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IT chargeback: A political hot potato is tossed up by cloud computing

A question has been nagging me since I attended Cloud Expo in New York: What metrics can IT departments use to charge back business units for cloud services? Measured service is fundamental to the National Institute of Standards and Technology definition of cloud computing, and enterprises building private clouds presumably will bill business units for their consumption of computing resources.

When I called CIOs and analysts about IT chargeback models, I didn’t expect to unearth such passionate arguments for and against chargebacks, a political hot potato at the heart of the IT-business relationship. Some say IT chargeback is not only inevitable but mandatory for achieving true efficiency; others say it sets up a charged relationship in which business units naturally second-guess IT departments’ pricing for services. With such public clouds as Amazon.com’s Elastic Compute Cloud, or EC2, a credit-card click away, an IT staff risks losing an opportunity to guide IT strategy.

In this economy, IT departments need to prove their investments support the strategic imperatives of the business. Therefore, IT chargeback metrics need to reflect the desired business outcomes, often in business terms. In a Software as a Service model, for example, the metrics wouldn’t refer to the disk and memory usage so much as to the number of customer requests responded to within a given period of time. For chargeback to be effective, both IT and business strategists need to collaborate on appropriate metrics; that can be challenging because they often don’t speak the same language. In fact, one source said the growing role of a CIO is that of a translator between IT managers and the business.

IT chargeback isn’t as simple as it sounds. My reporting blossomed into a series of stories on SearchCIO.com beginning this week that included IT chargeback metrics, the pros and cons of chargebacks, the contentious relationship between IT and the business on the subject, and important takeaways. I learned that chargeback isn’t the be-all and end-all, but just one part of an IT cost management structure.

Do you or don’t you charge back? Send me email at lsmith@techtarget.com. I want to hear all about it.

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