Brief Summary on ITIL Costs

The cost of a product or a service dictates the value proposition. Think about it. If you go to the market and purchase an expensive TV, you want it to come with the features that warrant the price tag. Such as 4k resolution, OLED screen, premium HDR, sufficient HDMI ports and 120Hz refresh rate. Likewise, if you are paying a premium price for a streaming service, you want the shows to be of quality and new ones added every so often. At the end of the day, no matter how rich and pricey a customer is, costs will have a bearing on the perception of value.

Let’s take an example of a landscaping service. You are the proud owner of a bungalow and you have a massive garden. You need a landscaping job to be done and you hire a landscaping company. You agree on a price for certain works that will be carried out in your garden. Two things are implied here:

  1. The cost of the service that you have agreed is all that you have to pay and nothing else for the agreed set of landscaping activities. If there are any other costs like the costs of gasoline or electricity, it must be spelt out before the hands are shook.
  2. If you are not going to a landscaping company, you would essentially hire professional landscapers and get them to do the job. The agreement would be on the lines of you providing the essential tools and implements, including the gasoline and electricity. The people you hire would be paid by the hour. So essentially, by hiring a landscaping company, you are removing all these costs and agreeing to pay a lumpsum for the services – which may end up working out expensive but at the end of day, it will give you fewer headaches.

The official definition of cost is:

The amount of money spent on a specific activity or resource.

To summarize, there are two costs that ITIL focuses on:

  • the cost of a service that the customer needs to pay and the
  • costs that are removed from the consumer’s end.

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