Cost Allocation and IT Chargeback

The most efficient way to create more accountability and awareness of how IT resources are used is to implement a chargeback system. And the key to efficient consumption and fair distribution of resources is to base chargeback on IT resource usage metering for IT products or services.
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This paper describes the methodology of IT chargeback based on metering of IT resource consumption. We will address how a company can benefit from using Open iT metering solutions and outline some steps in moving forward with IT resource usage metering as a viable chargeback option, without taking focus away from everyday IT operations.

Implementing chargeback systems can save companies a significant amount of money. Too many users look at IT services as a free, all-you-can-eat buffet. The most efficient way to create more accountability and awareness of how IT resources are used is to implement a chargeback system. Companies truly can benefit from introducing or upgrading their system of charging business units for the IT services they receive. However, business units in general tend to be very skeptical of chargeback systems introduced by the IT department. Considerable care should be put into the business processes around design, implementation and introduction of such systems to ensure that the chargeback is accepted as a fair and just methodology.

There are several common methods used for IT service cost allocation varying in degrees of complexity and sophistication. On the one side there is costing based on simple headcount in various business units. Another method uses detailed service-based pricing per measured unit of service. There are pros and cons to all methods, and it is always important to consider the context in which chargeback is taking place.

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