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IT Cost Transparency for Fun and Profit

        posted by , June 12, 2011

Companies that look like smooth money making machines to outsiders — often look very different to insiders.

Even successful businesses have inefficiencies, waste and redundancy. This is often driven by bad decisions, office politics and failure to decompose complex challenges into simple, manageable tasks.

IT Wasteland

IT is often ripe with inefficiencies, over-spending, waste and failure.

IT assets represent a far more complex investment than traditional asset classes. When a business invests in a building — the investment has predicable return on investment. In other words, the utility of the building is easy to predict.

IT is a different story. What is the value of an ERP to a company? What are the risks? These questions are not well understood.

IT Cost Transparency to the Rescue

The key to minimizing IT waste is accountability and visibility. Every department, team and individual in the organization should be accountable for their IT costs.

Products, processes and transactions should also be assessed IT costs.

IT cost transparency

Transparency Changes Behaviour

When IT costs are transparent business sponsors have more incentive to work with IT on strategic initiatives. Transparency makes the business more receptive to IT efficiencies such as extensible designs, reusable services, retiring legacy systems and hardware rationalization.

Transparency can have other benefits as well:

- discourages frivolous requirements
- makes the business accountable for failed projects
- makes the business accountable for over spending on IT
- encourages the business to provide diligent requirements
- puts departments into competition with each other to clean up their business processes, applications and hardware

Incentives for Innovation

IT cost transparency has many benefits. However, there is also a danger that it can stifle innovation and long term strategic decision making.

Example: A product manager will not want her product to be the first to be launched to a strategic SOA platform if the charges for the entire platform are charged back to her product.

The organization should incentivize innovative tools and common services. This can be done with subsidies for strategic solutions — much the way governments subsidize clean energy to provide incentives to the private sector to shift to green technologies.

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