IT Heal Thyself

A McKinsey Quarter web exclusive for August is titled "Unraveling the Mystery of IT Costs," by Andrew M. Appel, Neeru Arora, and Raymnd Zenkich. The message is that the IT organization needs to make its costs transparent to its internal customers so they can make smarter decisions about how to use those services -- and so IT can fully recover what it spends.



But what are those costs? As the article states: "A large IT organization might support thousands of applications, dozens of physical sites, and tens of thousands of end users. Tracking all assets in use at any given time. . . is a major challenge."

But it's even more complex than the authors say. You also have to identify cost dependencies and maintain dependency relationships over time as things get shuffled around. That's why you would use budgeting applications specifically designed for that purpose. (See my Centage white paper for more on how to do this.) The authors are making the point that IT is like any business and IT services are like any other service -- you need to understand fully their cost components before you can market these products effectively. Okay, so why can't IT just apply the same solutions it would recommend for any business unit with complex and dynamic cost dependencies? What's the big deal?