Co-Engineering Business Need and IT Services

Co-Engineering Business Need and IT Services

Jay Ramanathan, Rajiv Ramnath
DOI: 10.4018/978-1-60566-276-3.ch006
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Vertical traceability along the internal value chain illustrated in Figure 1 below allows us to establish a charge back system for the use of IT services. In addition the fine-grain Interaction approach to implementing chargeback also encourages the discipline needed for other initiatives like capacity management, audit procedures, and aligning of IT investments with business needs. How to achieve this alignment is the subject of this chapter.
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Why is a good chargeback model important for the effective organization?

  • How is the chargeback model developed based on the BioS work products?

  • How are chargeback and capacity management related?

  • Why is a good chargeback model closely tied to retaining flexibility, effectiveness, service-level management, and a tool for customer-oriented management and visibility?

Today’s enterprise must maintain a diverse portfolio of IT applications to support critical business Interactions and drive the processes responsible for the day-to-day operations and management of internal and external business services. At the same time there is a need to manage the total cost of ownership, reduce overall complexity of the IT assets, and properly align and control capacity. The ability to do so is directly related to several factors: (Figure 1)

Figure 1.

ACE structure and associated capacity work products

  • Aligning infrastructure Agent capacity to business need,

  • Charging for IT services based on the services delivered, and

  • Expanding service capacity based on demonstrated need.

In addition, financial management has become an item of highest priority within organizations due to recent events like the bursting of the high-tech bubble, global economic slowdown, and scandals. This has also resulted in mandatory compliance requirements due to the Sarbanes-Oxley (USA), Basel II (Europe), and AS8015 (Australia). As a result IT expenditures are increasingly scrutinized.

One result of all this is that the justifying, directing, and controlling IT expenditure through ‘chargeback’ to customer organizations within the enterprise is becoming increasingly important. Another result is the understanding that chargeback is a key governance mechanism for an adaptive organization as it allows the IT infrastructure roles and their capacity to evolve more directly to meet business priorities.

Finally, service chargeback mechanisms have the ability to influence the behavior of service consumers but these mechanisms also have the capability to increase understanding between consumers and providers and enable more effective joint decision making. Ross (Ross 99) explores the impact IT chargeback has from a sample of large organizations that have established chargeback practices. The findings suggest that chargeback is, at least to some degree, a useful tool for strengthening the IT-Business relationship because it increases and promotes mutual understanding and problem solving. A cornerstone of the co-engineering approach is to build relationships that allow this style of valuable communication and joint decision making possible and the article shows that chargeback is one such mechanisms that can be used to build up a solid foundation for collaborative engineering practices.


The Business Challenge

An example of a typical as-is chargeback policy for the use of capacity and internal services has three aspects as follows.

Allocation of Capacity: During the budgeting process each customer organization within the enterprise is allocated certain percentages of Agent capacity. In the as-is scenarios this is typically based on based on history rather than actual use in most cases because the traceability is missing within the organization. This is often because the needed reporting and monitoring is not in plane or too cumbersome. For example, a department might be allocated ten months of a specific Agent / programmer, even if the projected and actual use might be two months.

Cost Identification: Typical sources of costs utilized for the chargeback within the organization include:

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