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Balancing chargeback

Ross O. Storey | June 10, 2008
Although Asia is showing itself to be resilient to the economic uncertainties in the US and Europe, there is even greater concern about costs. Ross O. Storey reports that shared services and IT chargeback are likely to get more attention but how do you balance the needs of the business with the price of IT services?

Chargeback is somewhat less common in mid-range enterprises and other contexts, where tools may be less mature. It is also highly dependent on the maturity of both the IT group and the nature of the relationship between IT and the business.

A 1999 Gartner poll found that some 60-70 per cent of respondents said they practised chargeback in one form or another, up from 50 per cent in 1996.

Financial management has long been a capability found in IT organisations; however, many are now maturing and expanding their IT-specific financial capabilities. As a result, Gartner estimates that approximately 65 per cent of large IT organisations have at least one individual assigned to the task of optimising IT financial management.

Bittinger says the growing breadth of IT financial management capabilities is essential to improving the overall credibility of IT in the organisation.

CIOs have learned the hard way that money is the language of the business, he says. To succeed, the IT organisation must demonstrate that it has con

Higher standard

"One Gartner client stated that internal users will not tolerate less-than-exceptional service from the IT department, but that this type of expectation is not shown when these same internal clients receive poor service from other non-IT departments within their organisation." He says: "Our research shows that 'the IT department is held to a higher standard' than other company departments, yet many IT managers do not understand this reality.

"Business managers engage in chargeback rate disputes because paying for IT services affects their performance measurements. Also, savvy business managers challenge all their suppliers to consistently improve value and reduce costs. When clients perceive a mismatch between chargeback rates and service levels, both are challenged. Many business managers do not understand chargeback methodologies and metrics, and this creates mistrust as the IT department attempts to avoid uncomfortable discussions about the lack of an adequate measurement to better measure usage and provide fairer fees."

Bittinger says people typically push back on chargeback because they do not feel they are getting good value for the price they are paying for services, or they do not trust the IT department on some level.

"Users will pay more for services if they perceive value," he says. "The perception of value is the best consensus builder between the IT department and users. As an example, Gartner research shows that once the IT organisation charges for help desk and end-user support, the users will pay more for these services if the IT department provides choice and shows value."

Bittinger believes there is no simple solution to these political issues.


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