Charging Out: Managing IT Costs Within the Business
Download the Output Report from this Corporate IT Forum webinar. The report has been produced based on the experiences shared by delegates representing a number of different organisations from the financial services, pharmaceuticals, automotive and healthcare sectors.
Charging out is a complex and sometimes contentious model of accounting, whereby IT organisations 'charge' business users for the cost of the IT services, hardware and applications that are used.
The big advantage of this approach is that business units should pay a more realistic sum for IT services, with departments using highly complex, new applications or demanding very high levels of support and availability paying more than departments that are relying on simple legacy applications requiring little in the way of ongoing support and maintenance.
Charging out also provides the business with more visibility into the cost of IT services, by specifying exactly what is being paid for. This may be an effective tool in driving business behaviour (and change) by persuading business users to make better use of IT resources to reduce the cost of IT to their organisation.
However, charging out can be a challenge for many organisations, not least because it will almost certainly be unpopular if business units find charging out is considerably more expensive than the traditional model, where IT simply absorbed all IT costs and delivered services that were effectively 'free' to the business.
Key challenges identified in the webinar included:
- Identifying all the costs involved in delivering IT services and products, to ensure charges to the business are fair and representative
- Understanding what costs should be charged back to the business, and which should be paid from a central IT budget
- Securing buy-in from business users, particularly where they see the new charges as being very expensive compared to market rates
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