This is a discussion thread for Steve Purkis excellent MapCamp 2021: Use Case Edition talk.
I have enjoyed the presentation a lot and I have in my todo list to review the content published in the web.
I would like to know more specifically the calculation of the costs between services is defined and managed. It’s a relevant information I have always tried to understand to get better understanding of each piece of services.
@joapen: to determine a services costs, the easiest thing to do is:
Ask the Service Manager to provide them to you
Just as any CEO of a small company should know their costs, the Service Manager should know roughly what the costs are, or at the very least they should be able to find out. They may not have fine-grained detail on consumption, but they should be able to provide a Profit & Loss (P&L) view for their service.
Of course, if you are the Service Manager, you’ll be asking the exact same question… so that doesn’t really help. What else can you do?
Assuming you’ve got some understanding of accounting, you can:
(1) Hack something together in a spreadsheet
I’ve used this approach before, and I bet everyone else in the world has too - it’s the first place to start.
It does have value – you can choose the level of detail you go to, and can develop P&L’s for whatever you like. But it takes a lot of manual work (depending on the size of the organisation), it gets out-of-date quickly, and will only ever be an approximation. What’s more, visualising it in map form is yet again manual work.
All in all, it’s the kind of thing you’d want to do once or twice a year to get a snapshot.
(2) Use a capital flow tool?
This is something I’m looking into, and could do a whole talk about. In a nutshell, I’ve not found any tools that do this well / at all, so we’re looking at creating one.
In a nutshell: you need to define your services to the point where you understand all of your expenses at the service-level, and the value chain fragments for each expense (ideally, you automate this). Then you need to have some cost allocation rules for each service based on consumption. Next, you need a way of charging customers to generate income for the service. Finally, you need a way of managing & visualising all the data.
If you’re interested in getting involved, let’s talk!
thank you so much for your answer,
I though that there would be new ways to do this, but I see there is not so much advance on it.
Related to the approach #1 I use to do it one week per quarter when I was Service Manager so we would re-assess the billability from time to time and avoiding to do every single week.
We put some rules as vacation percentage and sick leave to do some type of budgets (for the quarter).
The conflict?? the one I think every body has: time communicating with other services or teams.
- I would like to have more time, honestly, but I’m struggling with the commitments I took and my body cannot accept more by the moment.
I know that start-ups are using the time management tools but apart of the fact that they are tracking time, I do not know what ground rules they use to promote collaboration.
I know people working in platforms as freelance, where the session is billable to a customer. The are paid by session and the common sessions they organize between teams are paid by the company.
I understand you are considering all these rules, and many other things.
The abolition of sunk cost is something very key in big organizations, and to have another tool I do not know if it works.
Personally I track my time 3 times. And I can tell you, I hate it.
Hi @joapen , you mentioned a lot about time tracking, which is something I don’t do at all as a Service Manager. This makes me think we think of services differently. Could you share more about services you deal with?
I have dealed with IT services in applications and infrastructure environments.
I’ve come across 2 such tools - hope they help sparking ideas/concepts/conversations.
There’s one that @alexander.simovic put together:
- The tool: https://capitalflow.ai/
- The write-up: FinDev and Serverless Microeconomics: Part 1 | AWS Cloud Enterprise Strategy Blog
Another one is specifically for Cloud infrastructure:
I’ve already spoken with @alexander.simovic about CapitalFlow.ai and taken some lessons from his work, along with Adam Bouhenguel’s experience creating MapScript v2. I’m thinking about starting up a wider open working group on this.
That’s the first time I’ve come across Infracost.io, I love the idea of showing costs in PRs. I’ll dig a bit deeper!
At a glance, the tooling I’m looking at is complementary – both of these are focusing on cloud infrastructure, whereas I’m interested in everything. Capital flow (and other flows) for all components. Eg: Product Development, Marketing, CRM systems, Copy writing, Editorial, Accounting, Manufacturing, Support, Ticketing systems & helpdesks, Buildings, Electricity, Phones, etc. etc. etc. Technical infrastructure is often a large part of costs for many of the companies I work with, but focusing on it alone would give an incomplete picture.
@steve I spent a bit of time researching capital flows, and I got stuck because of the incalculability of the revenue stream for Genesis/Custom-built space, where all the initiatives are rather leaps of faith than rational decisions.
On the other hand, as I am writing this, my mind starts wandering and asking questions - perhaps I should not be trying to find a way to calculate all the flows, but rather focus on finding a good use for flows which can be calculated (product + commodity) and associated practices.
I recognise also the danger of creating such a tool - capital flows can be used to create better organisations and misused to overoptimise value generation at the expense of learning capabilities.
cc: @t.onyszko - I know you’ve been interested in that space, too.
That’s a wider scope than I had in mind
I’m curious to see what you end up with.
When I looked a little into it, I ended up in a book “How Finance Works” and haven’t made my way back ¯_(ツ)_/¯
Here’s a chain of chapters in case that helps you decide whether to read it or toss it.