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Fairy tales in IT – and why everyone needs to be wary of them

Fairy tales in IT – and why everyone needs to be wary of them

Fairy tales in IT

There’s a very human tendency to believe what suits us. Unfortunately, that is not a good way to make business decisions.

Over the years I’ve seen IT decisions made on incomplete or skewed information. There are many reasons why, some valid (considered risk) and some not so much.

Decisions should be made on cold, hard facts. Having said that, I am fully aware that it is not always easy to do:

  • First of all you need accurate metrics.
  • You have to trust that the information is complete.
  • You have to believe your team is not giving you information they think you’ll like.
  • And you can’t get distracted by shiny toys as you make decisions.

Here’s an example of what can happen.

Suppose the chief financial officer (CFO) wants to outsource a company’s payroll services. The CFO asks for a report on what payroll services cost, and is told it’s $X. The company gets a quote from an outside provider which suggests they can handle payroll for 25% less ($X minus 25%). The company does the outsourcing, but a year later the CFO discovers it’s not seeing any cost savings in the finance department where payroll is one of several key business services.

Why?

It turns out that $X was not an accurate figure;  $X didn’t take into account that the people doing the payroll work had other duties that could not be outsourced nor consolidated significantly. Employee costs didn’t change.

The biggest cost in most businesses is HR, if you can’t break that down how can you hope to know if you’ll benefit from outsourcing what your people do?

It’s not that anyone was trying to mislead or misrepresent; it’s that the people who compiled the figure did not have all the information and made assumptions. Payroll cost $x was a fairy tale that everyone took at face value.

Assumptions and metrics are words that can’t co-exist with equal weight in a sound business case. Assumptions must be reduced as much as possible if you want the outcome to match your forecast.

When the outside provider bid on the work at what looked like $X minus 25%, management did not question the $X figure. That’s because they were blinded by the apparent costs savings.

There are all sorts of fairy tales out there. Management is told, for example, that outsourcing saves money. (It doesn’t always; see my blog from two weeks ago). Or that moving everything to the Cloud will solve 90% of IT’s budget problems.  Those things may or may not be true.

The only way to distinguish fact from fantasy is through complete and accurate metrics.

If, for example, you have a multi-year software agreement that’s based on how many unique end users there are, your company isn’t going to save significant money by moving the physical servers that host that software to the Cloud.  The costs are in the licensing model, you’d save much more if you look at concurrent use licensing.

Don’t be taken in by figures that seem to fit your plan.  The devil is in the details.

Everyone in IT, at all levels, needs to work hard at due diligence and get complete and accurate metrics before making a decision. Frontline resources need to go as far as they can go and report to management where they had to make assumptions.  Those assumptions can blur facts to the point where you may be better off with status quo until you can figure out a way to reduce the assumptions significantly.

Back to the topic of shiny toys distracting you from metric based decision making… if you’re going to get sucked in, make sure it’s a diamond and not cubic zirconia.

 

Susan Odle - COO, RAPA

Susan Odle is chief executive officer at RAPA. She has been in enterprise IT for over two decades, is ITIL V3.5 certified, enjoys anything outdoors with family and music (playing, singing and listening)..

Picture by Artiom Ponkratenko