[HN Gopher] If you want to transform IT, start with finance
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If you want to transform IT, start with finance
Author : feross
Score : 94 points
Date : 2021-07-13 19:32 UTC (3 hours ago)
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| rdxm wrote:
| Tried to plant this seed ~3 years ago at a large defense
| contractor. They were frustrated by the fact they weren't getting
| the velocity out of gov cloud they expected. my response was:
| "you literally applied the same procurement / process model to GC
| that you had for on-prem, wtf did you expect?!?"
|
| I called my pitch: "AdminOps", basically the message was the
| finance/biz side of the house needed the same type of
| transformative event engineering got with devops.
|
| They are still slow....go figure. Enterprises gonna
| Enterprise....
| nhoughto wrote:
| Seems very familiar.
|
| Its not that finance get things done, its that they can prevent
| things being done entirely, or reduce funding/investment to the
| point they naturally peter out.
| kingrazor wrote:
| The stages mentioned in this article are exactly what the company
| I last worked for went through. Inevitably they lost customers to
| other products with faster release cycles. The company is still
| limping along but at a fraction of their former revenue. It's
| sad, really.
| yardie wrote:
| From an operational view finance and IT are more aligned than
| they are not. Finance is all about cash flow; where it's coming
| from and where it's going. And IT is all about data flow; where
| is good data coming from, what is it doing, where is it going. In
| my experience in IT most of the infosec applies broadly to the
| organization it's especially the case when working with sensitive
| financial information.
|
| Also, because of recent ransomware attacks I've been given
| (almost) carte blanche to secure our network and operational
| infrastructure with a special focus on finance, because the spice
| must flow.
| tmitchel2 wrote:
| Last part made me chuckle
| landryraccoon wrote:
| I'm seriously stumbling over the description of phases I and II.
| Wait, this is a startup that doesn't have a strong product vision
| from day 1 and isn't aggressively iterating to find product
| market fit?
|
| Here's a tell tale sign that you have product market fit - your
| product is buggy and sucks and your customers constantly complain
| and demand more improvement but they can't give you up. They need
| to pay you because you serve a need they can't or wont find
| somewhere else.
|
| The customer needs a bespoke feature that really only they will
| use and isn't general to anyone else? Is the founder team
| disciplined enough to say no and focus on what really adds value?
| Sure, they would love for you to be a cheap outsourced dev shop,
| but that's why your CEO needs to push back and sell the vision of
| the company.
|
| Phases 1, 2 and 3 are backwards. Why is the startup trying to be
| a consulting company? This doesn't sound like the story of any
| visionary startup I know of. It sounds like a group of developers
| who can make a profitable software consulting company trying to
| pivot to making a product. IMHO a startup can be really
| dysfunctional in its dev process and management and still
| succeed, if they find product market fit first.
| hyperpape wrote:
| He says this is common to pre-SaaS companies. So he's mostly
| describing companies started at least a decade ago, perhaps two
| or three.
|
| However, the problems he describes can easily affect enterprise
| SaaS companies in a niche. If your market literally has a few
| thousand potential customers, you could end up in a situation
| where onboarding a big new customer is a double-digit
| percentage of your current revenue. At that point, it doesn't
| matter if you're a SaaS or not, you're gonna feel the pressure
| to do things for the sake of them.
| clipradiowallet wrote:
| Finance is an _excellent_ place to start. It 's very common for
| IT directors to report to the CFO - not the CIO or CTO, but the
| chief _financial_ officer. CFO 's are (ideally) great at saving
| money, and it's likely they will begin to do so by pinching
| pennies within IT. Think about that - someone who has an entire
| career around a specific discipline(finance) directly governing
| another discipline(IT). They cannot hope to make informed
| decisions based on the current state of the industry unless they
| are neglecting their primary responsibility of finance.
|
| tldr; yes, "starting with finance" is a good way to transform IT.
| shoto_io wrote:
| In my experience it's a bit more nuanced than that.
|
| My experience is that IT and finance people simply have a very
| difficult time communicating with each other properly. They are
| different type of people and speak different languages.
|
| A CFO will be very open to invest if he's convinced that there
| is a clear return on invest. Many IT folks don't want to
| bothered thinking from that perspective.
|
| If you want to have an easy life learn how to speak with your
| board, especially the CFO.
|
| PS: that's one of the core reasons some IT guys get management
| consultants to do the translation job.
