The pervasive potholes of charge-out

10.04.2006
In an effort to allocate limited IT resources effectively across the organization, many corporations are considering establishing charge-out systems. They believe charge-out -- also known as chargeback -- will make consumers of IT services better stewards of company resources and allow the organization to better align IT usage with corporate priorities.

Will your charge-out system be viewed as fair, rational and understandable, or will it be received with general fear and loathing? The perceived fairness of IT pricing depends on choosing a pricing structure that accurately reflects actual consumption.

Don't use simplistic measures such as departmental head count. That often results in unfair charges. For example, problems can occur if one department invests in a new system that reduces its head count (thereby lowering its IT charges) but actually increases its IT consumption. Don't roll charges up into an "easy to understand" number. That's often both confusing and unfair. Most important, avoid pricing anomalies. Effective charge-out systems must produce the same charge for the same service across all departments.

Before implementing charge-out, you need to address these potential potholes:

Purchases. Are users free to buy IT products and services outside approved channels? Other departments may argue that if they have to pay for a service, they should be able to buy it at the lowest price. IT argues that introducing unsupported suppliers into the organization makes it more difficult (and costly) to manage the overall infrastructure. Unfortunately, these arguments often involve unfair apples-to-oranges comparisons. For example, after one company established laptop standards, users complained that CompUSA sold the same product for less. However, the CompUSA product had a shorter warranty, a different operating system (XP Home Edition) and weaker virus protection.

Provider. Can IT sell services outside? If users are free to buy outside services, IT may propose selling its services to other companies. In practice, selling IT services externally is often a mistake, since it can easily distract IT managers from their own company's needs. In addition, to provide external services, IT needs more internal discipline than IT shops at most large companies have.