MI Solutions
Insights/Budgets and finance
Budgets and finance

Showback and Chargeback for Software Costs

How showback and chargeback work for software costs, the main allocation methods, and how to choose a model that changes behavior without creating overhead.

By the MI Solutions SAM team9 min read2 exhibits

When software costs sit in one central IT budget, the teams that use the software rarely see what it costs. Showback reports costs to those teams; chargeback moves the costs into their budgets. Both make spending visible to the people who drive it, which tends to change behavior: unused licenses are released faster, and requests for premium tiers become more considered.

01Showback

A report to each team of the software it uses and what it costs. No money moves; behavior changes because the cost is visible.

02Chargeback

The cost is moved into each team's budget. Stronger incentive, more need for accurate and agreed data.

Allocation methods compared

Exhibit 1
Choose the simplest method that reflects real useSoftware cost allocation methods by accuracy and effort (indicative)SIMPLE, ROUGHSIMPLE AND FAIRCOMPLEX, ROUGHACCURATE, MORE EFFORTAccuracy →Ease of running →Headcount shareLicenses assignedActive usersMetered consumptionNegotiated fixed sharesPositions are indicative.
MethodHow it worksBest for
Headcount shareSplit by number of employees per teamShared platforms everyone uses
Licenses assignedCharge per license assigned to the teamPer-user SaaS
Active usersCharge for licenses actually usedProducts with uneven use
Metered consumptionCharge by units consumedCloud and usage-priced services
Exhibit 2
The allocation method changes who paysShare of a $240K design suite charged to each department, by method, illustrativeMarketingProductSalesHeadcount share40%35%25%Licenses assigned60%30%10%Active users70%25%Illustrative, from the example above.

Showback first

Showback carries little risk and builds trust in the numbers. Publish a monthly or quarterly report per team: products, licenses, active users and cost. Move to chargeback once teams accept the data.

A useful showback report

Common pitfalls

Do
  • Keep the model simple enough to explain in one slide.
  • Charge only for what teams can control.
  • Keep shared platforms central, or split them by a simple rule.
Avoid
  • Allocation models so complex nobody understands their bill.
  • Charging for licenses teams cannot release themselves.
  • Moving to chargeback before teams trust the data.

How MI One helps

Frequently asked questions

Does chargeback reduce costs?

It often does, because teams release licenses they do not need when the cost lands in their budget.

Should every product be charged back?

No. Shared, enterprise-wide platforms are often simpler to keep central.

How often should showback reports go out?

Quarterly is usually enough; monthly for teams with large or fast-changing consumption costs.

See where your software budget goes

Bring your five largest vendors to a 30-minute call. Our SAM experts will show you where the savings usually hide, and how fast MI One can surface them.