Manage the costs, before they manage you
But it might contain some pieces of information that might come handy to more than few CxO ‘s right now. Especially if the said CxO ‘sare given the responsibility to “own” the IT landscape in some medium or large organization. Approx 50 seats onward, complexity depending.
In this context, and perhaps because of this post, I might be called a bit of a pessimist., which is calling himself a realist.
Side note: Perhaps looking for good copy/paste opportunity? Click here for your required dose.
When IT Really hits
Therefore, I am talking to you the CTO or CIO. Basically IT is absolutely necessary and IT is not cheap. My first little advice? Be sure you know what you own. Where is the end of your IT kingdom. Basically it is not possible, not to own “something” tangible that is not IT related and is the business asset. So yes, you “own” it all. Problems including.
Modern, virtual business? Even if your clever IT management model has provided completely virtual medium sized business (aka SMB1 ),that actually works (which is very unlikely), someone has to own the licensees, take care of IT Services, SLA’s and procedures in place, implement and plan the compliance (which costs money) , and so on and on.
The table bellow is not about that . It is about enterprise with underlying big expensive IT. IT that is as big as it can get in the context of “everything IT” that one large corporation will have in place. Corporation that (as any other corporation today) uses combination of in-house developed and external IT solutions.
Combination of legacy and new. Combination of (usually) older on-premises IT, and brand new, private or hybrid Cloud IT.
That is the landscape you own.
Through the life cycle of every modern corporation a lot of these new/old combinations have been left around as results of many past socio-techno-political compromises. Therefore, now you might be inheriting the whole minefield of them. Expensive “mission critical solutions” combining old and new. Coexisting in precarious IT balance, that has to be “pruned and grafted” and “watered regularly” just like some orchard which must never stop yielding the fruit. Because “everything” depends on it.
To clarify the economy context I have developed a little table. Columns are stages in the lifetime of the IT solution. Rows are IT context. This same table can be applied to a single project or to a whole of IT you are responsible for.
And each cell in this table means real money. Capital + Operational Expenditure that activity in each of them cells will incur in reality.
For example :”Testing/Infrastructure” cell means new infrastructure has been procured (CAPEX) and now the team made and deployed for that purpose, is going to formally test it (OPEX).
As we said already columns in this table do represent procedural steps of (large organization) IT services. From Development to “Recovery Position”. Which is separate data center where redundant copy of the primary data center is gathering dust and waiting for the primary to go out of service for whichever reason. Yes, there are some clever solutions which can avoid this “dust gathering”. Dreaded by your CFO. But. Company board has not made up their collective mind yet when and how to implement that fundamental change. So “tick,tick,tick” all the three cells in that column are added to the costs.
Not every cell in the table will be significant in each cycle, for each and every IT related project activity. Neither every project will have IT requirements that will cover all this columns and rows. But whenever and wherever any of these cells comes into existence be prepared to see it clearly and to act.
Do not just take the global “board room” view on your IT costs. Each of these cells can “explode from zero”, if not managed on time. You are not the luckiest CTO/CIO that ever was, thus you “own” the divine right to oversee the full set of 18 of these cells. On the company level. I have just formalized it for you so you can juggle with all the 18 balls in the air.
For the key terminology you might feel well educated bu tneverthelsess I have prepared that too. For basic explanation on key terminology please follow the links bellow.
- C = CAPEX
- O = OPEX
- R = REVEX
- money that a company spends on activities that are directly related to making sales in a particular period.
- This might be called “marketing” but every marketing campaign does require some IT resources, these days.