In my previous post I explored the crucial business need for supplier and support provider transparency and began the tale of a small business owner I had met, for whom this certainly wasn’t the case…
So as I had promised, I drove out to George’s offices near Parramatta in Sydney.
He asked me to come out about an hour before the others were due so that I could look around and ask any questions I needed to ask.
The business was an import/distribution operation with a reasonable turnover and after a look around I sat down with him and asked what he’d spent on technology during the past twelve months: I kind of expected the answer I got which was, “We think it’s around $450,000, give or take a little.”
So I asked, “What comprises this number? To be honest, this sounds a little light based on what I’ve seen around the place.”
George called in one of his beanies and got him to go through the details.
As he worked his way through the figures, I could see that a lot of the costs that I would consider to be technology related were seen as operating or finance costs and weren’t being included. Once we added all of them back, even allowing for the fact that the beanie didn’t agree with the reclassification of the expenses, we came up with a total of nearly $800,000.
George nearly fell off his chair. And the beanie began to turn an unexpected, if improbable, fire engine red — with gloss finish!
He coughed, spluttered, back-pedalled and delivered amazing excuses: Credit this, debit that, liability something else, below the EBIT line over there, management fees somewhere else, intercompany loans and so on.
I could see George starting to waver so I asked a very simple question to by-pass the jargon and drivel and get us back to the point of the discussion:
“How much did overall, aggregated technology expenses affect your Profit and Loss for the last twelve months.”
George turned to the beanie and just looked at him, waiting. Finally, the answer came back. “About eight hundred thousand.”
I turned to George and said, “That’s the number you need to reduce and if your support guy and your vendor don’t want to help you achieve that, then get rid of them and get someone who will.”
George was pretty shocked at this point. Technology costs were buried in various operational and sales budgets, and lumped into categories that (strictly speaking) were correct, but, didn’t help the business see clearly what it was spending.
I said to George, “You need to get that number down by about $350,000 over the next twelve months. Now you might not get there, but you need to have a budgetary target that you’re all working towards. So who manages technology for you internally?”
George turned and looked at the beanie again.
I nodded slowly and asked, “Did you hire him to be a finance guy or a technology guy?”
“Finance, why?” he replied.
“You wouldn’t hire a blacksmith to do joinery, so why hire an accountant to do technology?”
Just then George’s phone rang. It was the support guy and the reseller. The preliminaries were over, it was time for the main event.
George said, “We’ll meet with them in the Board Room.”
The 1% Spend is written by a prominent Australian I.T. consultant who is choosing to remain anonymous (and candid).
Illustration: Mike “Dakinewavamon” Kline