Hosting Service Providers

Understand Service Costs to Improve Profitability

A Hosting Service Provider’s business depends on accurately understanding the IT costs incurred in providing services and the revenue associated with those services. Understanding how to increase margin by targeting the most profitable services or focusing on the most profitable customers requires an accurate and in-depth understanding of the total costs of those IT services, both while in production and before bidding on a new contract.

Of course, most providers understand the revenue side very well. That’s the easy part. But understanding the cost elements of a hosted service including all associated network, labor, facilities sales and marketing AND accurately allocating those costs to a service is very complex.

In fact, many service providers have aggressively bid on contracts only to find out they can’t provide that service at the contract cost—a money losing proposition. Understanding the service cost structure and being able to quickly simulate new service models before a contract is written enables hosting providers to maximize their profit margin.

Of course, measuring the total costs of providing a service enables providers to retroactively gauge the cost and thus profitability, but by then it could be too late. The provider is locked into a contract. In order to optimize per customer profitability it is necessary to understand the underlying cost structure of a service and to dynamically model various service levels before signing a contract.

The second step in maximizing profit margin is to reduce operating cost. With a deep understanding of the unit cost drivers with a service or product and the ability to compare across products, across data centers or across industry averages it is possible to create a process for optimizing IT efficiency. Leading IT organizations systematically and repeatedly analyze the cost data and the asset catalog to identify high cost, low value services that can be cut, low utilization infrastructure that can be consolidated with virtualization technology or high cost-per-megawatt data centers that can eliminated or reallocated.

IT Cost Transparency Tracks Service Costs and Revenue

Apptio enables hosted service providers, collocation providers & SaaS companies to maximize their profit margin by ensuring high margin bids and optimizing cost reduction initiatives.

Apptio is a Software as a Service (SaaS) solution that automates the allocation of IT unit costs into a fully-loaded cost per IT Service. It provides a sophisticated but easy to use cost modeling environment to accurately assess the fully loaded cost of service, rich reporting and analytics to understand unit cost drivers and compare across other services or data centers, ‘what-if’ scenario planning to quantify the ROI of proposed cost reduction projects, all from an on-demand offering that requires no upfront investment in infrastructure.

With Apptio hosted service providers are able to:

• Maximize Profit per Customer
• Deliver more aggressive and more profitable service bids
• Maximize long-term EBITDA by continuously tracking cost and revenue per service
• Manage difficult to predict labor and support costs

Getting Started on IT Cost Transparency

As hosted service or managed service provider it is critical to your business to understand the cost of IT services compared to the revenue those services bring in. Apptio is the only solution designed from the bottom up to automate and simplify this process. Customers such as Alaska Airlines, Motricity and NYK Systems Research Institute have been using Apptio to track IT costs and optimize operational efficiency. To get started today contact us for a Free Demo and on-site Proof of Concept. Or to learn more download our solution whitepaper or one of our customer success stories.