As a part of the student local interest group of itSMF, USA we recently had a knowledge session on ‘Financial management of IT services’, where we got a chance to discuss the topic and share ideas with a small group of students. As a good start to the discussion, we were more or less settled on the fact that for an IT service organization, the best way to charge its consumers is to have a usage based charge-back model. The model does the best to ensure transparency, visibility and control over all IT spending. Not just that, such a system is required to streamline the ITFM processes within the organization, identify cost optimization opportunities and to better forecast and plan for future.
Nothing comes without its cost however. We discussed the complexities involved in building a service catalog, which requires identifying the services offered, defining metrics, establishing tracking mechanisms, etc, etc. A lot of the discussion centered on the need for such a comprehensive charge-back model and whether the costs incurred can always be justified. It was interesting because most material available may advocate usage based charge-back as ideal for the IT service model; But not all of them look at the trade-offs.
And then I came across this article, which I thought presented a practical view. As rightly titled, what is fine in theory may not always work the best in reality. To quote Gartner analyst David Coyle from the article, “Chargeback adds overhead at a time when most organizations are being told to cut overhead. No one wants to hire accountants to handle chargeback.” Compromises and approximations are inevitable and what suits a particular scenario needs to be decided on a case by case basis.
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