What is a Costing Framework


What separates good decision making from great decision making in the enterprise? A sound cost information strategy and framework. With the exponential increase in the volumes of data generated by an organization, many leaders are seeking ways to capitalize on that information. 


To drive innovation, reduce cost, or justify modernization efforts, organizations must be prepared to align their strategy around 5 key pillars:

  • Establish enterprise data standards and technical architectures
  • Form governance boards for policy and procedural administration
  • Invest in developing and or acquiring data scientists and data architects 
  • Define use cases that will demonstrate the value of an analytical framework
  • Implement modern data management tools and technologies

[Graphic of 5 pillars?]

Many organizations have deficiencies in data standards, architectures, integration, as well as a lack of data governance creating a proverbial “black hole” of information. An organization’s lack of total financial visibility results in the inability to accurately show the proposed savings of modern data platforms. This results in delays, withholding, and denial of funding for new systems and capabilities. 

To address all these issues, an organization needs to establish a common understanding of what the stakeholders hoped to achieve. This includes:

  • what questions they needed to answer
  • what decisions this information would support
  • what data is required and when
  • where does that data currently reside?
  • what data is missing
  • what tools would be leveraged to build and present the analytical findings

Answers to these and other questions form a cost framework. A sampling of the cost information framework requirements included:

  • Defining the required data and data entry standards
  • Establishment of standard cost reporting categories
  • Creating associations between funding sources, acquisition cycle phases, and cost reporting category
  • Establish full lifecycle cost visibility
  • Match annual funding with actual expenditures from the financial system to show how dollars were being spent vs planned
  • Using the standard cost reporting categories to identify common capabilities and functions for consideration to consolidate and migrate into a shared service model.

With these questions answered the next step is developing an implementation effort.

Link to cost framework article 2