The result is the creation of an interlinked performance ­measurement system for the management of IT, customized to fit the selected organizational form – whether IT provider, ­shared service center, or an IT department – and which describes the relationships as well as the effects. The value contribution of the IT to company success becomes visible and measurable.

Cost and activity accounting customized for the organizational form assures IT alignment at optimal costs

Establishing the economic efficiency relationship between costs and benefits by means of value-oriented allocation models incorporating the entire value chain from the IT services to the IT applications to the business processes assures alignment of IT at optimal costs. Cost and activity accounting (see Figure 2) creates the therefore required transparency about the absolute amount of the various cost and activity types and their development over time and transfers them into an allocation model which is comprehensible and transparent to the business. Cost and activity accounting creates the basis for efficient service delivery, need-oriented service design, and the establishment of management instruments for economically reasonable user behavior.

Furthermore, the cost transparency thus created supports the identification of areas of improvement and savings, ­providing the valuation basis for different operating models. In this ­respect, the controlling models of IT service providers prove to be especially effective in practice as IT cost management is one of their core competencies. This is rooted in the necessity to allocate market prices and to perform retrograde calculations from expected market prices (target costing). In addition, IT providers need benchmarkable structures.

Since an in-house IT, an IT shared service center, or an external IT service provider have differing requirements for their IT controlling, IT controlling structures customized for the ­specific organizational form such as activity types, cost centers, cost type structures, or allocation prices are required as support for IT management. Achievement of an optimal balance on controlling expenditures and complexity depends on the business ­model and the size of the IT organization which determine the cost accounting instruments to be used. For example, a medium-size internal IT department only requires the instruments cost type and cost center accounting, internal activity based costing, and project controlling. Though, the use of market segment and profit account is essential for a large IT provider to manage the product and customer portfolio as well as the regions and sales units and to answer the question about profit contribution, profit, turnover in relation to various variables – products, business segments, customers, segment, region, country.