The Charge Back Myth

Here is one my all time favorite misapplications of time for an IT department - charge backs.I've worked in a larger than 100 person IT staff that used a charge back mechanism to apportion cost. What was the result? User departments dickered over each megabyte of disk space and CPU MIP (meaningless indicator of processing speed).

Did this method actually contribute anything to the growth and profitability of the company? Not that I could tell. Instead, the users rationed their own use of IT and self-constrained themselves into treating IT as a public utility and not a business partner.

Or let me ask it this way, is Human Resources a partner in the business? Every executive I've ever met said absolutely, yes. Human Resources is how you recruit and retain the best and brightest. Yet, show me one HR department that uses a departmental charge back method to pay for itself. I've never even heard it discussed, much less implemented.

When companies use charge back methods for IT then the arguments are over funny money. No actual cash will be involved but department managers will argue with great passion as if real money was leaving their checking accounts.

Now, treating IT as a profit center is something I'd consider - even though that has it's own problem. At least with the profit center model, IT itself sets a going rate for its services. With the profit center model, though, IT must be compelled to compete with outside services and earn its profit.

Either way, the author's idea is one of the oldest and, in my mind, least productive IT governance methods out there.