Brief analysis of cost management in it Department

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A brief analysis of the cost management of enterprise IT department

the high cost of enterprise informatization makes people pay more and more attention to the cost of IT department. Cost composition analysis is the basis of cost management. Based on the analysis of cost composition and cost management objectives of IT department, this paper puts forward the mode of cost management of enterprise IT department, and puts forward suggestions on the problems existing in the implementation process

since Shenyang first machine tool plant introduced MRP Ⅱ software from the German Association of engineers in 1981, with the development of information technology and the progress of management concept, various enterprise informatization projects have followed, such as enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM) and enterprise process reengineering (BPR), and various domestic enterprises have rushed to spend a lot of money on Enterprise Informatization Transformation and set up special IT departments, Setting up CIO is like catching the information express, and enterprises can enter the new economic era with peace of mind. However, an expert survey found that in the more than 20 years from 1981 when Shenyang first machine tool plant introduced MRP Ⅱ software from the German Association of engineers to 2002, the application of ERP in enterprises was not optimistic. 10% to 20% of the enterprises successfully implemented system integration on schedule and according to the budget, 30% to 40% of the enterprises did not realize system integration or partially integrated, while 50% of the enterprises failed. Most of the enterprises that successfully implemented ERP were foreign-funded enterprises

a similar situation exists in foreign surveys. Kalido, UK, published the survey results on enterprise information management on December 12, 2001. The survey shows that 96% of enterprises are dissatisfied with the company's information management system. It is thought-provoking that the survey was conducted by Harte hanks of the United States through questionnaires with 171 companies in the global top 500 enterprises and Fortune 1000 enterprises as the objects. Among the respondents, more than 40% of enterprises have an annual transaction volume of more than US $2billion. About 60% of the enterprises answered that the current information system cannot flexibly respond to changes; About 60% of enterprises are worried about the accuracy of data; More than 60% of enterprises are planning the integration plan of relevant data and information. Domestic and foreign figures show that the success rate of enterprise informatization investment is very low. On the one hand, it is a huge investment at all costs, on the other hand, it is unsatisfactory output effect, which makes the CIOs of enterprises feel great pressure. An important reason for this dilemma is the lack of cost management of IT departments

during the Internet foam, the cost expenditure of enterprises on IT departments was almost out of control, and a large amount of "burning money" was a vivid portrayal of this period. However, the harsh reality of market competition makes enterprises have to consider the contribution of IT departments to the increase of enterprise value and the rationality of the rapid cost growth of IT departments. Although more and more people believe that the service of IT department is an indispensable support for an enterprise or a business, the rapid increase of it cost has affected the further investment of enterprises in IT department, and even the development of new IT service projects. In order to measure the performance of the IT department, and at the same time, it departments also want to prove their efforts. Both the recipients of IT services and the IT department itself need to know the real cost of providing an IT service and how the IT department manages and controls these costs. The cost management and control of IT department is put on the agenda

I. cost composition analysis of enterprise IT department

a correct understanding of the classification and nature of costs is the premise of effective cost control. The costs incurred by the IT department mainly include: hardware costs; Software cost; Human resource cost; Site cost, including computer room, office and other equipment rooms such as testing room, training room, air conditioning, etc; Outsourcing service cost refers to the cost of purchasing services from external organizations. It can be the purchase of application system development services or the construction of data centers. Therefore, the cost includes different cost types such as hardware and software. However, because the service provider is unwilling to provide detailed cost data, it is difficult to decompose the outsourcing service cost into the most basic cost types, so it is listed separately as a category; Transfer costs, for multinational companies or large enterprises, usually have a relatively complex internal accounting system. When different departments within the organization provide products or services to each other, a transfer price should be set. The transfer price represents revenue for the department providing products or services, and costs, that is, transfer costs, for the purchasing department using these products or services. It usually includes: hardware, software (the control mechanism established by the company's financial department for the cost management of the IT department), human resource cost (the human resource fee charged by the company's human resource department), place cost (the fee mainly charged by the company's facility management department). We can divide these costs into different categories according to different needs of cost management and different standards

1. According to the traceability of cost, it is divided into direct cost and indirect cost

direct cost refers to the cost that can be traced back to individual products, services or departments, which is called direct cost. For example, if the IT department directly consumes resources to provide a certain it service to customers outside other departments or enterprises, and the consumption of this resource is only related to the service, these costs are direct costs. Indirect cost refers to the cost caused by several services or departments, which is called indirect cost. For example, the administrative expenses of the IT department, which are not specifically incurred for a certain service or department, are counted as the indirect costs of the IT department

