Well, as I said below, I work for a vendor and so the parameters of our process may be different than for a typical CIO. I suspect that the process, which is a combination of activity and asset based costing, factored over anticipated number of users, would be essentially the same. We calculate cost of infrastructure to host a service, add the cost of people to support it, cost of software development and maintenance ... And a bunch of other costs. Add a margin (very reasonable, of course).Then we predict how many customers we will get, and set the price. Finally, we see what the competition is up to, to see if the market will bear our proposed price.
Going "private" with the process, infrastructure could be owned or hosted, people costs would be different, but in the end there's a cost per user. Business users might well question the prices, unless it can be established that the process is analogous to the way that the business sets its prices to external customers. I'm not sure, though, that anything will ever make business users really happy with IT prices unless the relationship between business and IT is really trusting. Failing that it might come down to "pay", "don't use the service" or "go elsewhere" ... Which comes back to my point that IT needs to embrace the market ...
You've said a mouthful, Mr. Rowlands. Actually, several. That whole "cost center" thing should have gone out with the Hollerith cards and punch-tapes. IT is no longer a support mechanism. In many cases, it IS the business. It's the phones, the workstations, and even occasionally, the product. It's a cost of doing business, and should be treated as such. The clever CIO will have a good handle on his costs, and try to assure they're always cheaper than outside services. That way, the "rogue" or "shadow" IT infrastructure won't get a chance to get started, because nobody will be able to make a business case for external services if they always cost more than (and don't work as well as) internal services. The way that modern IT has become pervasive throughout businesses, there is no "profit center" that does not make use of IT services. Perhaps it's time the Biz School grads got the clue that corporate IT is the ultimate profit center.
I was there when a lot of "traditional" IT Chargeback systems were implemented, and saw many implementations crumble under the weight of the challenges of detailed log collection and management, resource allocation, and the impossibility of bridging the "understanding" gap between business and IT.
In the Cloud era, the proposition gets to be more interesting. I now work for a vendor selling (amongst others) cloud-based capabilities. We have to figure prices for our services that allow us to be profitable and competitive. I have come to think that if enterprises want to play the IT chargeback game, they should follow the same process. Figure out what IT resources are needed to support IT and business services, and charge accordingly. Don't get sucked into the log processing / allocation trap.
I know there's a "gotcha". A priced services scheme implies a profit center mentality. And that opens the option of business uinits seeking to source services externally. In practise, it's happening anyway. Corporate IT has to compete ... so time to embrace the market.
As a dinosaur, I still prefer runing IT as an overhead -- but that's hard to get away with. So be it, run IT like a business. But don't get mired in the futility of trying to run as a cost center and assign costs "fairly"
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