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Blog | Oct 1, 2020

5 Questions to Ask About How You Charge for Automation

By Ian Hardy
Customer Success Director
Read Time: 6:18

Nothing in life is free

Automation has many interested parties whose time and effort cost money, how can you ensure you have visibility of this and ensure the business areas benefiting from deployments pay for it accordingly? There are several different ways to allocate cost and, in our experience, the chosen method really depends on what you as an organization would like to achieve, and how you would normally allocate costs for common resources.

Don’t treat automation any different to other shared services. The key here is to keep things simple. Below we answer five of the most common questions we get asked about chargeback models.

What model should you use?

The single most important question and the key to successful implementation is this - Why do you want to implement chargebacks?

Is it for cost allocation driven by senior function owners, to show value for internal v external teams and solutions or perhaps to drive ROI focused implementations. The reason this is so important is to ensure that when you implement the model, it doesn’t cause unintended consequences that might prevent end users wanting to engage with you.

With this in mind, you can now start to consider how, when and what you will do

MODEL

Description

High Level Allocation

This is based on very high-level metrics: e.g. number of FTE, overall operating costs, etc.

Low Level Allocation

This is based on more specific user metrics: e.g. processes in production, complexity of process, etc.

Measured Usage

This is based on specific actual metrics; e.g. storage consumed, bandwidth utilized, timesheets, etc.

When should you consider a chargeback model?

Introducing a chargeback model to your intelligent automation service may be done at any time. Ideally you should include it in your vision and roadmap from the start, but that’s not always the case.

Initialize: You are still understanding what and how you will do things so introducing internal charges at this point is not the best option. You will likely reduce the excitement from the business and struggle to get traction and quick wins. In the early days, consider if you can use central or transformation budgets whilst you set up the capability. If you can, great, but remember this funding might not last forever.

Industrialize: You will now be showing your value and benefit to the organization. You will also have insight of how long projects take to be completed. You will understand the stakeholders and impacted areas. You can now look to implement your chargeback model. Keep things simple and transparent and communicate regularly.

Institutionalize: Your ability to deploy automation will be first class and automation will be fully embedded within your organization’s DNA. Now you should be refining your model -- what is working, what isn’t, where can you improve further?

What items should I charge for?

So, we’ve looked at how and when but what should you include? This is going to be unique to your organization and can include several different areas e.g. FTE resource, hardware, software, licenses, facilities etc.

In the table below, we’ve included the main headings and areas you could look to map against. The list isn’t exhaustive, and you may have other items you want to include. For projects below you may wish to further split into ‘t-shirt sizing’ (e.g. Simple, medium, complex, etc.)

Capability Set Up

Discovery & Delivery

Service Model

Infrastructure

Onboarding

Project Delivery

Maintain and Run

Environments

Training

New Projects

Scheduling

Build

Governance

Change Projects

Release & Deploy

Maintain

Peer Reviews

Regulatory Projects

Out of hours support

Upgrade

Procurement

Continuous Improvement

Management & Control

Service Management

Process Discovery

Exceptions

User administration

Does it depend on what organizational model we have?

The short answer is yes, but it is more dependent on your delivery model. How much and what is produced and completed by the business and how much by a central function.

Your Centre of Excellence in all models can be a cost center that is either charged out to users or centrally funded. The same can be said of your Service Costs and your infrastructure. The difference in these latter two areas is how you will charge back based on usage. Will it be based on licenses, processes in production, hours, volumes, capacity, idle time or effort? We have seen customers use all combinations successfully.

Using the topics above is a great place to start and map your own delivery model against your organization’s normal procedures for common resource and shared facilities.

What challenges should I look out for when introducing a chargeback model?

There are some challenges to be aware of. These are:

  • Causing Confusion: In trying to achieve accuracy and total coverage, you come up with chargeable items that confuse people. This leads to people feeling stupid and endless discussions on the matter. Business areas become suspicious that they’re being overcharged and stop collaborating with you.
  • Bungling the Bundling: To counter act the problem above, you ‘bundle up’ lots of smaller lines of costs into a single larger ‘bucket’. Business often want just parts of that ‘bucket’ but can’t refuse as it includes things they need for Business as Usual (BAU). This leads to business areas feeling like they have to pay for things they don’t want or need.
  • Competing for control: As costs are often a key area of focus in most organizations, you might find that business areas naturally want to control their costs, so they feel they have a right to micromanage automation and have a say in its internal infrastructure, staff costs and processes.
  • Forgetting your wallet: It’s essential that the business sets aside budget that is aligned to their goals and objectives when it comes to automation. It’s vital that communication isn’t only had when it comes to the annual forecasting cycle but throughout the year to ensure business have a robust pipeline and providers understand what’s expected. If you are implementing charge back for the first time you will also need to look at transferring budget from IT to the business.

Finally…

Chargebacks are not an end in themselves. They need to be seen from the perspective of a business within a business. They are just one step on a path that gives customers meaningful control of their automation implementation decisions and to help align resource, changing the question from “Can I automate this?” to “Should I automate this”?

The danger is that charge backs can become an administrative overhead that often provides little benefit and prevents the organization from focusing on the possibilities of how automation can benefit the organization and its customers.

The key, at all stages of your model is to understand the vision of why it’s needed, to collaborate with all main stakeholders, be transparent and communicate regularly.

Done correctly, chargebacks can be more than just an accounting methodology, they can drive optimization and efficiency within your organization and add real value to the enterprise vision.

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