend: Oct 2009 Apr 2010 Dec 2010

Dimension 2 3 4 5
2.7 3.5 4.0

Service • Develop standard products

Maturity for different cost & service
• Customer-friendly
expectations
catalogue pages
2.0 2.5 3.7
• Automate/stre
Service Usage amline usage • Product Managers are responsible for
collection reported usage
Management
• Usage history online for easy customer access

2.3 3.0 3.7

• Align costs to
standard cost
Service Cost framework
Management • Remove single- • Document all cost
customer costs are allocation assumptions
from pools
2.0 2.5 3.0

•Identify information needs of customers

•Automate/streamline manual activity
Chargeback
• Provide for
Administration
information needs
of customers
2.0 2.7 4.0
• Train Product Managers for
Service/Cost Role
• Models created for all service rates
Management • Monthly cost pool reviews
• Product Managers have plans for the evolution of their
services

DRAFT FOR DISCUSSION PURPOSES ONLY -- 13

13 --
 Long Term Roadmap for Chargeback Improvement - Directional
Dimension 2010
• Standardize and segment services
Service • SAMs meet with Clients on Services
• Improve Catalog with customer
Maturity feedback
• Automate/standardize usage reporting
• Product Managers review and are
responsible for reported usage
Service Usage • Provide usage history online for easy
Management customer access
• SAMs review usage with customers at
least quarterly
• Align costs to standard cost framework
• Remove customer-specific costs from
pools
Service Cost • Document rules and assumptions
Management governing allocations
• Monthly reports of pool cost
budget/actual provided to Product
Managers
• Automate or streamline manual
activity
• Identify and provide for information
Chargeback needs of customers
Administration • Eliminate errors on invoices
• Train Product Managers to take
responsibility for managing costs
• Monthly cost pool reviews and
Service/Cost variance analyses
Management • SAMs proactively discuss services and
costs with customers
DRAFT FOR DISCUSSION PURPOSES ONLY
2011 2012
• Continue to Standardize and segment • Customer-specific view of Catalog
services • Continuous Improvement of Services
• Direct link from Service Catalog to
and Catalog
Service Request System
• Improve usage measurement for • Usage information is available in real-
allocated/derived usage time
• Continue to automate/standardize • Customers access their real-time
usage reporting, tie into modeling tool usage via the web
and invoices • Usage units are business-based
• Review allocated, non general
• Product Managers can see real-time
overhead costs, to determine how to
summaries of costs-to-date, as they
link to specific services
• Ensure procurement procedures and are incurred
• Specific purposes or subsets of
coding of supply requisitions identify
services can be identified separately in
the specific service or services
cost data
• Continue to automate and
• Real-time cost and usage data is
streamline
• Ad hoc modeling of new services available to Product Managers and
customers
and rates
• Customers can track usage more
frequently than monthly
• Modeling of Services and rates in tool
• Product Managers research customer
• Product managers flexibly manage
needs with SAMs
the capacity of their services
• Product Managers have documented
• Continuous improvement analysis
plans for the evolution of their
is performed to enhance service
services,
quality
• Product Managers take proactive
action to manage costs to protect
rates
-- 14
14 --
 Assumptions For Short Term Roadmap

Personnel Tools and Systems

•F
ull-time Lead ivioli UAM (Usage and Accounting Manager)
• Work with Finance on specifications for cost and usage collection automation,
standardizing and documenting the manual processes and allocation rules, • Implementation is completed, loaded with current cost, usage
error-proofing processes and updating Chargeback documentation. data, and business rules for services invoiced and reported
• Tivoli has the capability to be used for modeling rates (if not,
•0
.5 FTE TFG staff some other tool must be acquired or created).
• Time to support analyst’s research on usage and cost collection, make
adjustments and corrections to cost accounting, produce reports
•H
alf-time trainer ivoli UAM, or software native to Service toolsets
• 3 months to prepare curriculum for Product Managers, then deliver training • Support the automated collection of usage for more services
•P
roduct Managers
• 20% of their time devoted to learning to be cost and business managers
sset Management System •0
.25 FTE from IPG • There is a repository of the asset data required for Chargeback
• Work with Product Managers and SAMs to develop service segmentation for accounting, maintained effectively to ensure accuracy.
selected services
•S
AMs
• Time to research customer information needs, one SAM acts as the lead to MARS
collect and refine the requirements, over see implementation of requirements • Queries can be saved for reuse
into the Service Catalog, or provided to TFG or another responsible party.
•D
evelopers
• Spend portion of time making revisions to Service Catalog