| mistrial9 wrote:
| security; worker health & safety; responsible waste disposal,
| etc... are inevitably costs through the lens of a quarterly
| financial summary.
| ajsnigrutin wrote:
| IT is just a cost... it doesn't create anything, doesn't
| produce anything, ROI is zero...
|
| ...but without IT, everything else stops, and usually people
| think about that only when IT departments get so "skinny", that
| things fail... and then they get blamed for that too.
| landryraccoon wrote:
| No company where the core product is technology should have an
| engineering team that reports to the CFO.
|
| At a bank or in retail sure, it may make sense for IT to report
| to the CFO. At a healthcare proivder or insurance company, ok
| sure that makes sense. In that case, IT is really just another
| part of the plumbing because the core product isn't really
| technology anyway. The blog post is moot because the technology
| itself will have a minimal impact on the value added by the
| company, which is elsewhere, and nobody in IT is likely to have
| a seat at the product discussion table anyway.
|
| But at a technology company? One where the core value add is
| software products or services or hardware? I don't believe it.
| I simply don't think that any company that places management of
| technology based core value added products under the CFO can
| succeed. If there happens to be some company out there that has
| this structure, I'd treat them as having a big target on their
| back - they're ripe for disruption by a company where
| technology leads.
| markus_zhang wrote:
| I think it's usually the other way around. Bean counters drive
| IT professionals around.
| EvanAnderson wrote:
| IT reporting to a CFO or a comptroller has been common in my
| experience.
|
| Understanding the language and process of basic bookkeeping and
| simple accounting has given me me immense traction with finance
| people. When I demonstrate even a rudimentary understanding of
| the metrics and reports finance uses (understanding what
| financial statements communicate, tax ramifications of CapEx vs
| OpEx, cost of money, etc) the trust level and willingness to
| listen goes up tremendously. Stand-offish and distant
| relationships became more concrete and productive when finance
| people realize I'm not spouting techno-bullshit for bullshit's
| (or techno's) sake.
|
| Anybody with serious IT management aspirations in the private
| sector really should have a reasonable amount of business
| knowledge. An IT operation, both the in-house and contracted
| services components, should be considered an internal business
| unit. It should be evaluated on the expenses it charges-back to
| the revenue-generating business units, and on the gains in
| revenue it creates by driving efficiency. Knowing the metrics
| that finance will use to evaluate an IT operation allows you to
| make a case for improving those metrics.
| jjeaff wrote:
| That doesn't make any sense at all. What is the thought process
| behind putting IT under finance? Seems like if you don't have a
| cto or cio then reporting to a coo or even ceo makes more sense
| than cfo.
| austincheney wrote:
| IT is a cost center and very expensive.
| xxpor wrote:
| This is fundamentally what Europe especially and some non-
| tech large US firms don't get.
|
| Repeat after me: software development *is not* IT.
|
| IT is the department that hands out laptops and buys office
| licenses from MS.
|
| Software Engineering is a product development group.
|
| They're two entirely different functions.
|
| IT can make sense to have under the CFO, but product
| development almost never does.
| walshemj wrote:
| Not everyone makes that hard distinction
| 908B64B197 wrote:
| > IT can make sense to have under the CFO, but product
| development almost never does.
|
| Just get a CTO.
|
| But seriously, it's always hilarious to listen to non-
| tech companies pitch how they can pivot to becoming a
| "tech company just like Google" while following none of
| the practices in SV. Developers still working for "IT",
| cost cutting and penny pinching. No free food of
| course...
| fallingknife wrote:
| C_O's are expensive.
| orev wrote:
| That's only if you take a naive view of IT (which most
| people do because it's the lazy approach). Laptops,
| servers, networks, email boxes, etc. should all be charged
| back to the departments those are actually being provided
| to. When you do that, suddenly IT is making a lot of
| (internal) money, and the business can see where the costs
| _actually_ are.
|
| IT is also not nearly as expensive as other types of
| businesses that require huge capital investment, like
| farming equipment, factory assembly lines, biotech
| reactors, etc.
| mason55 wrote:
| IMO, if you're going to charge everything back to the
| business units then you also need to provide some kind of
| consulting-style services, or best practices, or
| guidebooks, or something.
|
| Otherwise you lose a lot of your economies of scale
| because each business unit is trying to figure out the
| best way to do things. Or you end up with shadow IT all
| over the place because the BUs come up with cheaper but
| unsanctioned/unsupported ways to do things.
