Estimating The Cost Of Managed Services For A Global IT Infrastructure: A Case Study
Eilingsfeld, F.
PRICE Systems Limited

This paper presents the approach used and lessons learnt while applying parametric tools for estimating life-cycle costs of a large turnkey project in the area of IT outsourcing. The task in question comprised a satellite-based communication network which connects over 250 sites all across the planet.

The global trend towards outsourcing IT infrastructure in the form of "Managed Services" has changed the decision environment of chief information officers (CIOs) and other IT stakeholders. These days, decision makers usually have to award long-term IT service contracts based on sometimes very complex proposals as submitted by potential service providers. Analysing these and verifying their respective price tags can become exceedingly complicated.

While there is a number of well-established cost models for estimating the hardware and software part of large IT ventures, decision makers often lack the means to analyse and review the "services part" of a given project. This is where the money is nowadays. Typically, between half and two thirds of the life-cycle cost of a large turnkey IT project can be attributed to items which are neither hardware nor software. Therefore, it is often hard for the respective customer to understand the value and the pricing structure of a proposed service.

Hardware and software estimating is relatively straightforward: cost drivers are well understood and estimating models are mature. Then again, the presence of "managed services" asks for an extended approach to estimate their costs. A suitable model for managed services must be capable of modelling distinctive cost aspects, like the cost of: bandwidth, service management, user helpdesk, network management and the maintenance of equipment, either local or remote.

The PRICE Systems TruePlanning Suite, especially its True IT model, offers a versatile platform for tackling estimates of even the largest IT infrastructure projects. With the help of some additional research, it can be extended to accommodate all different cost aspects of those services which were previously not taken into account.

In order to demonstrate these capabilities, a walkthrough of the aforementioned case study is conducted. Tips and tricks for setting up True Planning in the right way are highlighted. Lessons learnt will be recounted in order to enable readers to tackle future IT procurement decisions more easily.