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IT chargeback rankles the ranks and IT

The subject of shared services led to a lively debate about the need for IT chargeback — and, to put it bluntly, the strain and pain it puts on IT and business departments.

To back up a bit: This week and next we’ll be publishing stories on that define a shared services model from the IT executive’s point of view. Be forewarned: There are many CIO points of view on this topic. Here’s one definition of shared services: a multi-tenant environment in which IT resources and skills are pooled internally. As one IT executive put it, a shared services model is more about “the service and not the server.” Gone are the days when hardware and applications were dedicated to a given business unit. Instead, they now are pooled to be used as needed for projects and changing business needs.

As resources are pooled, however, whether in a multi-tenant environment or in a traditional centralized-IT model, IT executives are rethinking how they charge for IT services that are shared instead of dedicated. Is IT chargeback based on use really necessary? If it is, how should IT go about it?

The customers of one consultant with a systems integrator are having a pretty hard time trying to answer audit questions when they’re asked what exactly they bought for a particular project, he said. In a shared services environment, where a project investment is tied to usage as opposed to the purchase of a server, the answer isn’t simple. And, he added, the organization might not even have the metering or reporting tools to break out who is using which resources and what to charge them.

David Johns, CIO at Owens Corning, said he doesn’t bother with IT chargeback at all under his shared services model, because it takes IT’s focus off the business and ultimately the end customer, and is a burden on business units. “What value is there to the end customer if you spend an enormous amount of time going through a massive exercise focused on service charges to a business [unit]?” he asked.

In our upcoming stories, we’ll be exploring the issue of IT chargeback, the benefits of the shared services model and whether self-service provisioning portals are a given for shared services success.

Some say self-service absolutely is the ultimate end game of any well-run IT services organization. But where does that leave IT?

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I find that charge backs are more often than not a means of justifying the value proposition that IT brings to the business. If the executive management team of a company already recognizes this instead of viewing IT as a cost center, there is no need for charge backs.
Having seen many chargeback systems or schemes I find that they are very good tools for the purposefor which they are usually obtained. That would be establishing a control gate blocking resources of"lesser" managers. Once these lesser mannagers accept the naturally superior position of the IT manager, a quick promotion to "C" status follows and the concommitent huge jump in pay and perks. Read my book "DBA to Demigod" or the sequel "Bastard Operator from the Corner Office"
Where does that leave IT? The answer is obvious: To implement, manage and maintain the self-service provisioning portals, of course. And to teach users how to use them effectively.
Cost allocation can easily be an automated process completely done "lights out" when integrated as part of service delivery as done with tools like PINNACLE (see Only when done as a disparate step can there be any argument against it. Cost accountability is required for compliance in the public sector (OMB) as well as in the private sector (SOX). Nevertheless, the benefits to do it are plentiful but everyone must first recognize that if there isn't visibility into true costs and/or accountability, costs will go up without a doubt. When extending visibility into costs to end users or departments, many critical benefits are seen regularly. The first is everyone becomes an extra set of eyes and ears to identify optimization opportunities like underutilized resources. The second is IT goes from being viewed as an enabler vs an overhead department to the CFO meaning, they aren't spending the money but rather departments are asking for services to do their jobs thus curbing under funding temptations. I strongly recommend future articles expand on these as well as reference industry experts for their input based on research and experience. One association worth learning about is as well as an industry like Telecom Expense management (TEMIA). Signed,