|
| You also need a way to objectively evaluate how IT is
| performing. If the business units are going to third
| parties because IT is unresponsive or overly "expensive"
| then the exec team needs a way to see that. When IT is
| responsible for the IT budget then they have incentive to
| minimize costs and it's easy to do budget reviews. When
| the business units have to pay that budget then IT acts
| as a monopoly with little incentive to improve service or
| reduce prices and it's much harder to find the shadow IT
| that's being implemented to get around bad internal IT.
|
| There's no one perfect answer.
| tomnipotent wrote:
| > should all be charged back to the departments
|
| I had this fight with my last CEO. She put anything tech-
| related under my budget. Worked with accounting to show
| what the budget would look like if expenses were
| correctly attributed, and suddenly I wasn't spending so
| much money anymore.
|
| Reason she didn't want to change it? So they didn't have
| to explain why expenses changed so much quarter-to-
| quarter during the next board meeting.
| maverick-iceman wrote:
| > Reason she didn't want to change it? So they didn't
| have to explain why expenses changed so much quarter-to-
| quarter during the next board meeting.
|
| Seems like a win-win. Now she knows the reality of the
| enterprise and is okay with the expenses but she feels
| that investors would be bothered by it, so better avoid
| changing anything in order to avoid having to answer
| their questions
| 908B64B197 wrote:
| > Laptops, servers, networks, email boxes, etc. should
| all be charged back to the departments those are actually
| being provided to
|
| Wait there are companies that don't do that?
| papandada wrote:
| This is just a guess, but for some companies at some point in
| their lifespan, finance and IT were the people who sat at
| computers all day.
| Spooky23 wrote:
| Cash is ultimately truth in the business. You can bullshit
| people night and day, but the bank account doesn't lie.
|
| In my experience as an IT person, IT people are almost always
| full of shit when they talk money or roi. Usually when you
| think the tech team has their money story together, it's
| because they are growing and you can hide mistakes in growth.
|
| Once growth slows, you realize there's some dude making $250k
| and nobody knows what he does. Or that you're paying
| $1M/month for AWS charges that you cannot track back to
| revenue. Or that you're running a data center that full of
| end of life equipment that isn't used or brand new equipment
| that was never commissioned. So the CEO brings in the bean
| counters to rein in the nonsense.
| tomnipotent wrote:
| > Usually when you think the tech team has their money
| story together, it's because they are growing and you can
| hide mistakes in growth.
|
| Great insight, and mirrors my own experience a lot.
|
| > you realize there's some dude making $250k and nobody
| knows what he does
|
| I've been through this situation several times as a CTO.
| CEO's can come off as Jekyll and Hyde, one day shouting at
| you to hire, hire, hire and then giving you flak about
| those same hires when things don't go as planned.
| walshemj wrote:
| So just because you know how to count the $ does not mean
| you know or are competent to decide how it is deployed or
| see the bigger picture.
| Spooky23 wrote:
| Agreed, and actually many times the money people are
| complete idiots.
|
| But if you're not growing, the obvious way to make more
| money is to spend less. Many companies get away with this
| for decades.
| rodgerd wrote:
| > roi
|
| ROI and it's cousin TCO _should_ be useful terms, but it 's
| been so twisted and bastardised that it's basically a
| useless metric. Everyone has some bullshit story that shows
| that if you give them millions now they'll deliver a lower
| ROI or TCO.
| SimianSci wrote:
| IT can be a money sink for finance, under the wrong
| direction.
|
| I joined a firm recovering from this very problem. The
| previous IT director spent wildly and justified every
| purchase to finance who trusted their judgement. When the
| bills finally came due it almost put the firm under and the
| IT director left.
| slt2021 wrote:
| IT and Finance report to CEO. If you have clueless boomer CEO who
| doesnt understand what is digital transformation, then nothing
| will help
| acdha wrote:
| If the CEO doesn't listen to anyone who works for them, you're
| going to have many problems. If not, you might want to work on
| your communications strategy: in particular, ask whether the
| problem is that you failed to communicate the business benefits
| from a proposed modernization plan or are just repeating
| consultant babble.
| endymi0n wrote:
| Oh god, no.
|
| Finance itself is the worst place to get anything done, since
| their view is almost always a reactive one.
|
| When accounting and controlling are done setting up their cost
| centers, the most logical place from their view would be to fire
| all developers and double the sales team, as that's where the
| money is made.
|
| Risky and unproven new projects with unclear (but potentially
| massive) returns or indirect relations like production engineers
| increasing the productivity of application engineers through
| automation do simply not exist in that world.
