Yet Another Discussion on IT Chargebacks

It felt anachronistic, getting into a surprisingly good conversation on the pros and cons of IT chargebacks this past week …

We’re not seriously thinking about it (thank goodness), but a group of us did go through the intellectual exercise of discussing the good/bad/ugly of such an approach. Unfortunately, most of the “debate” focused on positive and negative experiences in the past. I think this is not an effective way to petition for such a change; it would be better to defeat the idea with positive reasons instead of of negative anecdotes.

The Big Problem with Chargebacks

This led me to an interesting insight on a killer shortcoming of the chargebacks approach:

Chargebacks focus the conversation on IT costs and not business benefit

A “monthly invoice” sent to the finance group of your business unit will generate endless hours of haggling, understanding the cost basis of the telecom service, the hard disk usage, the processor overhead, and whether or not the folks on these projects (charging all these hours) are working as hard as they say they are.

What a horrible waste of time! I’d rather differentiate between “projects” and other work efforts by focusing on the business value that each will bring.

There is a classic segue here, to the topic of project prioritization. Most IT departments have a surplus of great ideas for projects, but certainly not enough time to get them all done. I like to call this the “10 pounds of [dirt] in a 5 pound bag” problem. The best practice here is to compare projects in business terms; what’s the cost-benefit? Strict ROI is often difficult, and most projects are justified with a combination of hard (quantitative) and soft (qualitative) benefits.

It’s a fundamentally difficult conversation to have – trying to cast very different work efforts and technologies into a common cost-benefit structure so we can have a true “apples to apples” comparison when prioritizing. Why waste time bickering over money we’ve already spent, when we could be talking about revenue growth or cost savings we could be realizing?

<aside> I like to point out that “you can’t get 10 pounds of dirt in a 5 pound bag … you can get 6, but you have to push real hard …”. Always good for a chuckle … </aside>

This Post Has 0 Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Related Articles

You Can’t Run IT Like A Business (except Maybe You Can …)

Well-intentioned IT leaders, and their functional peers, want to apply run-like-a-business concepts like customer satisfaction and value creation to the operations of shared service functions. If we can describe things with the same words, we can apply the same fixes. But it's a bit tricky to restate things in a meaningful way...
read more

Accelerate Innovation with a Simpler Budget Approach

Organizations are desperate for innovation, but these are still investment choices that require complete and credible data to enable the right decisions. Developing a simple standard for characterizing all costs will accelerate decision making.
read more

Creating Enterprise Value with your Digital Transformation

As your organization ponders a Digital Transformation, a critical concern will be the creation of Value. But is this value for the Shareholder as we focus on building a Great Stock, or value for Employees and Customers as we build a Great Company? Three separate conversations, focused on three different stakeholders.
read more

James MacLennan

... is the Managing Partner at Maker Turtle LLC, a digital consultancy focused on creating value in ways that align with your strategy and drive engagement with employees, customers, and stakeholders. He is an active creator, providing thought leadership through on-line & print publications, and public speaking / keynotes.