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15 --
 Components of ITIL: Service Desk

4.0 Maturity Model Overview

DRAFT FOR DISCUSSION PURPOSES ONLY -- 16

16 --
 Capability Maturity Scoring

he general guidelines for scoring the maturity of Chargeback follow the standard CMMI
structure, aligned with the nature of the Chargeback activities

Score Description

5 Chargeback processes and activities are value-driven, with well-defined

institutionalized processes, operating in real time, responsive to change and
continuously improved.
Increasing Level of Maturity

4 Chargeback processes and activities support segmentation and flexibility while

expanding capability and automation, with primary responsibility exercised by
operational and customer relationship managers, and with a focus overall on
efficiency and customer satisfaction.

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.

DRAFT FOR DISCUSSION PURPOSES ONLY -- 17

17 --
 Chargeback Capability/Maturity Model
Chargeback Capability Ad Hoc Basic Capability Stable Optimizing Value-Driven
- Initial, not formalized, - Formalizing, beginning to be - Formal, stable definition - Segmentation of services - Well-defined, institutionalized
Maturity Model - Largely manual repeatable - Supported by Automation - Flexibility processes, driven by business value
- Not yet monthly - Limited documentation - Meets Schedules - Repeatable process supports and practicing continuous improvement
- Excessive manual attention - Modeled and documented customer-requested changes

Maturity Dimension 1 2 3 4 5

Service Maturity
The service is well-defined and
standardized; not subject to
changes in definition
- Service definition is rudimentary
- Lack of Service Catalog
- Limited customer awareness on
services offered
- Services exist more to organize
Chargeback billing, they have limited
independent reality
- Services are broadly defined and
published, with year-to-year changes
common
- Basic Service Catalog exists
- Service definitions are adjusted
reactively to map to customer
requirements
- Services are formally defined, and
subject to change control
- Service Catalog is used by
customers in spend planning and
budgeting discussions
- Service Catalog and detailed service
description available on Web
- Services are standard, stable, and
repeatable
- Services levels are tiered (e.g., Gold,
Silver, Bronze)
- Proactive communications between
customer and Service Account
Manager
- Services are business-based, and
not technology-based
- Continuous improvement activities to
improve service quality and lower cost
- Service Account Manager actively
guides the relationship between
customers and IT

Service Usage Measurements
Ability to identify incremental
usage and relate it to customers
and service
- Usage is rarely measured, more
frequently it is derived
- Data is scattered across various
sources (e.g., spreadsheets, Access
databases, etc.)
- Usage is often estimated based on
assumptions or allocations
- Usage units are technology-based
(e.g., # of servers)
- Usage reports are not widely
available. Reports need to be
produced manually every time.
- Usage units are based on metered
usage; not on estimated or calculated
usage
- Usage reports are available to
customers on an as-needed basis
using minimal automation
- Usage units are used to influence
consumption behavior, help manage
demand, and encourage lowest cost
consumption
- Usage reports are automatically
available
- Usage reports are proactively
reviewed by Service Account Managers
with customers on a monthly or
quarterly basis
- Usage units are business-based
rather than technology-based (e.g.,
number of application users vs.
number of licenses)
- Usage information is available in
real-time through customer portals

