Browse Definitions :
Definition

IT chargeback system

IT chargeback is an accounting strategy that applies the costs of IT services, hardware or software to the business unit in which they are used. This system contrasts with traditional IT accounting models in which a centralized department bears all of the IT costs in an organization and those costs are treated simply as corporate overhead. 

IT chargeback systems are sometimes called "responsibility accounting" because this sort of accounting demonstrates which departments or individuals are responsible for significant expenses. Such systems are intended to shift responsibility to users and encourage them to treat IT services as they would any other utility, which in turn encourages moderate use. 

Reporting systems that leverage IT chargeback can help administrators to clearly see what factors are driving costs and to budget accordingly. Such a system provides end users with more transparency into which business decisions are creating expenses and helps management identify how to achieve greater profitability. The cost of legacy systems, redundancies or expensive proprietary technologies also become clear, providing IT staff with an effective rationale for upgrades that are intended to improve utilization or reduce energy use and administration time. 

Since chargeback depends on a variety of IT metrics to provide equitable distribution of costs, a balance must always be struck between the precision of the system and the difficulty of collecting the necessary data. Complex IT chargeback systems can depend upon detailed line item accounting for each IT-related expense, including which business unit incurred it and whether it was for software, hardware or services. Since single line item expenditures can sometimes be substantial and can be shared by multiple business units (a mainframe purchase, for example), usage data from the IT department is also needed to help split out these costs in an equitable manner. 

Simple IT chargeback systems are little more than straight allocations of IT costs based on readily available information, such as user counts, application counts, or even subjective estimation. At a lesser degree of complexity, an organization trades some of the effectiveness of IT chargeback for a smaller burden, in terms of time and money required to perform the chargeback. 

This shift turns internal IT systems into service providers that may be managed independently of the organization at large. An IT chargeback system provides useful metrics that can be compared against the costs of outsourcing such services to a third party. IT administrators and CIOs, for instance, could compare the effectiveness of internal departments at provisioning networks, providing storage capacity, making network data transfers or maintaining Web application uptime. There are other uses for the system as well. A CIO could take the results of a past quarter's IT chargeback to a CEO and use those numbers to assess whether the revenue created by taking advantage of business opportunities justifies the expense.

Despite such advantages, however, some CIOs find the internal politics associated with implementing and maintaining IT chargeback systems to be daunting, especially when combined with administrative costs and substantial accounting challenges. Nevertheless, IT chargeback systems have attracted considerable interest as energy costs and usage have soared in recent years. Increased adoption of private cloud infrastructures, software-as-a-service (SaaS) and on-demand service-oriented architectures (SOA) at many enterprises could make measuring usage and allocating costs easier than ever before as IT services are treated as a utility.

This was last updated in February 2011

Continue Reading About IT chargeback system

Networking
  • network management system

    A network management system, or NMS, is an application or set of applications that lets network engineers manage a network's ...

  • host (in computing)

    A host is a computer or other device that communicates with other hosts on a network.

  • Network as a Service (NaaS)

    Network as a service, or NaaS, is a business model for delivering enterprise WAN services virtually on a subscription basis.

Security
  • WebAuthn API

    The Web Authentication API (WebAuthn API) is a credential management application program interface (API) that lets web ...

  • Common Vulnerability Scoring System (CVSS)

    The Common Vulnerability Scoring System (CVSS) is a public framework for rating the severity of security vulnerabilities in ...

  • Dridex malware

    Dridex is a form of malware that targets victims' banking information, with the main goal of stealing online account credentials ...

CIO
  • audit program (audit plan)

    An audit program, also called an audit plan, is an action plan that documents what procedures an auditor will follow to validate ...

  • blockchain decentralization

    Decentralization is the distribution of functions, control and information instead of being centralized in a single entity.

  • outsourcing

    Outsourcing is a business practice in which a company hires a third party to perform tasks, handle operations or provide services...

HRSoftware
  • team collaboration

    Team collaboration is a communication and project management approach that emphasizes teamwork, innovative thinking and equal ...

  • employee self-service (ESS)

    Employee self-service (ESS) is a widely used human resources technology that enables employees to perform many job-related ...

  • learning experience platform (LXP)

    A learning experience platform (LXP) is an AI-driven peer learning experience platform delivered using software as a service (...

Customer Experience
  • market segmentation

    Market segmentation is a marketing strategy that uses well-defined criteria to divide a brand's total addressable market share ...

  • sales pipeline

    A sales pipeline is a visual representation of sales prospects and where they are in the purchasing process.

  • market basket analysis

    Market basket analysis is a data mining technique used by retailers to increase sales by better understanding customer purchasing...

Close