Readers respond to practice and philosophy of IT chargeback

My thanks go out to readers who were charged up enough to write about the IT chargeback series on SearchCIO.com. Whether you do showback, partial chargeback or chargeback for a profit; charge by usage or subscription for internal or external services; or wouldn’t go near the model with a 10-foot pole, it’s clear that the issue isn’t cut and dried.

While several vendors wrote with words of thanks for illuminating a tense topic, other notable correspondents reflected on subjects as diverse as accounting principles, the philosophy of chargeback and the evolution of the IT department.

Chris Puttick, CIO of Oxford Archaeology (OA), a U.K.-based consultancy of archeologists working in Europe and Africa, questioned the perception of IT within a chargeback environment. “I’m surprised you didn’t have more people picking up on the negative side of chargebacks, i.e., you are presenting IT as a cost rather than as something of value,” he wrote. (To learn how the thriving business of archaeology influences OA’s IT strategy, watch for my profile on SearchCIO-Midmarket.com in August.)

Puttick specifically commented on chargeback by per-unit pricing, which is not as simple as it seems because it fails to acknowledge the savings present in larger deployments. “CFOs do not make accounting principles simple, they make them accurate,” he wrote.

Another letter came from a veteran of the IT chargeback debate, whose message was salient, sympathetic and solution-oriented.

“I’ve been working in the chargeback field since 1985, and your article is one of the few that relates the problems to something everyone can understand,” wrote Sandra Mischianti, director of research and development at Nicus Software Inc. in Salem, Va. “I usually use the restaurant analogy. (Set the prices for the entrees and do not attempt to measure the grains of salt. But you need to know how much salt you use each month and track what it’s costing you.) Some of our clients get it, and some definitely do not.

“I also agree that most companies are not doing a great job,” Mischianti added. “As one client recently said at our conference, ‘IT chargeback is like teen sex: Everyone is talking about it, but no one is doing it well!”

Mischianti noted that external cloud providers have created a great deal of pressure on IT departments, which are on tactical defense. “The real problem for the CIO is to demonstrate the value IT has over the cloud providers,” she wrote, listing Issues such as integration with internal change control to anticipate changes, risk management, disaster recovery, etc.

“When individual departments move their applications into an external cloud, those systems don’t normally interface very well, and you get a bunch of disparate systems, like we had in the early 1990s,” Mischianti added. “Anyone who was in IT then can attest to why that didn’t work, but it seems we are headed in that direction again.”

IT can and should set the technology direction and ensure that applications can evolve and interface with every other application the CIO might decide to implement. But it’s very hard to put a dollar amount on that — and even harder to get someone else to pay for it.

What’s your value proposition? Look for chargeback best practices next week on SearchCIO.com, and send your thoughts to [email protected].