Time recording can enable more accurate charging for IT
services, but there is no single best practice when it comes to
charging business users for the IT they use, said Barbara Gomolski,
research vice-president at analyst firm Gartner.
Organisations must choose the method that is appropriate to
their circumstances. Gomolski identified seven key methods of
charging business units for IT, each of which has its own strengths
and weaknesses:
Service-based pricing
Good for defined, end-to-end services. It is often available in
the open market but it takes time and effort to define processes
and workflows, benchmark against third-party suppliers, monitor
ongoing performance, and agree any price changes.
Negotiated flat rate
Good for well-defined projects, but business units need to lock
down the requirements and the scope of the project.
Tiered flat rate
Good for helpdesks, application maintenance and datacentres, but
disparate business units need to agree on pricing tiers.
Measured resource usage
Good for infrastructure services such as storage, e-mail and
telecoms, this method can identify the heaviest users and charge
appropriately, and therefore fairly. However, business units cannot
forecast the size of invoices, and may regard fixed costs as being
split unpredictably and an effort to administer.
Direct cost
Good for application development and dedicated projects, this
method needs clear scoping, change control, transfer to maintenance
mode, plus third-party benchmarking.
Low-level allocation
Good for setting a subscription fee for basic services such as
desktops, IT overhead, strategy and IT architecture. Though simple
to administer, this lacks fairness as power-users are subsidised by
base-level users. As this method imposes no constraints, demand can
then become unpredictable and rise uncontrollably .
High-level allocation
Good for simplicity as all IT costs are shared out among
business units, but it fails to identify and charge variably for
heavy usage or expensive projects.
Gomolski said, "Whichever method is used, chargeback systems are
often seen as a minefield for the IT managers administrating
them.
"Indeed, the ideal scenario is to have no need for a chargeback
scheme because the business self-regulates its demand for IT,
prioritises and funds IT initiatives accordingly, and is confident
that IT is a good financial steward and has the benchmarks to prove
it."
Until that day, however, IT needs to ensure that it understands
the business unit's priorities and concerns. Also, business units
need to understand the pros and cons of each method, and the trade
offs they will need to make. Gomolski said, "It is crucial that
business units sign off on the final system as their own creation,
because their sense of ownership is critical to ensure harmonious
and co-operative operations."
What's your priority?
The method is chosen for charging business units for IT will
depend on the priorities of the business unit being charged, said
Barbara Gomolski, research vice-president at analyst firm
Gartner:
Simplicity
For when business units want IT bills that are easy to
understand. Simplicity is commonly a priority with business units
that want a method which is low-cost to administer. Also a priority
when overall IT costs are low, or when IT is highly trusted.
Fairness
A priority for business units that only want to pay for their
own IT and not cross-subsidise other units. This is popular when IT
is mistrusted, or when the business suspects IT costs are out of
control. Also used in decentralised organisations.
Predictability
Useful when there is a good match between initial budget and
final invoice. This is popular when business units are
performance-driven and want to avoid any variability in operating
costs.
Controllability
For business units that want to actively manage their IT
budgets. Good when economic times are precarious, or business units
need to be flexible.