CIO — With CIO budgets under pressure, there’s an almost irresistible allure to the notion of chargeback, wherein IT costs are literally charged back to the user departments on whose behalf they were incurred. In this way, the IT budget stops being an ever-expanding money pit, endlessly consuming hardware, software and bandwidth?and instead the tab is picked up by the people who actually use the stuff. At a stroke, budget justifications become a cinch. "Of course we need this level of expenditure," the CIO can assure the board. "If we didn’t, the users wouldn’t be ponying up the money for it." Even better, the shock of actually having to pay for what they consume transforms users from hungry conventioneers at an all-you-can-eat buffet into disciplined dieters.
No wonder, then, that chargeback’s proponents are so enthusiastic about its merits. Bob Odenheimer, for example, believes chargeback not only shifts the burden of IT expenditure justification onto the newly cost-conscious users but also injects a note of rigor into the enterprise’s business model. "If you look at a small business, its IT costs are reflected in its profitability," says Odenheimer, senior vice president of IT operations and telecommunications at managed behavioral health services provider Magellan Health Services in Columbia, Md. "It buys the gear?and has to pay for it. Why should it be any different at a large business?"
It’s more than just a question of even-handedness. When IT expenses are retained within an overall IT budget, rather than charged back to departmental cost centers, companies can’t get a handle on the real costs of winning new business, complains Odenheimer. "If it helps their unit’s profitability, there’s nothing to stop them from taking as much IT as they can get?even if the actual IT cost [to the business as a whole] is higher than the revenue it produces [on the unit level]," he says. Chargeback, in Odenheimer’s view, prevents that by forcing users to reconcile within their own budget the marginal cost and marginal profitability of new business.
Bob Svec, president of TSL, a chargeback consultancy in Parsippany, N.J., sees a chargeback-related slant on the age-old centralization versus decentralization debate. Chargeback, asserts Svec, "offers the best of both worlds. You’ve got the efficiencies of centralization, combined with the ability to let people see what they are getting, and how much they are paying for it."
Taken together, such arguments have quickly elevated chargeback into so-called best practices territory. Consultants laud its merits, and vendors have sprung up to handle the dollars and cents of charging. But CIOs have found a dark side to chargeback too. It can become a political hot potato and an administrative nightmare. Many CIOs have come up with workarounds, but others find chargeback so problematic that they’ve sworn off it entirely.
