You're a shared-services organization, and must earn the position of clients' "vendor of choice."

Challenge

There are significant cost savings and synergies when internal support functions like IT are consolidated. But regardless, the pendulum will swing back to decentralization if a shared-services organization doesn't earn clients' business by becoming their "vendor of choice."

First and foremost, this means treating the business as customers (not victims, or even "business partners" where you share in their decisions).

It also means delivering products and services that are competitive in quality and price.

Solution

The key to making shared services work is respecting clients' right to choose what they will and won't buy from you.

Implementing this does not necessarily require chargebacks, although that may ultimately be desirable. Whether your revenues come from fee-for-service chargebacks, high-level allocations, or direct budget, you can give clients the power to decide what they'll buy.

The first step is to define your catalog of services, and assign all your costs to those services. This is fundamental to establishing a shared-services organization, and certainly prerequisite to clients making purchase decisions.

Product/service costing is used at two points in time:

It's done when you submit your budget, so that funding is based on what the business wants to buy from you in the year ahead. This is termed "investment-based budgeting."

Submitting a budget for the products and services you'd like to sell (instead of what you plan to spend) changes the nature of the dialog from one of micro-managing your costs to a businesslike discussion of how your products and services align with clients' business needs.

The annual budget process creates a "checkbook" of resources which clients use to buy your services. Governance then takes on a specific meaning: empowering clients to decide what checks to write within the bounds of that checkbook.

Your catalog with rates is used throughout the year to estimate the costs of new projects and services, and to invoice that checkbook for work delivered.

Comprehensive solution....

Other Resources

Case Study: From Adversaries to Advocates
how budgeting and product/service costing improved relationships between IT and its clients

Case Study: Can You Really Know Your Full Cost of Service?
Riverside County IT found the way

Column: Shared Services....

Column: Decentralization....

Column: Chargebacks....

Column: Allocations....

Column: Service Catalog....

Anecdote: Client-driven Portfolio Management (Out On a Limb Alone)
You're expected to defend the budget that's really there to benefit your clients, and blamed when you don't get enough.

Anecdote: No More Games!
How knowing the true cost of your products/services can change the nature of budget negotiations.

Anecdote: Our IT Allocation is Too Small!
How to turn the tables and get clients defending a larger IT budget.

Speech abstract: Investment-based Budgeting
why CFOs should mandate a new format for budget submissions

Speech abstract: Service Costing 101
everything you need to know to plan an implementation of service costing