Forrester Research Report: IT Chargebacks

A recent Forrester Research report details how with the ongoing economic condition, evolving service management processes and maturing tools in the market, CIOs are rethinking their position on charge backs. In the past, the technologies used to track IT services and the costs associated with them perhaps didn’t offer enough automation or proved to be cost-exorbitant. Now with added economic pressure and updated technologies from the likes of Apptio and HP, Forrester analysts say the best practice is garnering a second look from many IT executives.

Forrester had tracked since September 2008 inquiries around understanding IT services and found that 73% of some 30 requests focused on IT chargeback.

Nearly one out of four of these inquiries asks, “Why now – why has IT chargeback suddenly emerged as a strategic topic for CIOs and what are they doing about it?” Forrester’s report reads. “After years of either ignoring the need for IT chargeback or cruising along with the status quo, there is suddenly a renewed interest – in some cases, almost an imperative – to implement chargeback.”

IT charge back involves IT departments assigning a price to each service and billing departments for the services they consume. With such cost transparency, IT can prove its value to the business and show those it serves what their application or service demands ultimately cost the business, industry watchers say.

Forrester identified three drivers for the renewed interest in IT chargeback: the global economic recession, the inclusion of charge back processes in ITIL Version 3 and the availability of more mature tools. Still the reason that IT chargeback hasn’t seen wide adoption is because it’s not easy. It involves gathering data from several systems and developing a service catalog of sorts for IT.

“Providing this level of detail requires lots of information about costs, service performance and consumption, which in turn requires an automated approach,” according to Forrester analysts.

Forrester also identified the challenges organizations could face when adopting IT charge back. The research firm says IT shops will need to be able to assign financial value, or prices, to IT services that in the past had been offered seemingly for free or for one lump sum. This will require IT to organize services previously assigned to a specific domain in a more service-oriented fashion across, for instance, network, servers, storage and application groups. Reorganizing for service delivery will also require new roles such as service manager in many IT departments. “IT chargeback is fundamental to demand management and communicating ITs value proposition. There can be no more free lunch for IT customers, but at the same time, IT can no longer allocate IT costs as a lump sum,” the report concludes.

“Implementing IT cost transparency is no longer optional; it’s only a matter of when.”

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