Recently, there's been some questions about how to best allocate costs between the Projects object and the IT Resource Towers object on the Cost model. This article provides some best practice guidance to consider. As always, these are best practices but may not fit every situation and may vary depending on your data.

The guidance below applies to OpEx costs. The CapEx model does not have an IT Resource Towers component.

Let's start with a brief defintion of "project".

A project is a planned piece of work that has a specific purpose (such as to find information or to make something new) and that usually requires a lot of time (thanks Merriam-Webster!). In addition, projects typically have a beginning and an end.

In Apptio, we typically see two major kinds of IT projects reflected in Apptio:

• Infrastructure Refresh projects
• Application Development projects (including updating existing applications or creating new applications)

However, there's a third kind of project that we see that doesn't fit the traditional definition of project. We'll call it "operational activity" where people use project coding to reflect ongoing operations. We see this quite frequently in the way people track time (which, in turn, affects how costs are allocated to the Projects component).

Projects by their very nature tend to vary from customer to customer in terms of 1) how you view and report on projects and 2) the type of financial data that you have available. As such, this article provides best practices and general guidance. You may find that you need to allocate costs differently in your model.

Option 1 - you can identify the Tower and Subtower at the Project level

If you can identify the appropriate IT Tower and Subtower at the Project level, route the costs from the Projects component through the IT Resource Towers component and add granularity to ITRT as needed.

Example:  You're purchasing a new batch of Windows servers as part of a refresh project. In this case, you can route the costs to the Compute IT Tower and the Windows Subtower.

Example: You're creating a new application. You can route those costs to the Applications IT Tower and the App Dev Subtower. In addition, if you need to add granularity to keep track of the specific application, you can include the Application name in one of the metadata fields.

Example: You have a project to track time spent on supporting a specific custom application. You can route the costs to the Applications IT Tower and the App Support & Ops Subtower. Again, you can use one of the metadata fields if you need to track the specific application for better granularity.

Tip: If your project is an infrastructure refresh, route these costs from Projects to IT Resource Towers as much as possible. Benchmarks include the plan, build, and run costs (e.g., the full life cycle of operating assets - not just the ongoing operations). In many cases, the plan and build activities will be project related and will either be reflected as project OpEx or expensed as capitalized assets are depreciated. If you see a large spike in cost due to project activity that is immediately expensed (or over a period of time depreciated), that is the real cost that should be reflected in the comparison. A benchmark does not show you if you are good or bad if you're above or below the benchmark; it reflects a reference point to make educated decisions.

Tip: If the project is related to an application or service and you cannot identify the appropriate IT Tower or Subtower, bypass the IT Resource Towers component on the model and route your costs directly to Applications or Services as appropriate. Since Apptio does not currently perform benchmarking of applications, the criticality of routing these costs through the IT Resource Towers component is lower than for infrastructure costs.

Option 2 - you cannot identify the Tower and Subtower at the Project level

If you cannot identify the appropriate IT Towerand Subtower at the Project level, you can bypass the IT Resource Towers component. However, it's important to note that if any of the costs are tied to infrastructure, it may affect your benchmarking assessment.

Common Questions:

Should I allocated costs from IT Resource Towers to Projects?

The answer is most likely "no" given the best practices listed above. Again, you may have an exception depending on your structure and your data.

Should my Cost Source total match my IT Tower total?

Ideally, Cost Source and IT Resource Towers should be as close to matching as possible assuming you have high quality allocations. It is not beneficial to allocate all costs using low quality allocations just for the sake of allocating dollars.

What should I do with vendor (reflected via the Vendors component) working on Projects on the Cost model?

There are a couple of options:

• You can route project vendor costs to the Vendors component and then to the Projects component. This requires including Project IDs in the unique identifier for the Vendor component to ensure proper granularity.
• You can route project vendor costs to both the Vendors component and the Projects component. This requires a flag to be passed to the Vendors component that can be used to stop costs from being passed to the IT Resource Towers component.

You should talk with your Apptio consultant about which may be the best option as it depends on your needs around vendor reporting.

How should I handle RTB/GTB/TTB costs as related to Projects?

Let's start by defining RTB, GTB, and CTB:

• Run the Business (RTB) metrics are not about revenue. They are about enabling essential non-differentiated (from your point of view) services with the desired balance between cost and quality. They are about reduced cost, price-to-performance ratios, and reduced risk (which translates to avoidance of catastrophic costs).
• Grow the Business (GTB) value is about increasing revenues and profits from existing customer segments. Operations enables growth by providing capacity where and when it is needed – the ability to do business in a certain way.
• Transform the Business (TTB) value is about massive change: new value propositions serving new customer segments with new products and services. The most important questions are about who will win and why, who will lose and why, and what will be won or lost.

With those defined, it's important to note that RTB/GTB/TTB is not set at the Cost Source (or GL) level. By definition, all operating expenditures are Run-The-Business activities with the exception of project related operating expenses. As such, Apptio's recommendation is to set the Spend Type at the project level for all project related costs, whether OpEx or CapEx.

It's also important to note that we are focusing the RTB/GTB/TTB metric only at the IT investment perspective. As such, the RTB/GTB/TTB calculation that is provided in the Cost Transparency "out of the box" metric on the CIO Dashboard is about Project Investment breakout.

Of course, this all depends on your data and what you're trying to measure. Each company and individual may define xTB differently, but hopefully this serves as a good starting definition!