Chargebacks vs. Allocations – Defining IT’s Relationship with the Business
Some IT departments prefer chargebacks, while others do not. My own preference is to allocate IT costs to the business units, based on some reasonable balance of simplicity and accuracy. General services could be allocated by headcount, COGs, or revenues, with each business unit taking their proportional share. Some easily identifiable items might be allocated more directly - maintenance costs for specialized engineering, warehouse management, or financial systems, for example, could be allocated more directly to those departments. I've written…