The value of an IT chargeback system (parts one and two)

• Published in: Journal of performance management 2002-01, Vol.15 (3), p.16
• Main Author: Quinlan, Terence
• Format: Article
• Language: English
• Subjects: Billings; Budgets; Chargebacks; Cost allocation; Financial management; Information technology; Polls & surveys; Responsibility accounting; Statistical data; Transfer pricing
• ISSN: 1949-971X

Results of a survey of IT Financial Management Association membership companies on IT chargeback systems are presented. Two companies of the 18 companies that do not have an IT cost allocation or chargeback system said that it was too expensive. Chargeback is typically the responsibility of a financial unit rather than a non-financial unit. Of the 67 companies participating in the survey, 25% have cost allocation systems and 75% have usage billing systems. Corporate financial management was frequently among the original requestors to implement chargeback. One-third (34%) of the companies have strongly recommended downsizing or eliminating chargeback in the past. The major reason is that chargeback is too expensive. However, that criticism has been supported by very little hard dollar evidence. Two-thirds of the companies have attempted to demonstrate the value of chargeback to management, and over 84% of them have been successful. There is significantly higher degree of perceived value from the chargeback of most IT functional areas among usage billing companies compared to cost allocation companies.