Fundamentals: Usage-Based IT Pricing

May 06, 2011


Charge IT: Why We Need Usage-Based Accounting

It’s a trend we’re seeing in surveys and interviews across the technology spectrum: Business executives expect IT to act like a nimble embedded enterprise, responsive to rapidly changing technology needs—more Google, less Post Office.

Whether it’s the consumerization of IT, an economic hangover from the Great Recession or the popularity of Web 2.0 services that has brought us here is immaterial. What does matter is that moving to this new role, with concomitantly tighter customer relationships and greater bottom-line accountability, entails fundamentally rethinking IT’s business model, value proposition and deliverables. It means recasting IT from infrastructure operator to service provider. This requires characterizing IT’s activities and output in terms meaningful to the customer—that is, line of business managers and senior executives—not in ways reflective of internal IT operations.

Yet, in our February InformationWeek Analytics End User Device Management Survey, fewer than one-third of 551 respondents charge back, and of those who do, most (83%) stop at the purchase price of end user devices and OSes plus the software required for job roles. No maintenance, no network costs, no servers. Hardly an accurate representation. The key to facilitating this transition is developing an IT service catalog and portfolio, which serves as the basis for usage-based pricing. However, a service portfolio is but a means to an end, namely, the economic transparency that results from selling independent, separable, clearly defined IT services priced to reflect actual consumption—IT by the pound, if you will. This transition from infrastructure allocation to service pricing doesn’t just benefit the consumer, it helps CIOs balance supply and demand by harnessing economic forces to channel technology spending to those areas of greatest enterprise value.

In this report, we’ll chart the new service-oriented IT landscape and provide a guide to the key components: service catalogs, cost and pricing models, and financial systems integration. (S2850511)

Research Report