Cost Pools
What is Cost Pools?
Cost pools are groups of costs that share the same type or purpose. In TBM, they form the finance view of technology spending, such as staffing, hardware, software and cloud services.
Updated November 2026 · 5 min read
Cost pools are a basic building block of cost accounting and of Technology Business Management. A cost pool collects costs that share a common type or purpose so they can be managed and allocated together. In technology finance, cost pools are the first layer of the TBM model and the point where spending from the general ledger enters the model.
Grouping costs into pools makes them easier to understand and easier to allocate. Rather than tracing thousands of individual general ledger entries to the services that use them, teams allocate a handful of pools using consistent rules. This keeps the model manageable while still showing where technology money goes.
Definition of Cost Pools
In general cost accounting, a cost pool is any grouping of individual costs that will be allocated using the same cost driver. A manufacturer might pool all factory maintenance costs and allocate them to product lines by machine hours, for example.
The same principle applies to technology. Rather than allocating each server invoice, each software renewal and each contractor payment separately, a technology finance team groups them by type and allocates each group with one rule. The result is a model that is easier to build, easier to explain and easier to keep accurate as spending changes from month to month.
Cost Pools in the TBM Taxonomy
In the TBM Taxonomy, cost pools are called Technology Cost Pools and represent the finance view of technology spending. Version 5.0 of the taxonomy defines pools for Staffing, Outside Services, Cloud Services, Software and SaaS, Hardware, Data Center Facilities, Telecom and Miscellaneous Costs, along with a pool for internal cross charges.
Each pool is divided into sub-pools. Hardware, for example, includes leases, maintenance and support, depreciation and managed services, and each pool separates operating costs from capital costs. This detail lets finance teams reconcile the model to the books and supports later analysis such as capex vs opex.
Cost Pools and Cost Centers
Cost pools are often confused with cost centers, but they answer different questions. A cost center records who is responsible for spending, such as a department or team. A cost pool records what kind of spending it is.
A single cost center, such as the infrastructure team, typically contains costs from several pools, including staff salaries, hardware maintenance and software licenses. Mapping both cost center and account information is what allows a TBM model to place each cost in the right pool.
Importance of Cost Pools in IT Financial Management
Cost pools are where financial data meets the TBM model. If they are set up well, every later layer of the model inherits accurate, reconcilable numbers. If they are set up poorly, every report built on them is questioned.
Reconciliation to the Books
Because cost pools are built directly from general ledger data, the total of all pools should match total technology spending in the accounts. This reconciliation is what gives finance leaders confidence that the TBM model reflects reality.
When pools reconcile, any later question about a tower or solution cost can be traced back to the original ledger entries. That traceability is essential when business units challenge their allocations.
Insight Into Spending Mix
Cost pools also provide useful analysis on their own. They show how much of technology spending goes to people, to outside services, to cloud providers and to software, and how that mix changes over time.
A rising Cloud Services pool and a falling Hardware pool, for example, show a shift from owned infrastructure to cloud consumption. Tracking these trends helps finance leaders anticipate changes in cash flow, depreciation and vendor concentration.
How to Implement Cost Pools
Setting up cost pools is mainly a mapping exercise between the chart of accounts and the taxonomy. The work is straightforward but detailed, and it benefits from close collaboration between IT and finance.
Finance teams know how the chart of accounts is structured and which accounts carry which kinds of spending, while IT teams know what the vendors and contracts behind those accounts actually provide. Working through the mapping together avoids the most common errors, such as cloud spending booked to a general software account or contractor costs hidden in professional services.
Mapping Accounts to Pools
The first step is mapping each relevant general ledger account to a cost pool and sub-pool. Many accounts map directly, such as a software maintenance account mapping to the software maintenance sub-pool. Others, like a general professional services account, may need to be split using vendor or project data.
Teams typically document the mapping in rules so it can run automatically each month. A clear, documented set of general ledger mapping rules makes the model repeatable and auditable.
Handling Labor and Shared Costs
Staffing is usually the largest pool and the most complex. Payroll data must be combined with headcount records to separate internal labor from contractors and capital labor from operating labor.
Shared costs, such as facilities or corporate overhead charged to IT, should be placed in their own pools rather than mixed into others. Keeping them separate makes it easier to decide later whether and how to allocate them.
Some organizations choose to leave certain shared costs unallocated, reporting them as a separate line rather than spreading them across towers. Others allocate them in proportion to the costs already assigned. Either approach can work, provided the choice is documented and applied consistently.
Examples of Cost Pools in IT Financial Management
The examples below show how cost pools organize real technology spending.
Both are drawn from a typical mid-sized IT organization, and the figures are illustrative. The pattern, however, is common: staffing is the largest pool, cloud services are growing quickly and hardware is a shrinking share of the total.
The second example shows the next step in the model, where a pool is divided among towers.
Building Pools From the Ledger
An IT organization spends $80 million a year. After mapping, its cost pools show $34 million in Staffing, $14 million in Software and SaaS, $12 million in Cloud Services, $8 million in Outside Services, $6 million in Hardware, $4 million in Data Center Facilities and $2 million in Telecom.
This simple view already answers questions leaders often ask, such as how much the organization spends on people compared with vendors, and how large its cloud bill has become relative to its own infrastructure.
Allocating a Pool to Towers
The $6 million Hardware pool is next allocated to towers. Using asset inventory data, $2.5 million goes to Compute, $1.5 million to Storage, $1 million to End User devices and $1 million to Network.
Each tower now carries its share of hardware cost, alongside its share of staffing, software and other pools. This is how cost pools feed the rest of the TBM model, one allocation at a time.
Conclusion
Cost pools are the foundation of a TBM cost model. They group technology spending by type, reconcile directly to the general ledger and provide the starting point for every allocation that follows.
Well-designed cost pools give finance leaders confidence in the numbers and give IT a clear view of its spending mix. Investing time in accurate account mapping and clean labor data pays off in every report built on top of them.
Related terms
Cost Driver
A cost driver is a factor that causes a cost to change, such as users, transactions or servers. Cost drivers are used to allocate shared costs and explain why spending rises or falls.
TBM Taxonomy
The TBM Taxonomy is the TBM Council's standard model for classifying technology costs. It organizes spending into cost pools, resource towers, solutions and consumers so costs can be compared and traced.
CapEx vs OpEx
CapEx vs OpEx is the distinction between capital expenditures, which buy long-term assets and are depreciated over time, and operating expenses, which cover day-to-day costs and are expensed immediately.
Cost Center
A cost center is a department or unit that incurs costs but does not directly generate revenue, such as IT or HR. It is used to assign budgets, track spending and hold managers accountable.