One of the oldest conundrums of the IT world has been how to create an effective chargeback system to properly allocate technology costs across the organization. I think the cloud can provide the mechanisms to address this challenge, but these new tools may not enable IT organizations to overcome the non-technical issues that have stood in the way of implementing chargeback programs in the past.
In the old days, the task of allocating IT costs fairly was especially challenging, because many organizations relied on highly centralized datacenter resources, and most lacked the tools to accurately assess how computing resources were used by particular departments and end users.
In those cases where they possessed the tools, enterprises may not have been capable of extracting the data they needed to apportion the technology costs to the appropriate departments. Configuring legacy systems and software to properly monitor, meter, and measure usage may have sounded simple, but it wasn't. It required specialized skills.
Those few companies with the technological and technical skills to implement chargeback faced one final hurdle: the political pushback of the strategic business units and other corporate departments. With many of these user groups less than satisfied with the quality of service they received from their IT organizations, many were more than willing to fight off IT’s attempts to allocate costs to them.
As a result, many corporations used algorithms to calculate computing costs across their enterprises. Some used simple math to divide the costs based on headcount or some other impartial statistic. Others levied a usage “tax” based on the number of transactions a department initiated.
Ironically, it is an amorphous, on-demand service that many IT departments have resisted that is putting unprecedented power in their hands for the first time. Unlike the legacy systems and software of the past, which forced IT departments to create their own methods for allocating costs across an organizations, today’s cloud services often come with metering and measurement mechanisms built in. The usage tracking features of these services are making them attractive to IT departments and corporate executives as well.
But in many cases, organizations are still hesitant to employ the cost tracking capabilities of cloud services to initiate chargeback programs. The reason? IT departments are still trying to overcome their tarnished images of the past and waiting until they can demonstrate better performance levels before they try to impose new IT charges on their corporate end users.
For the time being, IT is using these tools to evaluate the cost-effectiveness of cloud services at a corporate level and to analyze specific usage patterns to determine how these services can help them save money over the long term.
Enlightened IT departments are recognizing that if they employ the right cloud services with robust usage tracking capabilities, they will ultimately be able to overcome the chargeback pushback challenge.
I wonder to what extent it would feasible or practical (or, for that matter, cost-effective) to create a test "partition" datacenter or IT environment, rotate individual departments/end users on and off that partition on -- say -- a monthly basis, and more precisely measure average usage that way.
Jeff, interesting ideas. What I find most interesting is that business users are willing to accept 'allocations' from a service provider - they have decided that the value of the seat ( or whatever usage metric is in use) is worth the value gained. But, cloud provers are basically allocating their costs. So what is the difference? I think there are two. In house IT needs to allocate all costs even for a small number of users, so the cost formthe first adopters is higher. Cloud providers benefit from a larger pool to spread costs. Second, cloud is a turn on/turn off technology. In house is not. It's difficult to match cloud allocation to internal allocations.
Great point, Mary. It again confirms that we have not effectively defined, measured, or managed against the value of IT.
The premise Jeff makes of identifying the chargeable costs and IT looking for improvements is an example of IT not being recognized for the functionality and infrastructure they provide, let alone the value they can assist the business user in creating.
I think the evolution of cloud, as Jeff points out, and the increased use of chargebacks offer the potential to change the dyamics of IT to focus on the opportunities there are to "manage" costs and build value; going beyond the customer service satisfaction level.
It still points out the opportunity for all players to gain by having business users and IT working together to build, manage, and optimize the technology investments.
So true, Mary. Too bad IT departments that are getting resistance on chargebacks or complaints that their service isn't adequate can't "fire their customers" as is now the custom with banks and others that can measure the cost of service and profitability customer by customer...
It's interesting that the culture of IT resentment persists in so many places. Even the CIO can't claim to be a "real" C-suiter in lots of organizations, but reportedly has to answer to the COO or CFO.
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