I recently read a blog post discussing feedback from CIOs regarding the benefit of chargeback. Specifically, there were comments on both sides of the issue: some saying the costs of metering outweigh any benefits, while others say it’s impossible to manage without controls. To be fair, the shared services model does present a set of challenges.
1. How can I tie a particular shared resource to the ROI or business case of a particular project?
2. How can I make sure the resources are best deployed for the overall benefit of the enterprise?
3. How can I best and most fairly calculate the rates I should charge back?
4. How do I communicate the billings or charges back to internal subscribers?
5. How can I do this without the process itself exceeding the value of measuring usage in the first place?
If we consider ourselves IT as a Service Provider (ITaaSP), then we begin to realize these problems have already been solved by a lot of ISPs and we can use the same kinds of solutions employed by ISPs to set and manage rates. But is there merit to the argument that metering IT’s resources is a fool’s errand?
I suggest that having no measurement or chargeback system can only lead to ultimate chaos and inefficient resource utilization. Any resource that is not infinite or practically infinite must be, and will be prioritized and rationed by some distribution methodology such as:
1. Economics – this is the rationing system employed the most, which is simply based on the ability and desire to pay for the products or services.
2. Influence/Power – this rationing system is based on the political power/influence structure of the organization where the 800 pound gorillas get what they want regardless of financial or other justification.
3. Most Vocal/Need – this system rations products and services by who makes the most noise or can best represent need, but the determination of need is often subjective and can change as louder and more pressing requests come in. At best, this is a reactive rationing methodology.
4. First Come/First Served – this rationing system is simply who gets there first, but in reality would probably quickly degrade into the power system. This can also lead to a hoarding mentality to grab resources while they’re there for the taking.
Since IT’s budget and resources are not infinite (in most cases), chargeback is a necessity to ensure efficient allocation of resources for the benefit of the organization. IT leaders who say they do not have chargeback or need it, do in fact allocate or ration services by one of the four methods above. From my experience, it usually tends to be options two and three in those cases.
The bottom line is that since IT’s resources are economically constrained, i.e. IT does not have an infinite budget, it logically makes sense to manage that rationing by the same system under which resources are acquired: economic chargeback. This won’t eliminate the “influence” option from being used, but it should help manage it by providing IT with a defense against it. And it doesn’t matter if real budget dollars cross the table but there must be a fair method of “keeping score” of the monetary resource depletion. Without that chargeback methodology, one of the other three less efficient rationing systems will be used and the business as a whole pays for the inefficiency.
Craig Stanley is the Benchmarking Practice Lead for VMware Accelerate Advisory Services. You can follow him on Twitter @benchmarkguru.