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That’s only if you take a naive view of IT (which most people do because it’s the lazy approach). Laptops, servers, networks, email boxes, etc. should all be ch

by orev 5y ago

That’s only if you take a naive view of IT (which most people do because it’s the lazy approach). Laptops, servers, networks, email boxes, etc. should all be charged back to the departments those are actually being provided to. When you do that, suddenly IT is making a lot of (internal) money, and the business can see where the costs actually are. IT is also not nearly as expensive as other types of businesses that require huge capital investment, like farming equipment, factory assembly lines, biotech reactors, etc.

mason55 5y ago
IMO, if you're going to charge everything back to the business units then you also need to provide some kind of consulting-style services, or best practices, or guidebooks, or something. Otherwise you lose a lot of your economies of scale because each business unit is trying to figure out the best way to do things. Or you end up with shadow IT all over the place because the BUs come up with cheaper but unsanctioned/unsupported ways to do things. You also need a way to objectively evaluate how IT is performing. If the business units are going to third parties because IT is unresponsive or overly "expensive" then the exec team needs a way to see that. When IT is responsible for the IT budget then they have incentive to minimize costs and it's easy to do budget reviews. When the business units have to pay that budget then IT acts as a monopoly with little incentive to improve service or reduce prices and it's much harder to find the shadow IT that's being implemented to get around bad internal IT. There's no one perfect answer.
- orev 5y ago
  You make very good points. This kind of system only works with strong support from the CEO, where everyone is firmly “on the same team” and has designated positions to play (e.g. IT has to provide the IT stuff). Once you allow shopping around within the company or externally, you end up in a shitshow. It’s still better than the typical approach, where everyone is just angry at IT all the time “because they are such a drag with so many expenses”. Outside of the extremely dysfunctional cases, charging everything back to business units is at least the more honest approach.
tomnipotent 5y ago
> should all be charged back to the departments I had this fight with my last CEO. She put anything tech-related under my budget. Worked with accounting to show what the budget would look like if expenses were correctly attributed, and suddenly I wasn't spending so much money anymore. Reason she didn't want to change it? So they didn't have to explain why expenses changed so much quarter-to-quarter during the next board meeting.
- maverick-iceman 5y ago
  > Reason she didn't want to change it? So they didn't have to explain why expenses changed so much quarter-to-quarter during the next board meeting. Seems like a win-win. Now she knows the reality of the enterprise and is okay with the expenses but she feels that investors would be bothered by it, so better not change anything in order to avoid having to answer their questions
- xarope 5y ago
  I did that when I was CIO at a non-tech firm; all IT costs for hardware, software and services (including ISP lines) were apportioned to the various floors and depts by seat basis. 10 years later, my ex-CFO still thanks me for what I did, and wish I was still with the company.
908B64B197 5y ago
> Laptops, servers, networks, email boxes, etc. should all be charged back to the departments those are actually being provided to Wait there are companies that don't do that?
- orev 5y ago
  Pretty much most of them. Anytime you hear people complaining about how IT is nothing but a huge expense (which is by far the biggest complaint made by business people about IT), they’re in a company like this. It seems to be mostly the really large companies who have enough of an internal economy where they actually get to the point of internal chargebacks.

by orev 5y ago

mason55 5y ago

IMO, if you're going to charge everything back to the business units then you also need to provide some kind of consulting-style services, or best practices, or guidebooks, or something. Otherwise you lose a lot of your economies of scale because each business unit is trying to figure out the best way to do things. Or you end up with shadow IT all over the place because the BUs come up with cheaper but unsanctioned/unsupported ways to do things. You also need a way to objectively evaluate how IT is performing. If the business units are going to third parties because IT is unresponsive or overly "expensive" then the exec team needs a way to see that. When IT is responsible for the IT budget then they have incentive to minimize costs and it's easy to do budget reviews. When the business units have to pay that budget then IT acts as a monopoly with little incentive to improve service or reduce prices and it's much harder to find the shadow IT that's being implemented to get around bad internal IT. There's no one perfect answer.

orev 5y ago
You make very good points. This kind of system only works with strong support from the CEO, where everyone is firmly “on the same team” and has designated positions to play (e.g. IT has to provide the IT stuff). Once you allow shopping around within the company or externally, you end up in a shitshow. It’s still better than the typical approach, where everyone is just angry at IT all the time “because they are such a drag with so many expenses”. Outside of the extremely dysfunctional cases, charging everything back to business units is at least the more honest approach.

tomnipotent 5y ago

> should all be charged back to the departments I had this fight with my last CEO. She put anything tech-related under my budget. Worked with accounting to show what the budget would look like if expenses were correctly attributed, and suddenly I wasn't spending so much money anymore. Reason she didn't want to change it? So they didn't have to explain why expenses changed so much quarter-to-quarter during the next board meeting.

maverick-iceman 5y ago
> Reason she didn't want to change it? So they didn't have to explain why expenses changed so much quarter-to-quarter during the next board meeting. Seems like a win-win. Now she knows the reality of the enterprise and is okay with the expenses but she feels that investors would be bothered by it, so better not change anything in order to avoid having to answer their questions
xarope 5y ago
I did that when I was CIO at a non-tech firm; all IT costs for hardware, software and services (including ISP lines) were apportioned to the various floors and depts by seat basis. 10 years later, my ex-CFO still thanks me for what I did, and wish I was still with the company.

908B64B197 5y ago

> Laptops, servers, networks, email boxes, etc. should all be charged back to the departments those are actually being provided to Wait there are companies that don't do that?

orev 5y ago
Pretty much most of them. Anytime you hear people complaining about how IT is nothing but a huge expense (which is by far the biggest complaint made by business people about IT), they’re in a company like this. It seems to be mostly the really large companies who have enough of an internal economy where they actually get to the point of internal chargebacks.