Full Cost: It's Time to Pay Attention

Most IT leaders don't have a clue how important their business and cost planning processes are.

April 30, 2007 — CIO —

I hope my regular readers will forgive me if I break stride this month. Instead of playing my usual role of curmudgeon—blasting buzzwords with reality like they're the king with no clothing—I want to share with you a term that should be a buzzword but isn't yet: full cost.

Boring, you say? Just accounting? Hah! That's the point of this month's column. The king with no clothing this month is IT leaders who are busy with ERP, ITIL, project management and SDLCs; but they don't have a clue how important their business and cost planning processes are.

Sorry. I don't mean to insult you personally. Not at all. Throughout the industry, these critical processes aren't being discussed nearly enough. There may not be much buzz around full cost, but there should be. Have a look at what's at stake....

A Quick Exercise
Try this quick exercise: Put a (mental) check alongside any of the following concerns—widespread among CIOs—that are of signficance to you and your organization:

Your budget is based on prior years or current staff rather than on the investment opportunities at hand, perhaps accompanied by mistrust in your budget submission.
You're expected to "do more with less," deliver unfunded mandates, "take it out of hide" and otherwise make time and money out of thin air.
Clients' expectations far exceed your available resources (demand management).
Clients like being involved in your portfolio management process but are frustrated with the lack of clarity on what things cost and what they can afford.
Clients feel that you cost too much, and perhaps are pursuing decentralization and outsourcing.
You are subjected to apples-to-oranges, unfair comparisons to outsourcing.
Clients complain about unfair allocations or pricing.
Clients attempt to micromanage you, opposing expenditures on things you know you need but they don't directly value (like account representatives, infrastructure and internal process improvements).
Governance processes are bureaucratic, expensive, slow and ineffective.
Your staff sacrifice critical sustenance activities, like training and client relations, in the futile attempt to satisfy unmitigated demand that's well beyond available resources.
Teamwork breaks down when internal "prime contractors" find that support staff have different priorities or lack resources.
Customer focus is muted when staff don't know what they're selling to whom, perhaps exacerbated by an impotent product/service catalog.
Your managers don't take responsibility for their businesses within the business, instead running to you for every little business decision.

If you really care about even one of these problems, you'd better pay attention to your business and cost planning processes. If a number of them ring true for you, be assured you're not alone. All these symptoms are, for the most part, caused by the processes by which you plan your business and your budget, allocations, and rates. In other words, they're all resource-related problems.