|
| Finance is ultimately a completely soulless place that -- just
| like technology-centered nerds -- should defer to a CEO who puts
| all the pieces together into a coherent vision, ruthlessly chases
| product-market fit and a profit-first (but NOT profit-only or
| self-cannibalizing) approach and thus injects business sense into
| all players in their company.
|
| And that includes the finance department, of which I've certainly
| seen some of the most stupid ideas. Like software
| capitalization/activation that did made sense for converting opex
| to capex in the GAAP sheets, but in the end drove all the best
| engineers away because of all the mindless paperwork. Just one of
| many examples.
|
| Finance isn't any more intelligent than the other players in the
| company.
| andrewlgood wrote:
| Full disclosure, I am a CFO and have spent much of my career in
| Finance. I have never worked in a place where I or anyone else
| there thought Finance is "any more intelligent than the other
| players in the company."
|
| This article is disappointing in that it gives the impression
| that one department makes or breaks a company. To be clear,
| there are poorly run Finance organizations in the world and
| they can make the culture at a company less than fun. There are
| also poorly run IT organizations (to include product
| development) that can ruin a company culture. Even ones run by
| a CTO that reports to the CEO.
|
| I have also never seen a company where the CFO does not
| ultimately report to the CEO. I have seen companies where the
| CFO reports to a Chief Administrative Officer (CAO) who reports
| to the CEO. I completely agree that the CEO ultimately sets the
| vision of the company and hires the executive team to deliver
| on it. That being said, a CEO is not Superman/Superwoman. They
| need a team surrounding them to deliver what you expect.
|
| What the article could have emphasized is how software
| engineers can work with the Finance team to better describe
| investment opportunities like hiring production engineers to
| increase the productivity of application engineers. Yes,
| investment opportunities ultimately need to generate more cash
| returns than the investment. This may require serious thought
| around the benefits from increased software quality, faster
| cycle times, increased cybersecurity etc. Importantly the
| analyses do not have to be decimal level precise. But, if you
| cannot describe how your investment opportunity ultimately
| creates more cash flow than the investment required, your
| opportunity will likely not be funded.
| rootsudo wrote:
| I disagree, if you're able to understand and do a projection,
| forecast, risk analysis, sunk cost analysis you can easily get
| finance on your side.
|
| The issue is that IT/tech does not know business key words or
| excel spreadsheets, and finance does not know tech. Nowadays
| it's getting blurred with data scientsts and excel crunchers
| that can do a mean macro (and know more than Vlookup!)
|
| Finance people love automation. Finance people love excel.
| Finance people understand sunk cost fallacy. Finance people
| understand change. Finance people need help to embrace change,
| to guide decisions and make sure it's the right "tech" for the
| company.
|
| Many times the right tech is O365/Sharepoint/Flow automation,
| or nintex. Yeah, but
|
| it is not souless, it guides the entire company, it ist he
| company pursestrings.
|
| Get them on your side, understand how to read a P/L sheet, what
| FPA does and you'll not only earn respect, you'll have your
| name said at all the exec/leaderships meetings and you'll be
| loved.
|
| That's what I do in companies (consulting, self run) and w/o a
| good background in finance, and tech I wouldn't be where I am
| today (major in stats, tech was hobby, stats/math is everything
| etc.)
|
| So I fully disagree 100%. You had it so close with SAAS and
| capex vs opex, but you missed it. But yes it does move expenses
| around and opex is easier to navigage then a full sunk cost
| capex.
| erdos4d wrote:
| I read this comment and I feel dumber.
| clncy wrote:
| Spot in with the automation! Too often people rush to build a
| new system without thinking first about the systems and
| processes that already exist.
| planet-and-halo wrote:
| This is something I've been interested in for a while. Do you
| think it's worth getting an MBA or some other financial
| degree if you're already in the workforce, or can you learn
| enough on the fly?
| andrewlgood wrote:
| I do not recommend getting an MBA or some other financial
| degree. Rootsudo's response is excellent. There are
| actually very few financial concepts involved these types
| of analyses (e.g. discounted cash flows, IRR, and NPV).
|
| IMHO, the best thing you can do is work with someone in
| your FP&A (Financial Planning & Analysis) group discuss
| your investment idea and why you think it is a good idea.
| If they are a decent analyst, they will help build a model
| to describe financially your investment opportunity. This
| is what they live for.
