Application Portfolio Management (APM) Best Practices

Overview

Two financial accountability models are available for allocating cloud and SaaS costs to the business units and application teams that incur them: showback and chargeback. Showback calculates and reports the cost attributable to each organizational unit for visibility and awareness purposes without directly reducing their budget or requiring direct payment. Chargeback calculates the cost and directly charges it against the budget of the responsible organizational unit, creating direct financial accountability for technology consumption. The choice between them has significant organizational implications for cost awareness, demand management, and the political sustainability of the financial governance model.

Best Practice

Select the cost accountability model that reflects the organization’s current financial governance maturity and its goals for cloud cost accountability. Showback is the appropriate starting point for organizations establishing cloud cost visibility for the first time - it creates cost awareness and education without the billing friction that can generate organizational conflict before the cost attribution methodology has earned organizational trust. Chargeback is appropriate for organizations with mature, trusted cost attribution methods and organizational cultures that have the appetite and the financial governance infrastructure for direct budget accountability for technology consumption. A phased approach - implementing showback first, building attribution trust through demonstrated accuracy, then transitioning to chargeback once the methodology is accepted - is the most pragmatic and organizationally sustainable path for most enterprises.

Benefit(s)

Selecting the appropriate cost accountability model for the organization’s current maturity produces cloud cost governance outcomes without generating the organizational conflict that an overly sophisticated model creates when deployed before the organization is ready for it. Showback builds the cost awareness, attribution trust, and behavioral change that chargeback requires to succeed. Chargeback, once earned, creates the direct financial accountability that drives rational demand management at the business unit level. The phased approach maximizes the probability that the cost accountability model achieves its intended behavioral outcomes rather than being rejected as administratively burdensome before it has had the opportunity to deliver value.