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Phase 3: Cost recovery should be done with great care.

Cost recovery needs a structure and support processes. There are five requisites to success.

  • The first of these is a governance implementation body that uses representatives from IS, finance and the business units to oversee execution and act as a focal point for settling disputes.
  • The accounting practices need to be transparent. That doesn't mean giving business units a 64-page invoice. Rather, present invoices as a high-level summary, with the opportunity to drill down.
  • There needs to be continuous review of cost allocation methods and selection of the least complex methods.
  • Processes need to be in place to handle exceptions as they come up and to correct over- and under-recovery.
  • Service cost monitoring, to assure users that they're getting fair value for money from IS, is the final critical success factor. Use spending surveys of industrywide comparisons, high-level benchmarks, detailed benchmarks or full cost and process audits, although these can be expensive, to achieve this.

    With IS credibility and trust in the spotlight, IS has to show it's cost effective and delivering value. Chargeback can be an important tool for doing this - provided it is right for your enterprise, the business rationale is clear, and is applied wisely.

    [For more information on chargeback issues, see "Chargeback: For Good or for Evil?", CIO April. - Ed]

    Dr Marianne Broadbent is group vice president and Gartner Fellow, and global head of research for Gartner's CIO Executive Programs.

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