Service Cost
Granularity/Identification
Ability to identify costs to
specific services and/or
customers
Chargeback Administration
The collection of cost & usage,
and invoicing to customers
- Assignment of costs to Services/Cost
Pools in accounting system is
rudimentary or absent
- Costs used for rate-setting are often
approximations or estimates
- Customer invoicing is rudimentary
- Inaccurate information is often
reported for customer usage and
invoicing
- Significant discrepancies can exist
between costs invoiced/recovered vs.
what is spent
- Multiple views of service costs exist
(e.g., two sets of books for allocations)
- Costs can be assigned to specific
Cost Pool
- Costs specific to a single customer
are shared by the pool rather than
invoiced to that customer
- Customer invoices are issued based
primarily on estimated usage
- Invoices rely on manual calculations
and cleansing of data
- Only reporting of Service usage is
the invoice
- Cost reporting by service is not done
every month
- Standard and documented cost
allocation methodology is used
- Costs are allocated to specific
services or customers, with the use of
assumptions
- Fixed vs. variable costs are identified
and understood
- Customer invoices are issued every
month based on actual usage
- Service Pool Costs can be generated
from the accounting system
- Minimal discrepancies exist between
costs invoices/recovered vs. spent
- Customers can review invoice with
little assistance
- Costs formerly allocated are now
separately identified to each Service
when incurred
- Few costs are allocated unless they
are broad-based overhead expenses
- Customers can track usage more
frequently than monthly, and change
consumption behavior to manage
budgets
- Custom, ad hoc modeling of new
services and rates is supported
- Automation of usage collection and
invoice preparation makes invoices
100% accurate
- - Costs can not only be identified to a
specific Service, but also to the
purpose or function in the Service
- The accounting system fully supports
and automates cost granularity
- Real time usage costs available to
customers
- Cost Pool Managers can obtain near-
real time reports of Service cost
- Continuous improvement analysis is
applied to administration practices

Service/Cost Management
Process to review costs,
perform variance analysis, take
corrective action, so the rate is
protected
- Finance sets rates with little input
from Operations
- Cost Pool is not actively managed,
- Finance is relied on to manage the
cost pools, receiving limited
information and support from
Operations
- Very rough modeling of forecasted
service costs and usage to set rates
- Analyses of pool cost and usage are
quarterly.
- Little review of accuracy of cost
allocation and usage
- Cost Pool Managers are from
Operations and review costs and
usage for accuracy
- Cost Pool Managers perform monthly
variance analysis
- Assumptions for pool costs and
usage are modeled and documented
- Work processes to produce services
are standardized and documented
- Cost Pool Managers are Product - Product Managers can support
Managers, planning investments to service segmentation with detailed
maximize capability, efficiency, and forecasts and segment-specific costs
lower unit costs
- Product Managers research customer - Continuous improvement programs
needs with SAMs. enhance service quality and lower unit
- Trends in costs and usage are costs
analyzed and quick corrective actions
taken when necessary
- Product Managers maintain plans for
quickly modifying capacity (up or down)

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 Components of ITIL: Service Desk

5.0 Appendix

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19 --
 Dimension 1: Service Maturity / Service Definition Example
Capabilities Description of Gap
Service Definition • Services are now formally defined. Changes to the
definition should be under Change Control.
• The standardization and specificity of the services vary,
with some, such as those for hosting, are relatively open-
ended.
• A customer with simple, low-cost needs, pays the same
rate as a high-cost customer
Example • Massmail service today is segmented into two rates,
based on whether the mailbox is under or over 500 MB in
size.
• But Massmail as a service includes Active Directory
services for the Massmail forest, plus mailbox and Public
Folder restore services
• Customer agencies are expected to manage their user
accounts, distribution groups, and group policies.
• A service was added, integrated electronic faxes, without
a rate or fee specified.
• A more a la carte segmentation model could enable
customers with more costly requirements to be able to
get the service they want without forcing a base-bones
customer to incur additional cost.
DRAFT FOR DISCUSSION PURPOSES ONLY
Recommendation
• Increase the standardization of the services, with defined
segmentation and service level tiers to accommodate the
different requirements of customers with individual rates
by segmentation and service level to better reflect the
relative cost of the customer’s usage.
• Segmentation Possibilities:
• Base service with 500 MB mailbox
• Option for additional 500MB mailbox storage
(closely tied to real cost of the additional storage)
• Option for email archiving
• Option for email encryption outside of the
MassMail environment
• Option for providing full administration (managing
user accounts, etc)
• Charging for standard service requests like
mailbox restores, per request
• Charging by the hour for labor-intensive services,
such as collecting email for an investigation
• Can Active Directory support be charged by itself,
on a per individual basis?
-- 20
20 --
 Dimension 1: Service Maturity / Service Catalog Tiering
Capabilities Description of Gap
Service Catalog • The Service Catalog is newly published and is a
significant achievement.
• Each Catalog entry is a description of the family of
services, with a listing of the specific services and rates •
where these exist. It is not designed to facilitate ordering,
but rather to explain the background to the service.
Example • The Service Catalog pages are long documents that
provide a lot of information about each family of Services:
• Description of the overall Service
• Service Targets and Availability
• Service Reporting
• Specific Service Requests – what customers can ask
for in E2E
• Customer Responsibilities
• Chargeback Rate information: the cost pool for this
family of services
• The specific Services and their Rates
• A customer needs to page through a lot of information
to get to what they can order
DRAFT FOR DISCUSSION PURPOSES ONLY
Recommendation
• Improve catalog with feedback from customers on what
would better help them in planning, budgeting, and
ordering the service.
The structure could be changed, with a more tiered
structure created for the catalog “pages”.
• What do customers want/need to see when they use the
catalog? Organize the pages to start with that
information, then include links to more detailed
information
• For Example:
• Short Description of the Service family
• List of the specific Services and their rates
• Each specific Service is a hotlink to a description
of that Service
• There can be a hot link from the Service family
description to a long description
• Then hot links to the rest of the information,\: Service
Reporting, Service Targets, etc. always returning to
the main page for the Service family.
• If the information is specific to a single Service,
then it should only appear on the hotlink from that
Service.
-- 21
21 --
 Dimension 2: Usage Measurement / Allocation Example

