Thursday, July 28, 2011

If you don't own it you can't be responsible for it...

I want to revisit a post that originally showed up in Australian Anthill a while back about technology ownership, responsibility and reporting.

The original post was entitled “Grab it all. Own it all. Keep it all.”

Since then I’ve done a lot of consulting to a lot of companies and I keep seeing the same mistake being made.

For all those Managing Directors, CEOs and Boards out there you need to read this and really digest it because your finance departments are leading you down the garden path.

Your ICT team must be treated as a business unit, just like any other operational unit otherwise you lose visibility and spend money like there’s no tomorrow. This is going to happen because your business units won’t be responsible for technology consumption. If you query them on it they’ll say its ITs fault, but, IT doesn’t actually have the visibility and clarity needed to be proactive because this has been buried in management fee this and administration fee that and shared services something else.

If you’re on a board and one of your accountants comes to you with a suggestion to bury clearly identifiable expenditure into administration fees or some sort of nebulous shared services model take him/her/it out the back and shoot them. These ideas are just bad news for a business.

When it comes to technology there is no such thing as shared to the point where you can’t identify the consumption by business unit/user/site and anyone who says otherwise is either deliberately burying the facts or is breathtakingly ignorant of the capability of technology today.

This has come up because of the time I’ve been spending in Brisbane dealing with a client who is moving to a Windows monculture on the recommendation of their Group Financial Controller. As part of her ‘transformative technology strategy’ she’s also moved away from a user pays cost allocation methodology to a shared services/administration fee cost allocation methodology. Her rationale is that there is little difference if cost is allocated by percentage of revenue rather than by actual consumption.

Accounting doublespeak, smoke and mirrors. Its really all about reducing reporting on something that isn't seen by the Financial Controller as really important to the business. The company used a Voice over IP phone system so the data lines that were moved into corporate charges were actually the phone lines for the various business units.

With one magical flourish of a quill, whole divisions had direct costs eliminated from above the EBIT line.

Suddenly financial results looked better than they really were. Bonuses would be paid on patently false results and for the IT team, they would watch as the company slowly sank into the mire of self-congratulatory oblivion.

I’ll have more on this one soon because the turn of events at this company makes this a really compelling story.

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