Answering to the Business

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Answering to the Business

Steve Jones - SSC Editor

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April 3, 2010 at 12:01 pm

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Comments posted to this topic are about the item Answering to the Business

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Open Minded SSCommitted Points: 1872 More actions · Answer 1

I have a problem with our global IT in the charges we pay for itemized services. They can't quite explain to me as to how we are charged even for their use of office phones, and hard disk space for accounts long-ago decided not to have mailboxes. Worse, their services are very slow like days or weeks.

When I asked where to get global support for the globally mandated antivirus software, I was given the run-around and dead-pan by the global finance person. I had learned some companies have IT under Finance which is why I feel our particular multinational company has global IT in the dark ages of muddy progress. I feel cost control has taken more importance than systems progress.

In our case, I doubt the tier-level service level agreement would be of much help.

I am just fortunate our network is not fully integrated with their messy network. In the end, I still have to do the troubleshooting over the mandated softwares. For the AV, I finally got the go-signal to throw it out and replace with an AV having local support.

Jason Irwin SSC Veteran Points: 255 More actions · Answer 2

My last employer had this kind of system in place and, after three years in operation, it turned into a similar kind of situation that we see can see with carbon credits.

Each department was given a reasonable budget increase in order to "pay" for their IT usage. However, areas that would use an incredible amount of IT resources (development time, server utilization, and network storage) started to "trade" various things with other departments that weren't so dependent on the infrastructure to get around the process. The entire practice of "billing" departments was completely scrapped before the 5th year because certain department heads had too much political power over others, and could strong-arm their colleagues in order to ensure their projects were always given a higher priority.

I agree that departments should have a means of seeing just how much their IT requirements cost, but it might not be a great idea to take it too far and make these costs part of any departmental budget.

salman.samad Right there with Babe Points: 799 More actions · Answer 3

The idea of "billing" businesses for the T&M is great in terms of bringing visibility to the execs and management and, hopefully, making them realize that IT is indeed an asset and not an overhead.

TravisDBA SSCoach Points: 15780 More actions · Answer 4

I have absolutely no problem with companies, and their associated IT departments cutting costs and streamlining operations where ever they can these days. However, I draw the line on this when they start shipping American jobs overseas in order to achieve it. Our country, as far as I'm concerned needs to stop outsourcing. In light of staggering unemployment in todays society, this has become as national issue for us. American jobs for Americans first. I understand the expertise issue fully well, but we can no longer afford as a country to send jobs overseas, and we need to end tax breaks to companies that now do it, and begin to address this expertise issue another way, rather than just arbritrarily shipping our jobs to India and China.. Just my 2 cents 😎

"Technology is a weird thing. It brings you great gifts with one hand, and it stabs you in the back with the other. ...:-D"

sjsubscribe SSCrazy Points: 2080 More actions · Answer 5

This cost-based accounting (or charge backs) have their role in some limited circumstances, but most eventually fail under their own weight. The primary reason in my experience has been the lack of matching costs to values. Some costs may be low but have no value while others might cost a lot but have a high value. And this value can be determined by individual departments or lines of businesses, but often cannot be easily quantified or prioritized with IT's input. Even with sufficient IT input, it is difficult to predict the benefits of new technology, for instance. Much like hiring an attorney to work on an hourly rate. The value provided is entirely different from the actual costs and costs alone cannot help determine if the attorney's time is being well spent.

david_wendelken SSCrazy Points: 2388 More actions · Answer 6

I NEVER communicate IT options to management in IT terminology.

I always translate it into terms of money, time, business risk and business benefits.

If I do, I generally get very good decisions out of management because they understand what to do with that information.

In fact, unless I'm talking to someone in IT that I know is a top-notch technologist, I don't communicate IT options to IT people in IT terminlogy, either. 🙂

Steve Jones - SSC Editor SSC Guru Points: 736078 More actions · Answer 7

I think some of you are missing the point here. Chargebacks aren't occurring at BP, and I'm not advocating them. Instead it's visibility by the business into costs, and then letting them choose lower levels of costs, perhaps freeing up IT money to be used elsewhere, or get more projects done.

It's not so much about accounting as it is allowing customers a little more insight into how money is spent on them and perhaps allowing them to direct money in different ways, accepting less xxx from some service.

Revenant SSC-Forever Points: 42467 More actions · Answer 8

I think that the cost/benefit analysis as part of each fiscal year plan and "contract" that IT has with all users is not that rare and certainly getting some traction: I have seen it on my last two assignments.

