TABLE OF CONTENTS So what are the theoretical objectives of transfer charging for IT products and services between an IT function and its business users (and are those objectives actually realizable when the supplier is internal)?
To make the cost of IT service provision more visible to the business and so incentivize users to modify their behaviours and/or usage of IT services, so potentially reducing (or at least better controlling) IT costs. This typically has to be the key objective.
To allow business users to move their IT spend to a more variable cost base under their control (although in internal charging this will potentially simply result in other users having to bear the displaced costs from the organization s fixed IT costs).
To incentivize the IT function to meet its service level agreement (SLA) targets by means of various penalties (service credits or financial penalties) on its failure to hit those targets (although in internal charging any financial penalties will almost certainly be wooden dollars and therefore of questionable value as a sanction).
To allow the IT function to demonstrate its commercial competitiveness by demonstrably successfully selling IT services to third parties at the same price as set internally. Note that, minimally, transfer charging should help foster a measurement culture in the IT function and provide an unprecedented understanding of cost-intensive resources and activities (as a possible basis for IT cost-efficiency improvement initiatives). This can also assist in...