| syshum wrote:
| CFO's makes the worst CEO's for a reason.... This has been true
| for all of time, if you work for a company that has a CEO that
| spent their entire career in Finance... RUN
| 908B64B197 wrote:
| > When accounting and controlling are done setting up their
| cost centers, the most logical place from their view would be
| to fire all developers and double the sales team, as that's
| where the money is made.
|
| That's great for long term shorts.
| endymi0n wrote:
| Well it _is_ a common trick for "making the bride pretty" or
| for short-term incentivized CEOs:
|
| You know you've got a top notch DevSecOps team for example if
| everything is smooth, calm and boring -- because most issues
| are automated away. That's exactly the point when you know
| you can safely fire that expensive team, because it'll
| usually take a few years until the automation surplus has
| been exhausted and then a few more until the starting chaos
| has propagated into actual outside-visible incidents.
|
| Makes for a great bottom-line at approximately the end of
| shares vesting.
|
| You didn't get that pro-tip from me.
| avmich wrote:
| > And that includes the finance department, of which I've
| certainly seen some of the most stupid ideas.
|
| I've heard some tales about a town in Michigan - let's call it
| Flint - where water was distributed using some older provider,
| while some newer company existed which charged less. A newly
| hired CFO decided, logically, to save some funds by going to
| the cheaper one. CFO didn't know that pipes in the town were
| made in the old fashion (lead metal?) and the new company,
| which used iron pipes, used some chemicals in water which
| helped to keep pipes clean. This chemical wasn't used by the
| old water supplier. When flown through old pipes, the chemical
| caused dissolving the lead into water. By the time the
| population of Flint switched to bottled water for everything
| the CFO was long gone with earned bonus for saving money to
| town.
|
| I wonder what such stories, if true, teach us for the future.
| Just general mistrust towards financiers doesn't look quite
| right...
| clairity wrote:
| > "Just general mistrust towards financiers doesn't look
| quite right..."
|
| financiers, including startup investors, focus on money above
| all else, and that alone justifies mistrust (aka skepticism).
| with that kind of focus, it's inevitable that decisions are
| made selfishly and greedily. that doesn't mean it's a tool
| that can't be wielded for generally positive outcomes, but
| that the deck is (intentionally) stacked against it. beyond
| that, the flint situation sounds like a real failure of
| leadership all around (at the very least, basic due
| diligence/risk analysis). that often happens when decisions
| are made far removed from the expertise needed to make them.
| hdvpp wrote:
| Manage cash flow in a unpredictable ever changing environment
| for a month and come back and tell us what you think a finance
| dept does cause from the comment its quite clear you really
| dont know.
| lifeisstillgood wrote:
| Perhaps here would be a great place to let a few hundred
| developers know.
|
| It's worth differentiating between _allocation_ and _flow_ -
| a million dollar spend can be hard to allocate to Project X,
| Y or Z. But it is usually simple to see it got spent on
| Developers, Sales people, rent, hardware licenses etc.
|
| As the film says, if you go up high enough, there is only one
| man with one budget.
| blihp wrote:
| Computers first came into many companies via the Finance
| department way back when because they recognized what computers
| could do as glorified calculators, spreadsheets and accounting
| systems.[1] IT departments were often an outgrowth of those
| early systems. The only 'trick' to dealing with finance people
| is being able to draw a direct line between a proposal and
| either increased revenue or decreased costs. For solutions that
| can do that, they are often your best champion short of having
| the CEO already on board. For solutions that require a leap of
| faith/vision/creativity, they're probably not the place to
| start.
|
| [1] Who do you think the numeric keypad on 'full size'
| keyboards popularized by the IBM PC were for? Accountants.
| Granted, word processing was the other early use case... that
| Finance signed the checks for. IBM understood their customer.
| underwater wrote:
| I worked for a company where capex was cheap and easy and opex
| was hard to get.
|
| So engineering managers would pitch a project, fund a bunch of
| consultants, get a massive piece of tech built and then fail to
| support it. They knew the downsides, and wanted to build long
| lived teams that built and support products incrementally, but
| there was too much push back from finance and IT.
|
| I realised that the company would prefer to spend two or three
| dollars in capex every year than a dollar of opex. This helped me
| understand how and entire industry of overpaid and underqualified
| consultants exists.
|
| So my question is, where is that accountability for the finance
| function? Their controls and constraints caused the company to
| flush huge amounts of money down the drain, just so their books
| could have numbers appear in the columns they wanted.
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