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Chargeback process: An old model heralds changes in IT

The old chargeback process, revived by cloud computing, could have major ramifications for IT organizations as they revamp to become centralized service providers, experts say.

Traditional chargeback models divide the IT budget for a business unit, for example, by the number of users in it. There are numerous ways to do this, from “showback,” where the business units see a bill that they don’t have to pay, to partial, full and for-profit chargeback models.

The chargeback process for cloud services is more complicated, because IT must measure consumption for workloads in a shared environment. And yet the technical challenges — such as applying metrics to IT services and billing the correct parties — pale in comparison to the cultural barriers IT organizations will face as they reorganize to remain relevant, according to Craig Symons, vice president and principal analyst at Forrester Research Inc. in Cambridge, Mass.

With outsourcing, offshoring and hosted Software as a Service, or SaaS, there are plenty of opportunities for business units to compare external service offerings to an internal IT bill. Enterprise IT departments need to be willing to contract with external providers and promote their own internal strategy, or risk “being marginalized as business units go elsewhere,” Symons said.

The first order of business for enterprise IT is to develop a reusable catalog of products and services around which metrics can be placed to charge back business units. Some IT organizations are hiring product managers to package products and services to do this. Symons suggests assigning an account manager to each business unit to go over the bills, so more intelligent discussions can be held. Other new roles will include cloud services procurement and vendor management, as IT becomes a centralized provider of technology services — or what has been termed by some as “IT as a solutions broker.”

Let me know if your IT department is undergoing a role change due to shifting to external service providers, and how you are dealing with it; Email me at lsmith@techtarget.com.

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