TABLE OF CONTENTS There are two poles of transfer charging implementation, namely, the cost recovery model and the market-based pricing model (in practice, implementations typically fall between these extremes).
A market pricing model begins by assessing the components and scope of the IT service and the total costs of providing that service over its lifetime (depending on various assumptions about the future price/performance of equipment and the amount of service that is likely to be taken). It then builds up a tariff per service unit (considering the risks in delivering the service and its reinvestment needs). This is the commercial model that an ESP would adopt. Different tariffs might be set for peak and non-peak usage times in order to provide financial incentives for the user to perform more work at off-peak times and so help to reduce the total capacity requirements (and so overall hardware costs). Similarly, different staff tariffs might be set for delivering and supporting standard and non-standard services in order to incentivize the use of standard services. Note that this use of variable tariffing to incentivize more commercial user behaviours is a key tool available to both the internal IT function or an ESP (but consider for a moment what incentive the ESP has to deploy such tools). There are various methods of pricing, including standard cost, cost-plus, target return and market pricing (or going rate ). The price of the service is then the service unit tariff multiplied by...
