Reference Model of Cost Allocation and Profitability for Efficient Management of Corporate ICT

Abstract

Managers require, more than ever, exact information about economic situation of their business. They need high-quality information not only about business as a whole but also detail information about individual departments, divisions and activities and its share on business added value. Usually it is easy to identify parameters linked to companies’ profits and companies’ costs because these are known. But when companies want to make deeper analysis of the detailed cost structures of each product or service, they have to analyse companies activities in higher detail and try to identify business processes, cost drivers, cost centres etc. All of these activities are primarily connected with accounting and financial perception of which is based on accounting methodologies like the Activity Base Costing (ABC) and others. One of the most important Corporate Performance Management (CPM) domains is “Profitability Modelling and Optimization” that contains tasks cost optimization, product profitability and What-If Analysis.The proposed conceptual model mainly focuses two areas – “Cost Allocation”, and “Profitability Management”. The paper further introduces the limitations of the model, its architecture (the different layers of the model). In the end, certain ideas are presented how the solution of the reference model should proceed