January 11, 2014
Giving IT Costs the Attention They Deserve with Chargeback
Author: Penny Collen , Cloud Financial Solutions Architect, Cloud Cruiser
The goal of the IT organization should be to demonstrate value to the organization. Accurate representation of costs, and sharing those costs in meaningful ways is key. Clients (consumers) of the IT services need to fully understand what IT services cost in relation to the revenue generating products and services the entity provides. When the client recognizes the impact of consumption on product profitability and begins making better business decisions about how to consume IT resources, success is achieved. Thus, the movement of money is secondary if the goal of responsible consumption has been achieved.
Cost transparency reporting can be implemented by IT as a nearly independent activity. The change to charging for services must be a coordinated effort with the CFO and other corporate leadership. How the charges will be reported through the general ledger and how the charges will be treated for performance purposes must be defined. A process to back out internal charging from external reporting will be required. Internal communications will need to be increased dramatically as live billing often creates controversy.
Moving to chargeback adds many levels of complexity to the relationships between IT and the IT client. Despite the additional investment needed to make charging “live” sometimes the only way to get the serious attention IT costs demand is to “hit the client in the wallet.”
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