What is Chargeback?
In this deep dive with EOTSS Chief Financial Officer Jeanette Wade, we take a closer look at chargeback and its benefits.
Q: How much revenue did chargeback bring in the last fiscal year? How did that compare to other revenue sources?
A: Chargeback is EOTSS’ primary source of revenue. In FY17, chargeback revenues brought in $69 million, which accounts for 92% of total revenue. The remaining portion of EOTSS’ revenues come from appropriation which was $3 million in FY17.
Q: What are the biggest categories of chargeback?
A: The largest portion of our chargeback revenues are hosting charges, which includes infrastructure service management and support. Overall, hosting accounts for nearly half of all chargeback revenues $33.5 million. The next biggest category of chargeback is unified communications which is $10.9 million.
Q: How are chargeback rates calculated? Have rates changed over the past couple of years?
A: Chargeback rates are comprised of cost pools that include: Infrastructure, hardware and software maintenance, depreciation, labor and allocated overhead. Rates for services did not change from FY15 to FY17. In FY18 we have instituted a 3% increase and will be memo billing actual projected costs for FY19 on a monthly basis.
Q: When is chargeback an appropriate method of financing?
A: Chargeback is an effective revenue stream when it is for services where customers can control costs. Customers are empowered to select the services they need to run effective operations and understand, through transparent chargeback rates, the resulting financial impact of their decisions.
Q: How will chargeback change over the next year or two?
A: Along these lines, the Finance team will be working with ANF to consider where to move services from chargeback, where customers can and should control costs such as memory/CPU usage, to appropriation, where customers automatically receive services such as security or are required Commonwealth services such as MMARS, HRCMS, and Mass.gov. The organization has established cross functional partnerships to evaluate how moving to the public cloud and minimizing our on-premises infrastructure will impact our revenue streams.
Q: Why these changes?
A: We are modeling chargeback reforms based on the following pillars: Simple, Transparent, Efficient, Effective, and Supported. The goal of these changes is to be excellent business partners to our customers and ensure that we evaluate and manage our operational costs to support nimble, flexible growth, and consolidation.

