Cost Accounting for IT Services

In this industry research project, our project partner was faced with the difficulty of  determining the costs of  “Desktop Services” offered to the market. This specific IT service included the provision and deployment of an IT desktop computer fully equipped with operating system, software for word processing, spreadsheet calculations, and mail exchange. However, the exact costs for producing the IT service were not fully transparent to the provider. In response, we developed a cost accounting system for capturing the internal costs of service production. Our accounting system covered the whole life cycle of the service, from the selection of hardware, to the operation of the desktop computer including maintenance and repair to its final phasing out. 

Based on historical data, we also applied our lifecycle cost model to the evaluation of alternative models for producing the service. The simulations revealed that the real failure rates of IT equipment used in the past were much higher than assumed and stated in technical descriptions of the supplier. Hence, using a more expensive desktop computer, for example, resulted in lower overall service costs than using a cheaper model due to lower failure rates in practice and better support provided by the supplier.