Capabilities Description of Gap Recommendation

Usage Measurement • Usage for some services is derived, the units cannot be • Address the allocated usage to find a means for directly
measured directly. measuring by customer, or institute a process to revisit
• The units of measure are frequently technology-based, the allocation methodology regularly to ensure continued
reasonableness.
• Allocations are sometimes used to apportion use of a
resource, rather than direct usage, or costs are bundled • Consider whether services whose usage is derived
together and the rate is based on only one cost should really be independent services, or rather bundled
together.
• Or whether bundled costs should be charged separately

Example • Sometimes several types of costs are added together
and then charged for using a rate that only measures one direction at roughly the same rate:
of the cost drivers
• For example, Mass.Gov costs are primarily recovered
through two rates, one for storage and one for bandwidth.
• But there are significant costs for calls from the public to
the CommonHelp Service Desk with questions about
website navigation ,and server hosting costs, that aren’t
directly related to these two usage measurements.
• The danger is that a customer will seek to avoid a “high”
cost rated service
• E.g., they could minimize the storage needs of their
website to reduce their charges,
• This would reduce Mass.Gov’s storage needs
• But storage is only a portion of the cost recovered in
this rate, and those other costs are not reduced,
putting the rate at risk – it was calculated on a bundle
of costs of which storage was only one.
• Ideally, the costs for a Service all move in the same
• If the cost of one component increases, the costs of
the others should also increase, in roughly the same
proportion.
• Then if only usage of one cost component is the
foundation for the charging, as when only the usage of
storage is used to charge for the hosting costs of
Mass.Gov, it is still a fair apportionment of the cost by
customer.
• However, where costs can move independently, and
customers can affect their consumption of one
component, such as storage, without affecting others,
such as the server hosting expense, then the pool is
at risk.
• With bundled costs, look for components that can
easily be identified and billed separately, such as
CommonHelp calls, and charge for them separately
• Or add more components to the rate, creating a
complicated formula (e.g., add server utilization)

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 Dimension 3: Service Cost Management / Cost Granularity

Capabilities Description of Gap Recommendation

Cost Granularity • Costs specific to a single customer are sometimes • Remove customer-specific costs from the cost pools, bill
included in the pool and so shared by all those costs directly to the customers involved.

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

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 Dimension 5: Service/Cost Management / Service Management

Capabilities Description of Gap Recommendation

Service Management • Modeling of service rates, and the assumptions utilized,
are not well documented.
• Accuracy of cost and usage for each month is not
reviewed
• Few indications of multi-year planning for service
improvements
• TUAM tool can be the foundation for modeling chargeback
rates – Finance & Operations share use.
• Product Managers maintain plans for the evolution of their
services, including technology upgrades, investments, actions
to increase efficiencies, etc.
• Product Managers can manage capacity with flexibility

Example • Services should be modeled in setting rates, and those

models used to manage the rate during the year, as changes
in utilization and requirements take place:
• Capture assumptions about costs for the year
• Start with Prior year actuals
• Modify based on plans or trends, documenting the
rationale
• Capture assumptions about usage, using history (at the
customer level if possible) from the prior year as the
starting point and documenting modifications
• Utilize standard building blocks of capacity to increase or
decrease the costs in line with projections of usage
• These increments of capacity should include all costs
required to change capacity: hardware, software, labor,
services.
• The smaller the feasible building block, the better
• These units of capacity would also be the foundation for
managing the cost pool projections as changes in
demand are processed during the year – simplifying the
projection of cost trends.

