Business Tech: Money

Brother Can You Spare a Dime

The economy is recovering. That’s what I hear, anyway. I know enough unemployed people to make me sure that the definition of recovery has changed. It isn’t the only definition which is under revision. So, here are some things IT professionals need to know about money...

As we all know, internal meetings cost money because they require salaried — and sometimes consulting — butts to be in seats where they are not carrying out their primary roles. The assumed justification for any meeting is that the planning or discussion will save time at some other point, perhaps by avoiding duplicate efforts, or cross-purpose efforts. So, when management requires meeting before pre-budgeted money is spent on what it is budgeted for, it means that management feels that the lost productivity is warranted by the fear of overspending or misspending. More than ever before, your boss is under scrutiny when he spends.

For a comparatively few companies, this is not new. For most companies, it is a complete reversal of existing policy. So when we want to attend Spectrum, or other education events, we have more hurdles to leap. Likewise, if we want to provision a new server or add a new laptop, we are likely to see unusual levels of scrutiny. That’s how it affects us personally. Let’s talk about how it changes our job definition.

Money For Nothing

New income is not the only way to stretch a budget. Found money — money that is being spent inefficiently or for unneeded services — is another way for companies to stay economically competitive. For IT professionals, that means that Business Intelligence, asset audits, and monitoring systems are “money finding tools” for many businesses. Additionally, anti-theft measures, like RFID-ing materials and setting readers by every exit point, are as good as gold. There are a lot of IT projects which can more than pay for themselves in found money.

We need to bring these sort of topics forward to the upper ranks. Too many people think of IT as an expense department, but we provide value for that expense and, with projects like these, we are a margin-retention department. When people look at the Sales department, for example, there are certainly expenses. The offset is the value demonstration that Sales can produce — a list of orders. We need to think the same way in IT. What is our value demonstration?

I worked in one company where IT found significant mismanagement of finances by one executive. Another executive was called to task when IT proved that he had a staffer who was actively doing non-work Internet access for an average of forty hours a week. IT can make a difference in both productivity monitoring and fraud detection. That’s just two of the ways we can demonstrate value.

Pennies From Heaven

When I look at IT, I see a service business. Even when we are all staff and all of the work we do is internal. IT is generally run, like Payroll and HR for example, as a service business. This makes the transition from internal provider to external provider fairly smooth. As I like to point out during some of my training sessions, if you have data which has value to your customers, you have a possible professional service to offer. Say you are a shipping company and you do all the deliveries for a bank when it sends materials to its own branches. Now imagine if your company offered detailed records of all material transfers to the bank? You just became a third party inventory management company. Add a model usage program, and you can automate their re-ordering process. In two steps, IT moved the company from shipping specialists to shipping/inventory/purchasing specialists.

Even if these value-added services are sold cheaply, they bring in some pennies in a tough economy. Even if they are offered free as a form of customer retention, they provide a competitive edge and therefore, value.

Cent, Five Cent, Ten Cent, Dollar

There is more than small money at stake. When that shipping company adds enough services, it becomes a logistics company. When it expands its reach, for example by leveraging the Internet, it becomes a global logistics company. When IT facilitates these processes, we move from expanding the company’s scope to transforming it completely.

To give you a non-IT analogy: In China, export quotas were divvied up amongst certain factories. Some of those factory owners found that reselling their access to quota was more profitable than running a factory. They transformed their business from a physical goods manufacturing basis to an export facilitation basis. Management is more likely to see these opportunities if they know that they exist. Letting them know what we can do isn’t bragging, it’s good business.

Ten Cents a Dance

We think of a tough economy as a time for belt tightening and doing without. Sometimes it is a great time to expand your use of consulting help. If a project will save the company customers, improve your relationship with a vendor, or directly increase revenue, getting it done faster might justify bringing in a hired gun. The win-win for IT is that proving the need for consulting help and using it sparingly proves you are company-focused while using it extensively becomes the basis for justifying adding staff.

When you decide on consulting help, ask the cost-benefit questions of yourself before your bosses ask them. Can I peg the consulting cost to a specific benefit? Can I show a time savings by bringing in more help? Will this stop other projects from being delayed? Will extra hands allow us to make an otherwise impossible deadline?

Another reason for bringing in temporary help can they can make your permanent staff smarter? If this is your justification, make sure your staff wants to learn and your consultant is good at teaching. Remember that those of us who are getting taught generally see a value. Those who pay see two-part cost: training costs plus the cost of paying the employee or employees during training. Make sure you know how this additional person will prove enough value to cover both costs.

Can’t Buy Me Love

IT managers please note. If IT services are offered free to customers, insist that the value be treated as an inter-company transfer from Marketing or Sales. If they use the service you provide, they should — on paper — pay for it. Other departments do this all the time so their expenses are not exaggerated. Likewise, when you order a new desktop for Johnny in Billing, be sure the expense is recorded to Billing and not IT. If your Finance department will not support that, keep records yourself. When the owner/stockholders/bosses ask where the money went, it is handy to be able to show just how little of IT’s budget was spent on IT. It is especially handy if us IT people, the folks who make reports, can accurately present details on who spent what for which project or purpose.

Money is about income and outflow. Outflow becomes an accountability issue. When we don’t account for it, it becomes an “IT is costing too much issue.” I don’t mind getting a black eye for overspending if I’m the one overspending. It hurts twice as much when I get one for someone else’s actions. It hurts triple when I could have blocked it with one ledger sheet and didn’t take the time to defend myself.

While keeping better track won’t buy you love, it might buy you respect.

Featured:

Jan/Feb 2011