This is a story about how an implementation of Cost Transparency and a Chargeback/Showback model can provide a common language between IT and the business to create an understanding of the value of IT.

Initially, there was limited understanding from IT on what services they were providing the business. The bill that they used to give to the business units included one line with a number that was owed, and it did not explain why or how the charges were created. Over time, hostility rose between IT and the business units, and the business units began to question the value of their IT department and if they could get these services elsewhere for cheaper. Ultimately, the company established a mandate allowing the business units the option to opt-out of services and requiring IT to provide transparency of its costs.

With the ultimate lack of trust between IT and the business, it led us to establish a Cost Transparency model at the company. If IT needed to explain how much a service was costing the business units, then they needed the TOTAL cost of the service including the infrastructure and labor required to run and support it. By gathering the necessary data and configuring the model to appropriately convey costs, we were able to implement an internal pricing mechanism in Cost Transparency. This is what ultimately led us to create a Bill of IT and utilize business unit consumption.

While it began with a mandate allowing the business units the option to opt-out of services, the increased transparency that Apptio provided resulted in NO business units opting out and increased trust in the validity of the costs of IT.  The Bill of IT increased the amount of direct consumption spend from 31% to 85% and established a unit price and unit of measure for over 150 services. The business units could now change their own bill by shifting their consumption and there was clarity around exactly how IT was providing value to the business units.