The true cost of IT needs to be demystified

‘Black Box of IT’ is a phrase bandied about with some relish by IT consultants and commentators for years now. This phrase, used by financial executives to describing the opaque and impenetrable nature of IT budgets is now a phrase so worn from use, it has become familiar. We can perhaps only really appreciate how unfortunate, unusual and absurd it is, if we were to substitute something other than ‘IT’ into the phrase.

Think, for a moment, of how strange it would be to hear CFOs despair of the ‘black box of logistics’, to hear COOs driven to distraction by the ‘black box of HR’, or to hear accountants losing patience with the ‘black box of expenses’. In today’s business environment, any senior executive making these claims would likely have their professionalism questioned. They sound even more unlikely if we imagine a budget that had to grow by 35% each year just to maintain the same level of service, as most IT departments’ experience.

Unexplained costs are an unacceptable drain on any business. However, in many ways IT has been excused as a mess because C-level managers are not often familiar with IT, and its intricacy cannot be so easily grasped by those not conversant in its terms.

The opacity of the ‘black box’ can be accounted for by the sheer technical brilliance (and attendant complexity) of today’s IT. But, this is not the main reason the black box concept exists. After all, plenty of specialities in business are complex and obscure, and take a great deal of study to master.

For IT professionals, cost management should be bread and butter but, for those without a method for IT costing in place, that’s not so easy. Cloud services in particular can be confusing – a subscription, licences and usage are all relatively easy to account for, but the networking, compute and security costs to support cloud infrastructure are more obscure, particularly if they are not running on physical infrastructure.

Just as we do not attempt to cost each thought of the lawyer, or each gear-change of the lorry driver, we do not need to account for each compute cycle or each virus repelled. Instead we can look at the goals the IT department is attempting to meet for the business, and the individual steps taken to achieve them. And, although the cost may be complex, once they have been understood and the means to collect data is firmly in place, accounting can actually be made more accurate than most other parts of the business.

A black box, therefore, is really a shameful metaphor for the financial opacity of the IT industry. IT professionals need a standardised accounting model in order to measure spend in a language the rest of the business can understand. Financial results that are universally understood can be benchmarked against rivals and worked on, to reduce costs and increase efficiency. Only then will IT’s black boxes become transparent profit centres.

Once the true cost of IT has been demystified for the business, many benefits can be realised. IT can notably have fact-based conversations with the business about the costs of the services they are providing and take the emotion out of the discussion, present the business with options for consideration, tied to cost, about adding new services or capabilities and give a better understanding of the value IT provides to the business as well as increased trust for the CIO. Understand this can also lead the business in supporting increased innovation and winning a larger budget for IT.