Why Does IT Cost So Much?

  Costs have a way of hiding. Listen in on a conversation I had the other day with the CTO of a large financial services firm (who will remain nameless):

"How many engineers work here?"

"About half of them."

"What do the other half do?"

"I'm not sure. Non-engineering stuff."

"Do you have a time-tracking system?"

"Yes, but it's limited to application developers."

After more discussion, a decision was made to start tracking the time of all IT professionals. This of course, created lots of anxiety from people worried about job security. Hence, the need for a communications plan to let people know this was not a witch hunt to find loafers, rather a tool to understand how costs impact the overall IT financial picture.

 But cost data by itself, as my client soon discovered, doesn't solve the problem. It just spawns more questions.

The answers come from analysis. Many still call it cost/benefit.  Some call it "measuring the business value of IT."  Whatever you choose to call it, consider this:

If you can't assess the meaning of your total costs, think about acquiring better asset management or configuration management repositories. These tools can help you understand relationships between assets, their related labor costs and the applications that ultimately deliver value to the business.

If you suspect you're re one of these organizations, check out solutions from Remedy or  Numara.  Or, read vendor reviews from ComputerWorld. 

Or - try  benchmarking
Benchmarking compares your spending with your peers. But not just any peer. A good benchmark compares you to those that have similar business goals - and with those that run organizations of comparable complexity. 

Your benchmark analysts will create a peer group (that you approve, but the names of the firms remain anonymous). They will give you insight into why you're overspending - or potentially underinvesting - in all major IT cost categories like servers, application development, help desk, etc.

Benchmarking exercises are always enlightening. And - the data collection process that precedes the benchmark forces you to clean up your accounting practices.

One of the enlightening areas benchmarking reveals is how much spending on IT -- takes place outside the IT department.  My IT finance buddy, Jim,  told me such spending accounts for an additional 30 percent on top of the central IT budget. This, he advised me, represented a significant improvement, since his previous year's figure was 50 percent. 

Yikes.  What's this about?

Jim:  Rouge purchases of computer equipment, peripherals, software .. the usual IT assets.

What else?

Jim:  Our biggest leak is from developers that write applications outside our AD organization. You know, business types who write Microsoft Access or Java programs that connect to corporate data sources.

Inside hackers?

Jim:  Yup.

Doesn't this open you up to architectural and security issues?

Jim.  Yup.

So?

Jim:  Well, I can't say I blame them. They become impatient because IT lacks the resources to help them when they need it. So they do the work themselves or hire external contractors. 

I talked with another IT finance type who had some good advice for Jim.

Establish a mechanism for business units to provide emergency funding to IT. They get what they want, and IT can stay involved to manage the effort. It may be more efficient (since IT is trained to manage AD) and assures your security and architectural principles aren't compromised.

So, if you're one of those business people who believes IT costs too much, you're free to listen in on more of my conversations, but if this isn't practical:

Look into IT asset repositories or configuration management tools to increase financial visibility.

Implement time tracking for everyone in IT, not just project managers and developers.

Secretly listen in on telephone conversations from the business units to see if they are developing their own applications (get the NSA to help you if you're not sure about the secrecy part).