The perception of many business unit managers is that IT purchases and services shouldn’t be allocated and should instead be absorbed as a corporate operating expense. In a traditional chargeback model the IT department might divide its budget for services based on headcount or by the total number of business units it serves. I refer to this as the peanut butter philosophy – spreading expenses like peanut butter on a sandwich. Some departments get the short shrift, however, because their larger population may be consuming fewer services.

Not understanding total cost for an IT Service may also encourage managers to ‘go rogue’ and purchase services from a vendor that has not been pre-approved by the purchasing department. For instance, the organization might chargeback $100 for storage, but the business manager learns that Amazon offers storage in the cloud for $50. Thinking it’s a better deal, the manager makes the unauthorized purchase, only to discover there’s no cost savings because they’re either a) still being assessed by the internal group for storage fees or b) still required to pay other internal IT costs to support the solution, negating any savings.

To prevent managers from going rogue, it is imperative that they understand what goes into the cost of IT products and services. Using business language helps end users process the information so they are able to make educated decisions. For example, rather than just a line item that says “PC and connection, $450 per month,” include visibility into the IT cost  categories such as PC acquisition costs, capacity planning, security, help desk support etc. By providing transparency, managers understand they are buying the entire suite of services, not just the hardware and software.

Perception is reality and the cost of computing is not free. Empower managers with knowledge so they understand the true total costs of IT and make decisions that are economically savvy to drive long term savings.