Miles Neale SSChampion Points: 13147 More actions · Answer 9

I agree that CBAs and Service Level Agreements are valuable but I think that what Steve is getting at is that with the reminder as the projects move forward of the cost per service or week, month or quarter lets people know that IT is not free and we can use all of it we want, is a good thing.

Good article!:-)

Not all gray hairs are Dinosaurs!

Phillip - Texas SSC-Addicted Points: 415 More actions · Answer 10

And when the project starts to creep you can use any analogy such as: " you ordered the cheapest thing on the menu, but now you are trying to get the waiter to bring out some free cheese and bacon to top off your plain burger. Well, that aint free."

Matt Miller (4) SSC Guru Points: 124210 More actions · Answer 11

sjsubscribe (4/5/2010)
This cost-based accounting (or charge backs) have their role in some limited circumstances, but most eventually fail under their own weight. The primary reason in my experience has been the lack of matching costs to values. Some costs may be low but have no value while others might cost a lot but have a high value. And this value can be determined by individual departments or lines of businesses, but often cannot be easily quantified or prioritized with IT's input. Even with sufficient IT input, it is difficult to predict the benefits of new technology, for instance. Much like hiring an attorney to work on an hourly rate. The value provided is entirely different from the actual costs and costs alone cannot help determine if the attorney's time is being well spent.

Unless you switch to a full-fledged activity-based accounting system (which is a more extensive version of cost-based, with a more accurate method of applying costs out to the various interested parties), your chargebacks tend to get rejected as arbitrary, etc.... And that's when the system tends to fall apart like you mentioned. That said - when your figures are accurate, and the managers start to realize that their department is tied to a whole set of costs, then they can participate in the "value" discussion (cost/benefit, long-term vs short-term, etc...)

That said - IT costs are like any other costs: if you don't spend the time assigning items accurately or tying them to activities that allow you to prorate, you end up with a big pile of cash being spent by the organization, with noone's name next to them. If the costs are justifiable (meaning they look fairly assigned out to the various units), then the discussion of value becomes a business discussion between the department and Acocunting, and not some large black hole the CIO has to justify (and hopefully not lose his shirt/job in the process).

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Your lack of planning does not constitute an emergency on my part...unless you're my manager...or a director and above...or a really loud-spoken end-user..All right - what was my emergency again?

Revenant SSC-Forever Points: 42467 More actions · Answer 12

In my experience is is mostly about expectation management. The cheap burger analogy is on the point.

Cris E Ten Centuries Points: 1255 More actions · Answer 13

That said - when your figures are accurate, and the managers start to realize that their department is tied to a whole set of costs, then they can participate in the "value" discussion (cost/benefit, long-term vs short-term, etc...)

We only use the costs in terms of hours, not dollars. But we only use them in discussions of prioritization and timelines, not budget.

Basically we have a fixed pile of man-hours to divide between project and service request work each week, so we let business choose when to get something done. They send requests, we do estimates and at a weekly meeting they fight among themselves for spots in the queue. The discussion usually goes "Here are two ways to do this feature: I can do A in 16 hours or B in 40 hours. You have 60 service request hours to spend this week and a laundry list of other stuff in queue. Which do you want?" If one dept got to cut to the front of the line, then they usually get the unadorned version. Another might surrender some priority one week to get more time a couple weeks later. As you might imagine, IT usually sends a jr project mgmt person to record decisions but otherwise stays clear of the sausage-making process.

It works for us because we're a small enough shop that they can see that no resources are being wasted, and most requests are small enough to not completely block the pipe for too long.

EDIT: A lot of the credibility of IT comes from good estimates and being forthright in stopping work when something would run long and chew up another group's time. Business buys in because it's very transparent and they can see the huge amount of IT money (relative to the rest of the company) is being used well. They have some control and a very tangible feel for how much changes cost. It motivates them to be more active in the design process on new stuff too, so that they have what they want from the start.

[font="Arial"]Are you lost daddy? I asked tenderly.
Shut up he explained.[/font]
- Ring Lardner

SQLRNNR SSC Guru Points: 281334 More actions · Answer 14

I like the idea of transparency. If you are a consultant for a company - there is a degree of transparency there that is far greater than if you are an internal employee of an IT department. If internal projects were given the same transparency as external projects, I think perspectives on IT would change. Many companies just view IT as a cost center - not a services center. What they fail to see is that the cost is generated by some department in the company.

Jason...AKA CirqueDeSQLeil
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I have given a name to my pain...MCM SQL Server, MVP
SQL RNNR
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