2. It is divided into fixed cost and variable cost according to the cost behavior

cost behavior refers to the dependency of total cost on business volume. Business volume refers to the indicator volume of the level of production and business activities of an organization. It can be output or input; Physical quantity, time measurement and monetary measurement can be used. When the business volume changes, various costs have different properties, which can be roughly divided into fixed costs and variable costs

fixed cost refers to the cost that is not affected by business volume. It includes the investment of hardware, software and buildings, but this does not mean the purchase price of hardware, software and buildings, but their monthly or annual depreciation. These depreciation, whether business volume increases or decreases, has remained stable, which is the fixed cost of IT service department

variable cost refers to the cost that increases in a positive proportion with the growth of business volume. For example, the cost of IT staff salaries, printer cartridges, paper, electricity, etc. will increase with the increase of IT service provision. These are the variable costs of IT departments

3. According to the nature of the cost, it is divided into capital cost and operating cost

the cost incurred to purchase assets for long-term use is called capital cost. These costs are generally reflected in accounting accounts as depreciation within a certain period of time. Therefore, the cost of capital generally refers to depreciation rather than the price of purchased assets. Operating costs refer to the costs that are not related to the formation of tangible assets. For example, maintenance fees, insurance premiums and license fees of hardware and software

in addition, according to the controllability of managers on cost items, it can be divided into controllable costs and uncontrollable costs: if managers can control costs or have a significant impact on cost levels, such costs are called controllable costs. The cost that managers cannot have a significant impact on is called uncontrollable cost. Many costs cannot be completely controlled by people. When distinguishing controllable costs from uncontrollable costs, special attention should be paid to whether managers have the ability to affect costs

II. Cost management objectives of enterprise IT department

as the enterprise is composed of several departments, each department has its own objectives, so the foothold of cost management of IT department is very critical. The cost management of enterprise IT department should be enterprise centered and analyzed from the perspective of encouraging employee morale. Enterprises' cost management of IT departments is not simply to pursue the lowest cost and maximize profits, without considering the interests of other departments. Nor does it make the IT department obtain excess profits at the expense of the interests of other departments or enterprises. Each department of the enterprise is formed for the common goal of increasing and improving the value of the enterprise. If there is no interest relationship between each department and no internal accounting, the enterprise will lack effective control over the actions of each department and effective evaluation, reward and punishment of the work performance of each department. This affects the enthusiasm and effectiveness of all departments of the enterprise, and then affects the survival and development of the enterprise. Therefore, the goal of cost management of enterprise IT department can be defined as follows: it is the cost advantage of IT services on the premise that enterprises pursue the maximum enterprise value

specifically, cost management should enable it department managers to make decisions on each IT service based on the cost-benefit principle; Make budget plans based on reliable data information; Implement it services and related investments in the form of commercialization; Examine it services in a commercial mode, formulate investment plans based on cost compensation, and so on

third, the design of the cost management mode of IT department should choose the lead screw driven

the so-called cost management refers to taking the budget cost as the limit, spending costs and expenses according to the limit, comparing the actual cost with the budget cost, measuring the achievements and effects of activities, and correcting adverse differences with the principle of exceptional management, so as to improve work efficiency and achieve or exceed the expected goals. Therefore, the cost management mode should include: budget, it accounting records, enterprise internal accounting, and cost analysis and assessment


budget refers to the estimation of various costs and the calculation of budget costs by an organization according to a certain level of business volume and quality, and the measurement of its rationality based on the budget costs to control economic activities. When there is a big difference between the actual state and the budget, find out the reasons and take measures to control it. Budgeting is based on the cost prediction of budget items and the prediction of IT service workload

(1) cost forecast of budget items

budget items are generally divided according to cost items. Once determined, they generally need to remain stable. First, it can enable enterprises to understand their cost change trend and make vertical comparisons, as well as horizontal comparisons with other enterprises. Second, it provides a simple processing basis for cost management activities. For example, depreciation can be processed separately according to different cost types

in budgeting, the cost of each budget item is generally unknown, such as overtime wages, external charges, etc., so it must be predicted. These costs are estimated based on the cost data of previous it accounting years or the prediction of future workload. It cost management must carefully estimate uncontrollable cost changes

(2) it service workload prediction

it workload is one of the main reasons for cost changes. Therefore, when preparing the budget, it is necessary to predict the future it workload. Not only cost management activities need to estimate workload, but also workload prediction in service level management and capacity management. Workload prediction is based on the historical data of workload, taking into account the update of data and the modification of plan to obtain the future it workload

2 accounting records

accounting records are written records that track and monitor how the expenses of the IT department or organization are formed. Including various ledgers, which are managed by accountants. Accounting records are very important for people to recognize and identify costs related to it departments,

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