From collective billing with no organizational basis to internal cost allocation based on the source of the activity.
Background
A company in the automotive industry allocated its Microsoft 365 licensing costs centrally, without linking them to the departments that generated them. Microsoft 365 invoices list license types, quantities, and prices, but do not specify which department or cost center incurred the costs.
With approximately 1,850 users and 3,900 license assignments across nine license types, manually assigning licenses to 92 cost centers was not economically feasible. As a result, rather than a time-consuming assignment process, there was no assignment at all. Cost managers had no basis for making decisions regarding license inventory and allocation.
Solution
License assignments for all users are determined through Microsoft Graph and linked to organizational attributes from Active Directory and Microsoft Entra ID, specifically department, location, and cost center.
The prices are taken from the monthly Microsoft 365 invoice, not from a price list. Billing is therefore based on the actual contract terms, including all discounts, and price changes take effect automatically the following month.
Excess licenses are distributed according to customer specifications or assigned to a central cost center. The rule is documented and can be traced over time.
Together with the client, we decided against importing data directly into the financial system. The results are prepared for posting and transferred to the accounting department after a business review. This ensures that approval remains where it belongs, and there is no interface that needs to be updated every time a change is made to either system.
The analysis is performed on an aggregated basis by cost center. The results do not identify any specific individuals.
Operating Model
The process runs monthly and is fully automated. The processing of 3,900 license assignments takes place without any manual intervention. Following the implementation phase, the reporting function was handed over to the customer and now runs there on a self-service basis. Adjustments to changed or new license SKUs are made by ceterion upon request.
Outcome
- 92 cost centers with cost allocation based on the source of the cost
- Since 2023, regular monthly operation without manual follow-up work
- 3,900 license assignments across 9 license types are automatically billed each month
A consolidated invoice with no organizational context has been transformed into an internal service charge ready for posting. For the first time, cost managers can see which license costs are incurred in their area. Its continuous operation since 2023 also demonstrates that the automation keeps pace with ongoing changes to Microsoft’s licensing models.
Prerequisite, clearly stated
Allocation requires that organizational attributes be maintained in the directory. Where these are missing, the first step is to set them up. This contributes not only to cost allocation but also to dynamic groups, license automation, and governance.