9.8. Cost Model
The cost model takes the total hours from the resource model and determines the resource head count for each position in the ISD organization. Then it applies the estimated cost for each resource to calculate the labor cost of the organization. Table 9-1 shows an example of a cost model.
| SA | OSA | DBA | Clerical | Network | Manager | |
|---|---|---|---|---|---|---|
| Staff Year Hrs | 2,080 | 2,080 | 2,080 | 2,080 | 2,080 | 2,080 |
| Productivity Rate | 0.80 | 0.80 | 0.80 | 0.80 | 0.80 | 0.80 |
| Vacation Hrs | 40 | 40 | 40 | 40 | 40 | 40 |
| Training Hrs | 40 | 40 | 40 | 40 | 40 | 40 |
| Sick Hrs | 16 | 16 | 16 | 16 | 16 | 16 |
| Workable Hrs | 1,568 | 1,568 | 1,568 | 1,568 | 1,568 | 1,568 |
| Cost per FTE | $100,000 | $50,000 | $110,000 | $30,000 | $130,000 | $140,000 |
| Total Effort Hrs | 12,450 | 8,450 | 15,235 | 1,825 | 1,100 | 1,950 |
| Raw Resources Needed | 7.940 | 5.389 | 9.716 | 1.164 | 0.702 | 1.244 |
| Rounded | 8 | 6 | 10 | 1 | 1 | 2 |
| Avg. Cost | $800,000 | $300,000 | $1,100,000 | $30,000 | $130,000 | $280,000 |
| Totals | |
| = 26.15433673 |
| = 27 |
| = $2,640,000 |
At the top of the cost model is the job position from the resource model. Notice: Even though in the resource model we tried to determine the level (senior, intermediate, or junior) of the resource, in this example of the cost model we use the generic resource title. We chose to calculate cost on an average of a resource, instead of estimating the cost of a senior, intermediate, and junior position of the job. You can take the model to another level of detail by adding columns for each level of resource and determining the head count and costs of each. But, since the cost model is an estimate, going to this level of detail might not be worth the effort. In the end, the cost of hiring each resource will vary.
Staff Year Hours The staffed year hour's row is the total number of workable hours in a year. This was determined by multiplying 52 work weeks times five days a week, times eight hours a day to get 2080 hours per year.
Productivity Rate This is a determination for the amount of time a resource can be productive in an eight-hour day. For this example we are using a 80 percent productivity rate.
Vacation Hours This is the average number of hours being allotted to each resource per year for vacation time.
Training Hours This is the average number of hours being allotted to each resource per year for training.
Sick Hours This is the estimate of the average number of hours allotted to each resource per year for sick time.
Workable Hours This is a calculation of the total hours a year a resource will be available to work on tasks in the service model. This is determined by taking the staff years times the productivity rate, minus vacation, training, and sick hours. Example:
2,080 × .80 = 1,664 − 40 = 1,624 − 40 = 1,584 − 16 = 1,568
Cost per FTE Cost per full-time equivalent is the estimated average cost for each resource.
Total Effort Hours This is the number of hours calculated from the resource model.
Raw Resources This is a calculation for the number of resources needed to support a job title. This is determined by dividing the workable hours by the total effort hours from the resource model.
Rounded This is the whole number of resources needed to support a job title.
Average Cost This is a calculation for the number of rounded resources times the cost of FTE.