Start With Structure, Not Software

Starting with the Structure Rather Than the Software

When organizations decide to pursue technology cost transparency, the first instinct is often to look to tools or frameworks because they are tangible and they promise structure and clarity. In many cases tools and frameworks do help with delivery and communication. However, the reliability of any cost transparency program, no matter how sophisticated the tool or how well known the framework, ultimately depends on the foundation underneath it, and that foundation is a cost model that starts with a cost pool structure.

Segment 1: How to Build the First Layer of the Foundations of Cost Modeling series explains this in a very straightforward way, noting that “the reliability of the outcomes is only as strong as the reliability of the foundation beneath them.” It’s an important reminder because it shifts the conversation away from the tools and toward the underlying structure that makes a tool useful. Tools help to automate and deliver a cost model, and frameworks help organize perspectives into language that is easier to convey, but neither can replace the simple clarity that comes from understanding what an organization actually purchased and how they put it to work.

Letting the Structure Fit the Organization, Not the Other Way Around

Cost pools are the first place where cost behavior becomes visible in a cost model. They take the accounting data that often seems abstract or overly segmented and organize it into categories that make intuitive sense to both Finance and Technology. Labor, hardware, software, cloud, services, facilities, telecom, depreciation, etc. are the kinds of categories that help people see the composition of spend rather than just the totals or the complexity of an accounting structure. That shift alone can make conversations about cost accountability and investment decisions feel more grounded and accessible.

One of the things I try to emphasize in Foundations of Cost Modeling – How to Build the First Layer is that cost pools do not need to follow any particular framework to be effective. They can be aligned to NIST classifications, they can follow TBM or FinOps conventions, or they can be completely homegrown if that’s what makes the most sense for the organization at the time. The point is not to insist on adopting a specific structure, but to encourage progress toward cost transparency in a way that is sustainable. If a homegrown list helps the organization understand what it purchased, then that list is perfectly valid, and it can evolve over time as the model matures.

The real value of cost pools comes from the shared language they create. Foundations of Cost Modeling – How to Build the First Layer describes this as “the first meaningful opportunity for cross‑functional communication” because cost pools give Finance and Technology a way to talk about spend without requiring deep fluency in each other’s domains. Tools can visualize the numbers, and frameworks provide helpful terminology, but strong cost models are what make the data interpretable and repeatable across cycles.

Once a cost pool reference dataset is in place, every actual transaction, forecast record, and budget line inherits the same logic, and that consistency is what allows a model to scale into more advanced capabilities later on.

A Framework and Tooling Agnostic First Step Toward Technology Cost Transparency

Segment 1: How to Build the First Layer of the Foundations of Cost Modeling series serves as that foundation. It walks through how to read a Chart of Accounts, how to classify accounts into cost pools, how to build a reference dataset, how to join financial data to the model, and how to partner with Finance in a way that builds trust and shared ownership. The guidance is intentionally framework‑agnostic because the goal is not to prescribe a particular approach, but to help organizations take the first step toward clarity in a way that fits their environment.

If you’re interested in how this foundational layer comes together, or if you’re looking for a way to begin building cost transparency without committing to a specific tool or framework, Segment 1 may be a helpful place to start.

Read Segment 1: Foundations of Cost Modeling - How to Build the First Layer