Chargeback system definition
The management practise of billing business departments for services provided by an in-house information technology center.
Seven objectives of a chargeback system
- Cost recovery
- Resource allocation
- Efficient utilization of IT resources
- IT performance evaluation
- IT planning assistance
- Increase user awareness/involvement
- Increase IT staff awareness
Types of chargeback systems
Cost centers
- Cost recovery - Standard cost
- Cost recovery - average cost
- Cost recovery - flexible cost
Profit centers
- Profit center - fixed pricing
- Profit center - market-based pricing
Organizations use chargeback systems to have effective:
- IT cost control,
- IT demand control, or
- IT resource allocation
A chargeback system is ineffective if:
BU managers do not use the related information
How can we increase the information of chargeback systems by BU managers?
You need to increase:
- Involvement in budget preparation
- Accountability for meeting the IT budget
- Cost variability of the charges
Define IT value
IT value refers to the impacts of IT on organizational performance
Two formulations of organizational performance
Efficiency: internal perspective (doing things right)
Effectiveness: external perspective (doing the right things)
IT Value Creation Model
Combination of IT resources and complementary non-IT resources –> improve business process performance –> organizational performance
Components of the IT Value Creation model
- IT resources
Technological IT resources (TIR)
Human IT resources (HIR) - Complementary organizational resources
- Business processes
- Performance
Business process performance
Overall firm performance
Business/organizational performance is also influenced by:
- Industry characteristics
- Trading partners resources and business processes
- Country characteristics
Firms create value for customers through the following value disciplines:
Operational excellence
Customer intimacy
Product leadership
Business performance measures for operational excellence
- Supplier relations (SR)
- Production & operations (PO)
Business performance measures for customer intimacy
- Sales & marketing support (SM)
- Customer relations (CR)
Business performance measures for product leadership
- Product & service enhancement (PSE)
