Have you thought about charging your “customers” for IT services you are providing? I bet you have and I thought about that model for quite some time.
The promise of cloud computing, virtualization, usage metering, and IT as a Service often spawn the thoughts of billing the end customer, i.e. business units in a corporation. This is a world where super flexible infrastructure can flip the switch on applications, server workloads, entire desktops and user accounts in a heart beat.
Niel Nicholaisen writes about the topic in this article?
Let me add a few of my own thoughts:
• IT departments can count on (or hope for) a small percentage of a company’s annual revenues as a budget for capex and opex. IT is asked to provide literally the entire workspace and infrastructure for all users and often has to do more with less compared to the previous year. In the healthcare industry, that number stands at roughly 3% of revenues in the US and only about 2% in Europe.
• IT departments often get frustrated, because they have to provide expensive and complicated applications to a handful of users that chew up a large portion of resources and expenditures to do so.
• With the dawn of desktop and broader application virtualization, IT departments are tempted to charge for their services on a per user or per application basis. $30 per month for a desktop, $20 per month for Internet access, $5 per month for anti virus, etc.
• The model is obviously tempting for two reasons: It discourages the use of complex and expensive applications and brings the true cost of computing back to the business and it also holds the promise of increasing the IT budget linearly with the services that are provided.
However, as Niel points out, this can alienate the users. First of all, as a user I may find that I get really shoddy service for the $70 per month or so for basic services per user. As a business, I don’t have the choice to go get my Internet access or email service from someplace else . Sometimes (as a business) I think I can, and I may go to a cloud-based email service or attempt to buy my own backup service, but all of that comes at the cost of increasing complexity and introducing expensive integration points.
Keep in mind that IT is just another corporate service. I am not getting charged for payroll processing, legal support, marketing support, etc. Larger companies tend to cross charge for internal consulting services and sometimes for recruiting activities, but that’s pretty much it.
So, here is my recommendation for IT: Go ahead and charge your business units. Be aware of the pushback this may generate. In order to prevent backlash, do the following:
• Be the best in the industry. That’s right. Users will be tempted to compare the service you are providing (at the price you are charging) to consumer-grade services that are available online and that are provided by much larger organizations with better economies of scale. The expectation for the quality of your service goes up as you start charging for it.
• Virtualize applications and desktops. This will not only centralize the data, but make cost more transparent and predictable. If you do this right, you can reduce costs. If you don’t, you can end up driving up your costs, so choose wisely.
• Consider using third party, cloud based services for certain types of apps. Just because you managed something in-house in the past, doesn’t mean that this is the best modality going forward. CRM and web hosting services are examples of apps that have been pushed (or elevated) to the cloud for a while now in the industry.
• Monitor your resource use and utilization to get a grip on the human cost of environment support. The smaller your organization, the more difficult this is going to be. After all, you can’t hire a fraction of a SQL Administrator.
• Ensure that you explain (via your executives) that you have much higher data availability and reliability standards to meet than any publicly available service and that the company is required to provide the services internally to maintain control and ensure compliance.
• Consider implementing a “Bring Your Own Computer” model. We’ve had it at my employer for a while and it’s great. I own the endpoint, and I can manage my computer just fine, thank you very much. I can now have my own desktop, anti-virus, and other consumer grade services to dabble around and get a corporate Windows 7 image (a virtual desktop) from IT with the key apps I need to do my work.
• Expect to get charged by your accountants for the support they may need to lend to you as part of this process
Questions? Comments? Let me know what you think and how you have been managing the cost of providing IT services.