by Martin Veitch

IT charge-backs can be a ‘think of a number’ game

Feb 25, 2010
IT Leadership

For IT departments, the ability to charge back has long been regarded as either badge of honour or longed-for status symbol but ask CIOs about the process of creating a charge-back scheme and the clanking noise that you hear is skeletons falling out of the closet.

I was reminded of this at a small event the other day, organised by VMware and tabling the motion that ‘It’s Time To Get IT Off The Boardroom Agenda’. Shades of Swift’s A Modest Proposal, you might think. In truth, I’m not much fussed by the ancient chestnut of boardroom perception of IT, not the equally hoary concern about CIOs on the board. These are items, surely, that will fix themselves over time.*

But when the subject got around to charging back as an element in embedding IT into business management and accountability, things got more interesting.

The buyer side of the argument was represented by Jim Fennell, IS manager at Belfast-based engineering/construction firm Lagan Group. He said that virtualisation had helped him deploy projects quicker for internal customers and helped him charge back but admitted that creating a genuine metric for that charge-back was trickier:

“In our sort of organisation there’s no point in going to the last penny. You can waste a lot of time working out what everything costs [but] to keep [management] happy you have to benchmark.”

It seemed to me that Jim was running a very sensible IT shop but I’ve heard many other CIOs go a lot further when discussing variability. Sure you can charge back: you can cover your costs, even show a fat profit if that’s your bag. You can make the numbers sing and dance because they’re based on something like a per-seat measure (charge the same whether the user is just on CRM or whether they’re a power user sitting on a BI licence worth millions of dollars, for example) or per department (‘we don’t like marketing so they can pay for this database, even though sales also use it’).

You can create chargeback schemes that punish managers for asking for chargeback schemes and you can create chargebacks that are so detailed that nobody understands them. You can create a number to umpteen decimal places even though a lot of other budgets will get used up in an end-of-financial-year panic in order to make a case against cuts the next year.

Will this change? Maybe. Groups that attempt to bring professional rigour to IT beaver away at metrics that make more sense than earlier metrics. VMware has its own Chargeback program, designed for xSPs but which, it said, turned out to be popular with CIOs. But IT is complex and moves fast. Oddly, for a digital pursuit, the benefits and costs are often difficult to put a hard number on.

Of course, you could take the glass half-full attitude and say that a ready reckoner is better than nothing and this may be true. But, just between you and me, let’s be honest: chargebacks are often the equivalent of a wet finger in the air.