science

IT chargeback and showback

IT chargeback and showback is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand IT chargeback and showback rather than just read about it. In short: IT chargeback and IT showback (memo-back) are two policies used by information technology (IT) departments to allocate and/or bill the costs associated with each department's or division's usage. Chargeback The need to understand the components of the costs of IT, and to fund the IT organization in the face of unexpected demands from user departments, led to the development of chargeback mechanisms, in which a reque…

Key takeaways

IT chargeback and showback belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect IT chargeback and showback to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of IT chargeback and showback from memory before moving on to harder problems.

Reference excerpt

IT chargeback and IT showback (memo-back) are two policies used by information technology (IT) departments to allocate and/or bill the costs associated with each department's or division's usage.

Chargeback The need to understand the components of the costs of IT, and to fund the IT organization in the face of unexpected demands from user departments, led to the development of chargeback mechanisms, in which a requesting department gets an internal bill (or "cross-charge") for the costs that are directly associated to the infrastructure, data transfer, application licenses, training, etc., which they generate. The purpose of chargeback includes:

Making departments responsible in their usage, e.g., refrain from asking for resources they are not going to use Providing visibility to the head of IT and to senior management on the reasons behind the costs of IT Allowing the IT department to respond to unexpected customer demand by saying "yes, we can do it, but you will have to pay for it" instead of saying "no, we cannot do this because it's not in the budget." As of 2011, the chargeback mechanisms are often controversial in organizations. Departments rarely pay directly for their own electricity bill, janitorial services, etc. -- these are allocated to departments on the basis of the number of employees or the square footage they occupy. Similarly, departments may expect to pay a fixed allocation for IT and get a flexible set of services that meet their needs in return. While the discussion on such an allocation are always difficult, seeing actual variable charges arrive on a monthly basis for specific levels of usage can create conflict both between IT and its internal customers, and between a department manager and the users who caused resource consumption to increase and therefore costs to rise. The rise of subscription-based computing services (cloud computing) may make chargeback mechanisms more palatable.

Showback Around 2010, the concept of IT showback emerged to keep the advantages of chargeback without some of its drawbacks. Showback consists of providing IT management, departments, and corporate management with an analysis of the IT costs due to each department, without actually cross-charging those costs. The pressure on the departments to limit their usage is less direct, but awareness of the costs usually causes department heads and senior management to question why a department is "spending" more than another in IT.

References

See also IT cost transparency Financial management for IT services (ITSM)#Charging Virtual chargeback

Worked examples

Example 1 — a first encounter with IT chargeback and showback

Start with the simplest possible case. Write down what IT chargeback and showback claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to IT chargeback and showback before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about IT chargeback and showback ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of IT chargeback and showback

In research: IT chargeback and showback appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses IT chargeback and showback in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: IT chargeback and showback is common in secondary-school and first-year university syllabi. It links to neighbouring topics Costs, Information technology management, so understanding it makes those chapters shorter.
In everyday life: Look for IT chargeback and showback outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study IT chargeback and showback in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what IT chargeback and showback means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain IT chargeback and showback out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is IT chargeback and showback in simple terms?

IT chargeback and IT showback (memo-back) are two policies used by information technology (IT) departments to allocate and/or bill the costs associated with each department's or division's usage. Chargeback The need to understand the components of the costs of IT, and to fund the IT organization in…

Why does IT chargeback and showback matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study IT chargeback and showback?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on IT chargeback and showback.