Charge back systems
IT as a corporate overhead
IS costs are treated as an administrative overhead. Merits:
Simple and cheap to administer.
Encourages innovation and experimentation.
Minimal conflict between IT and user departments Demerits:
No incentive to control costs
No responsible use of IT
IT charged out on a cost basis (Cost based charge-out)
Users are charged for the costs of IT in proportion to their usage. Merits
Cost control responsibility
Motivation to regulate costs.
Inefficiencies of the IS department may be passed on to users
Complex to implement in practice.
Difficulty in determining appropriate cost units.
Overhead costs of IT department still need to be met.
Market based charge-out.
IT department acts as a profit centre.
External standards and price available.
Encourages an entrepreneurial attitude.
Prices are negotiable.
No comparable services might exist
May result in under utilisation of resources
Management skills may be lacking in IT