August Editorial Calendar
Blame it on August. It was that time of the year back before the bust, when every IT news rag was on to the annual IT productivity paradox. Pages and pages appeared on how investments in new technology was not delivering the promised productivity. This was the very thing that had Joe Spath in an uproar.
Yeah, he had the same intuitive feelings for years. His IT investments were not paying off. He figured it was some kind of accounting anomaly, so he spent some time going to intellectual capital conferences and trying to deal with all that hidden value in his corporation that couldn't be uncovered until a valuation. Those valuations were never done until the corporation was sold.
So he took on the mantle of the Counter of Invisible Beans. He wasn't joking. How many accountants did he meet over his career in accountancy that were in denial about accounting being an abstraction. No, accounting was the only thing that was real. Where the real diverged from the books, the books were right, real was wrong.
Brrring! Brrring! Oh, no, the last thing Spath needed as another phone call about his memo threatening to fire anyone caught reading on the job.
"Braticactor, LLC, Spath speaking?"
"Well, no, I wasn't looking for any help catching people reading. But, ah, thanks for your diligence in regards to this matter."
Anyway, yeah, the past day and a half have been a living hell. Readers of all types and stripes were calling about clarification or complaint. They found it unbelievable. Well, so had Spath.
Back in 1998, the Total Cost of Ownership (TCO) was conceptualized as a benchmark against which IT investment could be compared. It was a consulting methodology that would grow over the years to incorporate a few more concepts like the Time To Return (TTR). There were two parts to the TCO: first there was an activity-based costing allocation of application related costs, second there was the infrastructural multiple. The costs included business administration costs, system administration costs, and use costs. I've forgotten some of the cost categories here. Sorry about that. The big picture was, however, that use costs included negative use costs, as in the non-productive use or the salary contribution for the time spent doing things other than the real work the application was intended for, and positive use costs, as in the productive use or the salary contribution for the time spent doing the real work the application was intended for. Positive use costs came in around 18% for the first year's use of the application. The infrastructural multiple was all the fixed IT costs associated with keeping the application running as a multiple of the cost of the application. In 1989, this number was 2x. So if the application cost $600, you'd be paying $1200 to keep it running, and you'd expect an ROI of less than 9%. The ROI was the positive use cost divided by the infrastructural multiple.
In 2000, the infrastructural multiple was 6x. This before Bluetooth and Wifi, so you can imagine where the costs went by now. The cost allocations turned out to be somewhat intractable, so it was still 18%. Vendors pushed more costs off on customers. And, vendors went with the enterprise pricing model, and from there to the CxO sales model, so prices were through the roof. So the applications cost was above $2000, you were paying $12,000 to keep the application running, and your ROI was under 3%.
These ROI numbers were optimistic and required perfect implementation. How often does perfect implementation happen?
The final construction of the TCO omitted reading, self-support, and desktop training as costs allocated to application costs. Why? Well, because nobody ever tracked these costs. I've worked in one place that made you allocate your negative and positive use costs. But, these were weekly summary type numbers, not a lot of resolution.
Spath knew he could hardly fire anyone for reading. They'd have his job just for suggesting this. Spath's only hope was to hang on long enough that the bottom line would be affected. If he could point to some explicit productivity gain, then he might still be around next year. Of course, other people would claim the gain for their projects. They were explicit. He was implicit. But, somebody had to draw attention to this devious problem. At least, his wife was sympathetic.
Brrring! Brrring!
"Braticactor, LLC, Spath speaking?"
Yeah, he had the same intuitive feelings for years. His IT investments were not paying off. He figured it was some kind of accounting anomaly, so he spent some time going to intellectual capital conferences and trying to deal with all that hidden value in his corporation that couldn't be uncovered until a valuation. Those valuations were never done until the corporation was sold.
So he took on the mantle of the Counter of Invisible Beans. He wasn't joking. How many accountants did he meet over his career in accountancy that were in denial about accounting being an abstraction. No, accounting was the only thing that was real. Where the real diverged from the books, the books were right, real was wrong.
Brrring! Brrring! Oh, no, the last thing Spath needed as another phone call about his memo threatening to fire anyone caught reading on the job.
"Braticactor, LLC, Spath speaking?"
"Well, no, I wasn't looking for any help catching people reading. But, ah, thanks for your diligence in regards to this matter."
Anyway, yeah, the past day and a half have been a living hell. Readers of all types and stripes were calling about clarification or complaint. They found it unbelievable. Well, so had Spath.
Back in 1998, the Total Cost of Ownership (TCO) was conceptualized as a benchmark against which IT investment could be compared. It was a consulting methodology that would grow over the years to incorporate a few more concepts like the Time To Return (TTR). There were two parts to the TCO: first there was an activity-based costing allocation of application related costs, second there was the infrastructural multiple. The costs included business administration costs, system administration costs, and use costs. I've forgotten some of the cost categories here. Sorry about that. The big picture was, however, that use costs included negative use costs, as in the non-productive use or the salary contribution for the time spent doing things other than the real work the application was intended for, and positive use costs, as in the productive use or the salary contribution for the time spent doing the real work the application was intended for. Positive use costs came in around 18% for the first year's use of the application. The infrastructural multiple was all the fixed IT costs associated with keeping the application running as a multiple of the cost of the application. In 1989, this number was 2x. So if the application cost $600, you'd be paying $1200 to keep it running, and you'd expect an ROI of less than 9%. The ROI was the positive use cost divided by the infrastructural multiple.
In 2000, the infrastructural multiple was 6x. This before Bluetooth and Wifi, so you can imagine where the costs went by now. The cost allocations turned out to be somewhat intractable, so it was still 18%. Vendors pushed more costs off on customers. And, vendors went with the enterprise pricing model, and from there to the CxO sales model, so prices were through the roof. So the applications cost was above $2000, you were paying $12,000 to keep the application running, and your ROI was under 3%.
These ROI numbers were optimistic and required perfect implementation. How often does perfect implementation happen?
The final construction of the TCO omitted reading, self-support, and desktop training as costs allocated to application costs. Why? Well, because nobody ever tracked these costs. I've worked in one place that made you allocate your negative and positive use costs. But, these were weekly summary type numbers, not a lot of resolution.
Spath knew he could hardly fire anyone for reading. They'd have his job just for suggesting this. Spath's only hope was to hang on long enough that the bottom line would be affected. If he could point to some explicit productivity gain, then he might still be around next year. Of course, other people would claim the gain for their projects. They were explicit. He was implicit. But, somebody had to draw attention to this devious problem. At least, his wife was sympathetic.
Brrring! Brrring!
"Braticactor, LLC, Spath speaking?"
posted by Dave at 1:43 PM
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