I have long believed that one of the joys about working in the IT industry is that there is always something new to learn. You can have an entrenched view that there is only one way to do something then, lo and behold, someone proposes an alternative approach. These new alternatives can be varied. They can be work practices, technology or even whether one tactic is right or wrong. Recently, I had just such a revelation.
For a long time I have held the view that one component of IT Best Practices is the need to establish some form of chargeback arrangement between IT and the business. I had seen the light in the logic of the argument that without some form of cost recovery mechanism for the delivery of IT services the perception was created in the minds of the end users that IT was free. As such, what was to stop them trying to get as much of it as they could? In such circumstances I could see that it would be next to impossible for a CIO to try and regulate end user demand. However, if their requests for service were accompanied by a bill perhaps then they would be better able to assess whether this request was really important or not.
However, at the first session of the newly established Coalface Community the speaker argued with conviction that her organisation had decided against the application of an IT chargeback model. This really surprised me as she headed up IT in one of Australia’s fastest growing financial services organisations. Moreover, her CEO was formerly the CIO in the business so I knew he would be well aware of the difficulties the IT department would face in trying to match the plethora of demands from the business with the funds allocated in the IT budget.
This CIO was equally surprised when she joined the business five years ago to find that the organisation had no chargeback model. She remarked that large swathes of her time at her previous employers seemed to have been spent either defining what the chargeback arrangements would be or defending the charges against an attack upon them by those who incurred them. Yet, despite regular reviews of whether the company needed to change its position, she has found that the absence of chargeback has not been a hindrance in her dealings with the business.
Increasingly her sentiments seemed to be shared by a number of others who question whether chargeback breeds an adversarial relationship between IT and the business. A fairly pedantic and zealous implementation can create a perception of unnecessary red tape and a suspicion that the IT department really should have better things to do with its time. If previously no cost recovery existed it can be very challenging to get an end user to now support the impost of a cost recovery arrangement for IT. Moreover, many IT costs are unavoidable for most business users so trying to charge them for incurring these expenses is seen by many as something akin to a tax. How, users might ask, does a chargeback arrangement on such services do anything to influence their consumption of IT.
Furthermore, if the goal of chargeback is to link consumption with cost it is a challenging task to determine just what costs have been incurred. Take, for example, the cost for providing an email service. The truth is that there is no easy way of capturing all the equipment utilised by a simple transaction like sending an email. Then there is the need to educate the business about the full extent of the costs of this equipment. All many users will see is an email client on their desktop. The servers, security software, networking equipment and storage required to underpin a fully functioning corporate email service lay largely hidden from view for most users. Airing these expenses for the first time is likely to come as a nasty shock to business executives, especially those more familiar with the relatively modest charges imposed by the telcos for Internet services to consumers.
Unfortunately, if this process is not handled well the implementation of a chargeback arrangement could become counter-productive. It may well encourage these users to shop around to compare prices. This could prove a huge and unnecessary distraction for a CIO as they try and explain why certain offerings may be more appropriate than others. The exercise may also create an impression in the minds of end users that IT may not have been assertive enough is organising corporate contracts, especially if a supplier sees value in creating some mischief with an aggressively priced lost leader.
The evidence seems to be that chargeback should not seek to be an exact science. Too much work is required to achieve that precision and even then the likelihood is that there will still be many imperfections in how costs are determined. Instead, consultants advise that really the aim should be to provide some general indication of where IT expenses are incurred. This indication then enables a CIO to show why an IT budget is the size it is and to reveal what impact any cuts to this budget might have on IT service delivery levels.
One CIO I have read about has even coined an interesting term to describe this approach. He argues that we should not be talking about chargeback which has implications of IT departments replenishing their coffers with the hard earned cash of their corporate comrades. Instead he prefers the term “showback” by which he is implying the aim is to show the business where their IT investments are going. He sees that this transparency will go a long way to highlighting how behaviour patterns by them influence the amount of money that the business needs to keep spending on IT.
Nevertheless, in the end, whatever the approach that is taken, I still believe that there is a need to try and establish some way of impressing on the business the financial consequences from their use of IT. With IT being at the heart of most organisations the task for most CIOs is deciding how and where to prioritise their investments. In reality these decisions must emanate from the business. However, the CIO probably has to be the catalyst in getting them to reach these decisions. In this regard showback, chargeback or whatever you call it definitely is a key components in helping these people with these choices.
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