IT Chargeback System Planning
Implementing an IT chargeback system is a big decision that needs careful planning. Here's a simpler guide to help you understand how to do it:
Step 1: Decide if Chargeback is Right for Your Organization
Assess the Need:
Team Effort: Chargeback requires IT and business units (BUs) to work together. Both sides need to understand the benefits and impacts.
Current IT Cost Awareness: Check if BUs know how much they spend on IT. Chargeback makes these costs clear.
Practice with Showback: Before fully implementing chargeback, run a showback process. This shows BUs their IT costs without actual billing, helping them get used to it.
Benefits of Chargeback:
Budget Awareness: BUs will understand their IT costs, leading to more efficient IT use.
Innovation Funding: Freeing up the IT budget can fund innovation and align IT with business needs.
Step 2: Get Organized for Chargeback
Training and Skills Development:
Finance Skills: Train IT staff in finance tasks like cost modeling, setting rates, and billing.
Product and Service Management: Create roles for product and service owners who will manage, market, and recover costs for IT services.
Responsibilities to Assign:
Define Products and Services: Identify what IT products and services you offer.
Calculate Costs: Work out the total cost of each product and service.
Marketing: Promote your IT products and services.
Chargeback Strategy: Decide on a strategy for charging BUs.
Cost Recovery: Ensure costs are recovered effectively.
Step 3: Make Your Chargeback Model Accountable
Price Each IT Service:
Set clear prices for each IT service, so BUs know what they are paying for.
Build Confidence:
Show how chargeback reduces end-of-year surprises in budgeting.
Use a mix of cost-based and budget-based billing for predictability.
Get Stakeholder Buy-In:
Ensure BUs see chargeback as fair compared to external options.
Address concerns about new charges being too different from old ones.
Step 4: Set Up the Right Systems and Processes
Beyond Spreadsheets:
Chargeback requires tools that can define offerings, track costs, manage demand, plan rates, calculate bills, transfer money, and share reports.
Spreadsheets aren’t enough; consider using dedicated chargeback software.
Step 5: Baseline the Current State
Capture Current IT Usage:
Gather data on total IT costs, ownership costs of products/services, costs by BU, and usage.
Use this baseline to define and price your IT products and services.
Step 6: Market and Sell IT Products and Services
Communicate Clearly:
When IT holds the budget, they’re the only option. When BUs hold the budget, IT must compete.
Make IT an attractive choice by clearly defining what you sell, the value IT delivers, and why IT is better than other options.
Cultural and Tooling Change:
Chargeback requires changes in mindset and tools for both IT and business partners.
IT and BUs need to move from a siloed view of technology spending to a more integrated one. Chargeback helps break these silos if done well.