Perceived Value – A Good Case for LOB Chargebacks for IT Projects
Value can be simplified to represent the difference between the benefits of a good or service and the costs realized to obtain it. Every day in corporations across America, value is created without tangible investment. Projects are scoped, developed, and implemented with some end goal of changing a current process for the better. But because the IT department is treated as a cost center, or even a commodity, the perceived value of that effort is skewed.
Tom Evslin recounts his first experiences in the late 1960’s being billed out as a consultant for a facilities management company. In his story, he paints two similar engagements that yielded very different outcomes. He shows that “price can create a perception of value.” When the customer pays $300 an hour and has operational systems to show for it, it is easy to see the value proposition over paying $250 an hour to have an IBM system engineer that is unable to solve your problem.
I have experienced this in my days as a consultant as well. When I worked for GE Capital Consulting, no one batted an eyelash at paying $250 an hour and the customer’s stakeholders that were invited to meetings showed up early. When I worked for a company that billed the lines of business back for IT projects, I had a very similar experience. The managers were very responsive to my needs and would see to it that whatever human resources I needed from their department for discovery, testing, or training were available in a timely fashion.
Unfortunately, I have also worked for places that did not have a formal chargeback system and in each case, my perception of their perception of the value we provided was indeterminable. Did it mean our product stunk? Yes and no. Without that whole-hearted buy in, you are prone to not receive the full dedication of brain cells needed to discover what a business’s needs really are. When it comes time to test, it can be equally difficult to garner participation from the user community. When the application finally goes live, end users are left scratching their heads wondering what problem the app was meant to solve. So we may have coded the best application in the world but unless it changes the processes of the business in the manner that it was intended, the project was a failure.
So my assertion is this – implement a simple system for providing cost information so that business unit managers can have a project cost and an expected return on the project. You don’t have to actually chargeback their P&L to reach your goal. This small step will aid them in perceiving value from your project team and just might lead to a better product being developed.