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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?

"It is tempting to believe that selecting a chargeback method that meets business needs will reduce or eliminate complaints from users and business unit leaders," he says. "Yet arguments never really go away with chargeback systems because no single chargeback method optimises all business unit financial drivers: simplicity, fairness, and predictability."

Bittinger says each chargeback method will meet resistance from business units because, in each circumstance, the criticism is valid and correct. "The problem is that choosing a chargeback system essentially means choosing which weaknesses the company is willing to accept.

"Therefore, it's important to ensure that BU leaders understand which charging flaws they can live with before determining the final chargeback system.

"Ultimately, chargeback is a business tool aimed at shaping business behaviour, so business leaders should regularly review the chargeback model to see if any changes would further improve its effectiveness."

Bittinger has this advice for senior IT managers.

"It's important to remember that there is no single "chargeback best practice" but a range of practices that are specific to each company. Once the right balance is determined, ensure that the 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.

"IT organisations and business units can determine the best chargeback method for IT services if they consider the issues and proactively communicate the pros and cons of each method."

Bittinger recommends that IT executives should:

Be open and transparent about the charges for IT.

When chargeback issues arrive, determine the root cause of the problem. Do not assume the chargeback model is flawed just because stakeholders complain.

He says the method of chargeback will vary depending on many factors, including business-unit preferences and the type of IT service.

"It's important to remember the real purpose of chargeback is to change the behaviour of users or business leaders," Bittinger says. "Therefore, selecting the best chargeback method largely depends on the firm's culture and the role that IT plays in the organisation."

 

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