AGILE IN ACTION

In the software world, budgets are mostly about headcount and capital expenditure. Headcount is managed by cost per unit, where a unit is a person considered to be more or less a uniform resource capable of producing fixed output. On a cost per unit basis maybe 100 people offshore are cheaper than 10 onshore. But in my experience, more people means more waste.

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.

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.

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:

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?

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.

Despite the UK Government issuing it's new budget today - oh utter joy, btw - this post was motivated by IT budgeting experiences.