Howard Rubin, a research associate at MIT’s Center for Information Systems Research, has built a database to show the correlation between IT spending and Net Revenue at a wide range of companies. Basically what he is trying to do is show the business value of IT investments. Now, the interesting thing that he found is that there is no link between the money you spend on IT and an increase in revenue.

What does this mean in reality? I mean, we who are in IT all believe and know that IT adds value and is crucial to remain competitive. What Rubin has actually shown is that IT spending should be kept in control with the companies total operating expense. He has even shown an interesting fact that there seems to be a saturation point where more investment in IT does not add any more value.

And how is this linked to chargeback? Well, our experience and a lot of studies show that companies typically spend 60% of their IT budget on operations and not application development where the competitive edge is. So the natural answer is that by using a well planned chargeback method you will be able to link your IT operations expenses to your overall operating expense. And by running your IT operations as efficiently as possible you will be able to spend more money where it matters most, on application and services development. Up to a point, apparently, according to Rubins studies.