Several years ago, we were in meetings whereby multiple Information Technology (IT) projects were being assessed and compared. As was typical at that time, each operational project was characterized with strategic, tactical, and, financial impact metrics. The first two were very much experienced-based metrics where the senior managers brought years of insight to bear. The last metric, however, was based on the current spend, project cost, and the future spend.

Unfortunately, future spend was, more often than not, presented in terms of productivity improvement. Automation, process improvements, outsourcing were stated in terms of cost savings related to labor reduction. Very little work was done to show the mechanics of either the current spend or the future spend.

What was needed was a way to easily describe the current state in terms of organizations, resources and work and then relate it to one or more future states. But how should we represent what is accomplished in the current and possible multiple future alternatives? And how should this representation be cost tied to the various organizations and to the various delivery processes?

Our (eventual) solution was to capture the characteristics of the typical operational environment in order to:

  • Fully describe work and the role resources, consumables, and revenue play
  • Depict how the accomplishment of work requires at least one and, more often than not, multiple resources
  • Show how work is driven by resource count and throughput rates
  • Show how the work relates to organizations (bottom up) and to catalogs (top down)
  • Describe how resources are sourced to one ...or more organization(s)
  • Explain how cost of work accrued to an organizational roll up should match exactly the cost of work accrued to products and services in the catalog
  • Show how organizations may be abstracted into providers that afford an opportunity for cost localization and catalog ownership

One should recognize the above as an extended, rate-based ABC (activity based costing) set of properties.

The implemented solution uses well known technology and programming techniques:

  • A reasonably simple database schema that is implemented in two technologies
  • A spreadsheet-like analysis engine to quickly analyze resource usage
  • A Monte-Carlo simulation engine to better understand resource contention and usage variance
  • Two hierarchical views to facilitate top down or bottom up data entry and analysis
  • A generalized linear transformation mechanism as an adjunct to organizational copy and paste
  • A cost analysis engine that traverses hierarchy and maps utilized cost to actual costs

The resulting software models the operational environment using familiar objects. The two views, top-down and bottom-up, network-wise and hierarchically cover the work performed and, therefore, provide cost credibility by each view cost summing to the same value. This is explained in the image below.