Tag: economics
Monday, 12 December 2011
Too busy chopping wood to sharpen the axe
Posted by Simon Baker
The prevailing management (and financial) mindset in companies today is focused on efficiency, productivity, and costs. The primary concern is to maximize all assets and capabilities so that nothing sits idle. What this really means is keeping people working at 100% utilization.
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Friday, 18 November 2011
The (un)ethics of Big Vendor contracts with cost-driven companies
Posted by Simon Baker
Consider a company looking to procure external software services. This is a company that manages by objectives and spends time and effort micromanaging costs. In a typical procurement situation, probably a tender for services, their fixation on cost pushes them to select one of the cheaper quotes. This quote happens to be from Big Vendor who Procuring Company lock into a contract to deliver precisely the specification.
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Monday, 14 February 2011
Financing IT versus managing assets
Posted by Simon Baker
There's something smelly about financing IT projects in return for a contracted return on investment. It’s not that there shouldn't be some expectation about return. There absolutely should. But given the uncertainty and the risk, isn't financing IT projects more like a funding venture? Isn’t it more about managing risk to achieve reward (the desired outcome or better) rather than managing cost and schedule? If it is, then the question to be asked more often is: What types of benefits are we seeing for this round of funding, and does the potential return at this stage warrant additional funding? And not: Are we on schedule and within budget? In this case, the IT department needs to replace specifications and sign-offs with measurements of risks and outcomes.
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Monday, 7 February 2011
More meaningful accounting to visualize software economics for more informed decision-making
Posted by Simon Baker
In this article Ross Maynard says it’s unhelpful, even dangerous, to use the same methods to compile management and financial accounts. Regarding financial accounts he talks about matching accruals:
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Thursday, 3 February 2011
Track costs and benefits visibly together
Posted by Simon Baker
Have you noticed that costs and benefits are rarely seen together? I mean literally on the same page or board. Are we afraid of what the truth might tell us? I think this is the case when I've seen business sponsors protect initiatives dear to their heart. Also when product managers continue to add features to their product when user demand has already been satisfied. The blinkers are on. They pretend they can't see anything that might cause harm to their 'darlings'. If it can't be seen it doesn't exist, right?
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Thursday, 27 January 2011
Business cases are in the eye of the business sponsor
Posted by Simon Baker
Projects typically get funded based on their business cases. Business cases that seem to stack up on paper usually get budget. Business cases that don’t stack up are either rejected, because they’re clearly absurd, or, they do get budget because the business sponsor shouted loudest or had more political influence.
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Wednesday, 9 December 2009
Budgeting bunkum
Posted by Simon Baker
Despite the UK Government issuing it's new budget today - oh utter joy, btw - this post was motivated by IT budgeting experiences.
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Comments: 2
Wednesday, 21 October 2009
Product stream
Posted by Simon Baker
Think of a product stream as a small company working exclusively on a product and delivering features that excite users to maximize profit and growth. The stream invests in its relationship with users and is set up to compete on the basis of speed. It has everything it needs to conduct business, from concept to production to operational support, and unlike a project it persists as long as the product is in service. It includes a dedicated and diverse technical team that is actually part of the business and helps them use software more effectively. It self-organizes for optimum delivery and minimum risk, and produces flexible software that responds as the business learns from user and market feedback.
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Saturday, 19 April 2008
Where's the money?
Posted by Simon Baker
There's a company that makes shirts for men and women using one cloth-cutting machine and one sewing machine. The manufacturing sequence is the same. A single women's shirt is cut in 2 minutes, sewn in 15 minutes, requires fabric costing £45 and sells for £105. A single men' s shirt is cut in 10 minutes, sewn in 10 minutes, requires fabric costing £50 and sells for £100. The market's weekly demand is 120 women's shirts and 120 men's shirts.
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Comments: 1
Saturday, 5 April 2008
Create value by focusing on end-users
Posted by Simon Baker
What's valuable to a business? At the end of the day, the goal of every company is to make money. So, ultimately, a business values things that make it money. We should always do our utmost to deliver value to our business by giving it the things that will help it make money from its customers. But focusing directly on business value is not good idea. Making money is most definitely the goal but focus must be on the source of revenue - the customers or end-users. If a business focuses on the money it eventually does wrong by its customers and they go away and it makes less money.
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