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 Revised Chargeback Cost Framework

No. IT Chargeback Component Cost

Customer-SpecificCostsfor the Service, not part of the Service Cost Pool
Will depend on the Customer - could be specialized software purchased and maintained by ITDfor
1 the Customer $TBD
ExpensesSpecificto Service Offering
2a Salaries and Fringe - Travel, consultant, AA Sub $TBD
Hardware and Software: Direct infrastructure only
One-time
Maintenance
2b Depreciation $TBD
2c Service costs, such as network or storage $TBD
ExpensesSharedAcrossService Offerings
Expenses shared across 2or more Services (but only a limited number). For example, Windows
3 Server license costs would be shared across the Wintel and VM services $TBD
ExpensesSharedAcrossAll Service Offerings
4 Security $TBD
5 CommonHelp - Cost of CommonHelp plus a percentage of IT operations $TBD
Additional Overhead - Any costs distributed on top of the direct expenses (does not include
overhead related to Shared Infrastructure Services)
Management
MITC rent
Project management
6 Infrastructure planning $TBD
Technology Services - Database, network, storage, backup and recovery, midrange hosting,
7 mainframe hosting $TBD
Adjustments – State appropriations, subsidies, and expenses that are not typically included in a
8 chargeback $TBD

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 Dimension 1: Service Maturity

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 Dimension 2: Service Usage Management

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 Dimension 3: Service Usage Management

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 Dimension 4: Chargeback Administration

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 Dimension 5: Service/Cost Management

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 Challenges for Chargeback from ISB Chargeback Subcommittee
1 Customers may compare ITD's rates for some services with commercially available rates and decide against consolidation. ITD rates
include more than just the base costs for providing the discrete service.
2 Communicating to the Customers Why Service Costs May Be Higher With ITD - How to demonstrate/communicate the Additional Value
provided?
3 Chargeback has changed, with the publication of the Service Catalog and the detail on the costs behind the rates. The challenge is how to
communicate the improvements.
5 We are transitioning to a comprehensive definition of services, but most people probably aren't aware of the improvements
6 How do we communicate what is in the Cost Pools, why it is there, and provide the reasoning (ie, additional security, strategic planning)

7 Bundling Services vs. a-la-carte Services

8 Auditing Usage Based Charges
9 Some services today include, as part of their costs, services or features that only a single customer is using. The other customers are
subsidizing the first customer, since they are picking up part of the cost but not using the feature.
10 The challenge of Federal funding: making adjustments to the pools, or the usage basis for cost allocation, without causing the Federal
Government to question the fairness of the allocation and demanding repayments.
11 The challenge of dealing with cross-service subsidies, where one service provides revenue in excess of cost, covering another where costs
exceed revenue. We would like the rates charged for services to be directly related to the cost, and this cross-subsidization is contrary to
that.
12 How to we transition to a rate structure that removes cross subsidization?
13 How do we close the gap between ITD rates and those of competing commercial services?
14 With IT consolidation there will be existing Secretariat and Agency assets. If they are are taken on by ITD, to continue provide the
consolidated services to the customers, how do we do that?
15 Consolidation will require expenditures on infrastructure prior to being able to bill for services. So there will likely be costs added without
corresponding revenue, at least initially. How will that be accomodated?
16 The challenge of the seed money required to support consolidation preparations, costs in excess of those required to provide current
services.
18 Costs that are spread across services - we have the challenge of identifying and managing those. Security is an example.
19 The challenge of the current culture, where cost management is not a strength of the technical managers responsible for providing the
services
20 We need better asset and configuration tracking, providing a method or approach for tighter control on asset management with a stronger
focus on decommissioning (if they get a new toy they should be throwing out an old one)
21 There needs to be a focus on de-commissioning devices and technologies, eliminating costs, as part of managing the services and the cost
pools.
22 The challenge of having the operational managers become strong managers of costs and budgets for the services

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