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IT as a corporate overhead
IS costs are treated as an administrative overhead.
Merits:
?
Simple and cheap to administer.
?
Encourages innovation and experimentation.
?
Minimal conflict between IT and user departments
Demerits:
?
No incentive to control costs
?
No responsible use of IT
IT charged out on a cost basis (Cost based charge-out)
Users are charged for the costs of IT in proportion to their usage.
Merits
?
Conceptually simple.
?
Cost control by responsibility
?
Motivation to regulate costs.
Demerits
?
Inefficiencies of the IS department may be passed on to users
?
Complex to implement in practice.
?
Difficulty in determining appropriate cost units.
?
Overhead costs of IT department still need to be met.
Market based charge-out.
IT department acts as a profit centre.
Merits
?
External standards and price available.
?
Encourages an entrepreneurial attitude.
?
Prices are negotiable.
Demerits
?
No comparable services might exist
?
May result in under utilisation of resources
?
Management skills may be lacking in IT
gregorymasila answered the question on December 18, 2017 at 13:28
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