23 August 2012

IT is either a cost centre or provides business value - Binary Thinking Hex No. 6

Why has IT management become so cursed with Binary Thinking?

No. 6: IT is either a cost centre or provides business value


Binary Thinking: If the IT department is accounted for as a cost centre then stakeholders in the enterprise will be unable to appreciate what the IT team and its services can do for the enterprise and will not be able to exploit the opportunities IT provides for adding value to the business. Only by changing the accounting treatment of the IT department can its full value be realised.

Portfolio Insight: It is often convenient for a business to group some of its IT related costs in internal accounts and either write them off regularly or transfer them directly (or indirectly) to revenue earning operating units. This need have no impact on how IT services are organised or exploited. It is possible to conceive of an IT department which issues invoices to external customers and collects revenue but since this administrative change would have tax and accounting implications and would provide no tangible benefits to the organisation it is largely irrelevant and unlikely to ever be implemented.

Binary Thinking Hex No. 5

Binary Thinking Hex No. 7

Related blog post: Are you making a meal of your IT finances?

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