How to Create an Effective Platform Cross-Charging Model (and Why Not To Do It)

Cross-charging models in enterprise platforms, which involve reallocating costs from central IT functions to various lines of business (LOBs), are often met with skepticism due to their complexity and potential drawbacks. These models aim to recover operating and hosting costs by billing internal consumers or producers, distinct from product monetization. The process requires a detailed understanding of fixed and variable costs, such as software licenses and cloud infrastructure, and decisions regarding whether charges should be based on usage or consumption. Although cross-charging can make teams more cost-conscious, it may also discourage platform adoption, disrupt reuse of resources like APIs, and lead to defensive behavior or shadow IT practices. Building a comprehensive cross-charging model demands significant effort and resources, potentially offsetting any financial benefits. Therefore, a simplified approach is recommended, leveraging tools such as Kong Konnect's analytics to maintain cost-effectiveness and minimize friction in value streams.

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