Executive Summary (This is a document excerpt)

Understanding your IT cost of goods sold can lead to a more agile and competitive organization. Cost of goods sold (COGS) includes the variable and fixed costs — for example, materials and labor — directly linked to the product or service. The key to knowing your COGS is keeping finances within IT transparent, splitting out IT costs by activity (i.e., general and administration versus COGS), but charging back all IT expenses at the service level based on consumption by the customer. IT costs come at you in many forms, yet they all must be accounted for in the same way, hence the need for CIOs to push for this transparency.