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Increasing IT Cost Efficiency with Internal Chargebacks

Uri Nativ | 31 Aug 2020

IT chargeback is a process where departments are held accountable for their technology usage and resource expenses. IT chargeback usually results in a report that brings visibility to the costs associated with the IT services the various departments consume. However implementation of, in practice, has always been a challenge due to the highly manual process required to create the chargeback and the difficulty inherent in ensuring accurate reports.

Salesforce chargeback

Motivation for Using IT Chargeback

The proliferation of SaaS tools has created new challenges for IT. One of these is how to keep control of all SaaS costs.

In many cases, IT owns and pays for a SaaS tool that is used by many other departments. In other cases, one department buys a core tool which is also used by other departments. Since the departments and business units have no visibility into the cost, it doesn’t create the required cost accountability for use of the tools making it seem as though they are free resources.

For example, the company has decided to use Box as its file sharing solution. This service is bought and budgeted for by the IT department, while all the company employees use the service.

Another example is the use of CRM software. The Sales department uses and pays for Salesforce, its CRM solution. Then the customer support and marketing department decide to use Salesforce as well. Who owns the Salesforce budget now? Should the Sales department pay for the Salesforce seats of other departments?

This is where IT chargeback finds its place. With IT chargeback reports, you get an accurate view of how much each department should be charged for the IT services they consume. The visibility offered by the chargeback reports creates accountability for the costs of the services. The result is that departments will ensure that all services are utilized properly, reducing the amount of wasted and underutilized licenses and the removal of unnecessary duplicate tools.

Salesforce IT Chargeback LicensesIT Chargeback Challenges

There are 3 main challenges when trying to implement IT chargebacks:

  1. Data gathering
  2. Data accuracy
  3. Deciding on a chargeback strategy

Data Gathering

The first challenge most IT teams face is how to gather the data. IT already struggles to understand who uses which tool and to which department or business units they belong. Trying to create an up-to-date chargeback report often fails as the return on investment for creating such a report doesn’t seem to be worth it. Unless IT uses a SaaS Management Tool, gathering the data for chargeback is a long and manual process that hinders many companies from using the chargeback process.

Data Accuracy

As the data from the chargeback is used to ensure visibility of the cost associated with each department or business unit, this process may result in internal pushback from various stakeholders. If the data created is not accurate, this alone will make the whole process obsolete and will fail due to lack of trust from other parties.

Deciding on a chargeback strategy

Different tools may require different allocation strategies. Different chargeback strategies should be used with different tools.

Here are the most common strategies we’ve seen our customers use:

  1. Bottom up - cost per license - The recommended strategy to apply where different costs apply to different license types
  2. Bottom up - cost per user - The recommended strategy to apply where you pay per user regardless of their license type
  3. Top down - The recommended strategy for apps that are not charged per seat (e.g. Cloud Computing, Firewalls, Network Infrastructure) where you allocate cost to business units by percentage

Salesforce Top down chargebackIT Chargeback with Torii

With Torii, implementing a chargeback process has never been easier as Torii solves all 3 challenges with ease.

  1. Automatic Data Gathering - Torii automatically pulls all the license and user data from your SaaS applications, keeping them up to date at all times. Torii also creates a reconciled user and license inventory, pulling together license information alongside with user departments and business units.
  2. Data Accuracy - With over 100 direct integrations, Torii can fetch license information directly from the SaaS tools giving you the most accurate and reliable data you can have.
  3. Chargeback Strategy Configuration - Torii offers you a choice of the right chargeback strategy per application, giving you full flexibility and control over your created reports.

IT Chargeback ReportConclusion

IT Chargeback is a proven process creating accountability for software costs across the different departments and business units. While many companies refrain from implementing chargeback due to the complexity and the effort required to create chargeback reports, with Torii it comes down to the click a button.

SaaS-management, license utilization, Cost saving, Chargeback

Author: Uri Nativ

Co-founder, CPO
Uri Nativ has over 19 years of software engineering experience as both an engineer and a hands-on manager. He founded the Klarna Engineering center in Tel-Aviv, holding the position of VP Engineering & Site Manager. Uri has broad experience building B2B enterprise products from his days at VMWare, EMC, nLayers, and Sanctum.
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