Chargeback – its time has come

The fact that most of the world is currently undergoing a challenging time, as a result of the economic climate negatively impacting most areas of life, should not come as too much of a shock. Throughout the industrial age there have been periods when good businesses prosper on the back of both their own merits and general growth in the economic climate. Equally it is true that there are periods when life isn’t so simple and organisations have to retrench. This, essentially, is where we are today. Certainly market conditions are not good but the fact that the market is difficult should be something with which organisations can cope. The onus on IT is to demonstrate that it is delivering value to the business. In many scenarios this is a task that would be much more straightforward if some form of internal chargeback modelling were to be used to help set and monitor IT budgets.

The fact that trading conditions are difficult obviously poses a few challenges for IT departments as they seek to deliver good service whilst maintaining a very strong grip on costs. Undoubtedly, IT organisations are having to look very carefully both at how they deliver services and how they can meet the needs of the business going forward whilst ensuring tight financial constraints are not breached. One thing that has become clear over the course of the last five years is that IT departments are now expected to show exactly where money is being spent and to provide unprecedented degrees of transparency on such expenditure.

So today the pressure is on for IT to be able to demonstrate exactly how money is being spent to support the business. Alongside this, IT needs to be ready to support new business operations that may change dramatically overnight. There is a now an inbuilt expectation that IT be ready to support any business change very, very quickly, frequently without having much latitude to manage the potential impact such changes might place on the underlying infrastructure. This begs the question of course just how IT can demonstrate to the business where the money is going and how effectively the IT infrastructure is being utilised to support key business services?

To my mind this scenario is simply shrieking for the use of chargeback modelling. After all most business people are exceedingly familiar with the concepts of money and budgets whereas they may be very unsure of quite how IT runs to support their daily operations. A simple way out of this dilemma is to employ some form of chargeback modelling which allocates costs to the users of IT services based on the percentage of the infrastructure resources that those services actually consume. Alas whilst this sounds easy in principle it can, in fact, become extremely complicated in practice.

I believe that we have now entered an era when the use of chargeback models will become prevalent in a majority of IT organisations. Chargeback models provide transparency in a format which is acceptable to the majority of business users since it operates using concepts of money spent for each service delivered. For line of business managers this approach should be, therefore, easy to get grips with. However from the IT perspective this places a degree of burden on the infrastructure in terms of monitoring resource consumption and then reporting on what resources each business unit is actually consuming. This reporting must be in financial and business operational terms rather than IT centric metrics. The challenge is to find a model that the infrastructure can sustain that is politically acceptable to the business users and economically acceptable to operational IT. Get it right and hopefully everybody will be happy, or at least recognise where there may be IT / business conflicts that need to be resolved.

This is easier said than done but it is an area that many organisations will begin to explore very carefully in the near future. The rapidity with which business managers need to adapt is placing new burdens on IT support staff. These in turn are encouraging the adoption of new IT solutions, virtualised computing and other dynamically manageable systems. When the business itself is looking for IT to provide levels of resource flexibility such as have never before been possible some form of chargeback modelling simply has to take place in order for IT not to become a bottleneck on operational business. So the questions become which form of chargeback modelling will be acceptable and how is the idea to be sold to the business?

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