IT Budget Pressure Boosts Chargeback Practices

The percentage of organizations charging back IT expenses to business units rose 13% year-over-year, indicating that IT organizations may finally be embracing the idea that they need to operate more like IT service delivery businesses as they come under pressure to innovate more and spend less.

“Businesses are clamoring for IT to deliver innovation, and having business units pay for those investments is one way to get that done,” said John Longwell, vice president of research for Computer Economics, Irvine, Calif. “We have been anticipating that this practice would regain traction but this is first time we  have seen evidence of it.”

The practice is one of 30 profiled in the Computer Economics annual IT Management Best Practices 2014-2015 study. Figure 34 from the study shows that 51% of IT organizations are charging back at least some IT expenses today, which is up 45% from a year earlier. That represents a 13% rise in the number of companies charging back IT costs.

Chargeback of IT expenses is the second fastest-growing practice in the study, after adoption of bring-your-own-device policies. Unlike BYOD policies, however, the practicing of charging back IT expenses has been long-established among large organizations since the mainframe era. The current rise is likely due to a combination of budget pressures, renewed demand for IT investments, and growth in IT service management practices.

There were 119 IT organizations with operations in the U.S. and Canada that participated in the IT Management Best Practices study during the first half of 2014. The study, now in its tenth year, analyzes the relative maturity of each IT management best practice along with their adoption rates and practice levels by organization size and industry sector. The practices in the study are as follows:

• IT governance practices: IT strategic planning, IT executive committee, IT project portfolio management, and IT change control board.
   
• IT financial management practices: IT personnel cost accounting, IT service cost accounting, IT chargeback, showing back of IT expenses, and benchmarking IT spending.
   
• IT operational management practices:  Enterprise architecture, IT Infrastructure Library (ITIL), project management office (PMO), IT asset management system, BYOD policy, post-implementation audits, user satisfaction surveying, and publishing IT performance metrics.
   
• IT security and risk management practices: Formal security policies, auditing compliance with IT security policies, data classification, security incident management, disaster recovery planning, testing of disaster recovery plan, business continuity planning.
   
• Software development practices: System development life cycle, agile software development, peer reviews, automated testing, change management, and software metrics.

This study is designed to increase the awareness of IT leaders concerning what are best practices in IT management, provide benchmarks against which an IT organization can compare its own adoption and practice level, and justify investments to improve an organization’s IT management practices.

This Research Byte is a brief overview of our report on this subject, IT Management Best Practices 2014-2015.  The full report is available at no charge for Computer Economics clients, or it may be purchased by non-clients directly from our website (click for pricing).