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May 24, 1999

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Follow The Money

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Big Improvement
Until now, most IT managers have gotten by with homegrown tools patched together from spreadsheets, mainframe accounting software, or ad hoc programs built in-house to track project costs. Many IT executives haven't found these approaches to be particularly effective. General business financial packages from companies such as PeopleSoft Inc. and hardware asset-management tools from companies such as NetBalance Inc. and MainControl Inc. have done a decent job of keeping track of the overall spending on technology hardware and off-the-shelf software. But few have provided project-specific expense information for software development or deployment that integrates with overall IT spending plans.

One reason is that many of the costs associated with IT projects are people-related, accounting for more than half of IT budgets, Connell says. IT resource planning tools attack that challenge head-on, with the majority providing accounting capabilities for personnel costs. That's important, since labor costs are increasing as a percentage of total IT spending compared with hardware costs, driving the need for tracking employee and contractor expenses, Shevlin says.

Loren Anderson, a senior product manager at Omnipoint Technologies Inc., a wireless services provider in Colorado Springs, Colo., recently implemented Account4 from Work Management Solutions to better track labor expenses. As in many IT departments, Anderson's technicians perform work ordered by other divisions in the company. To keep Omnipoint's profit and loss accounting tidy, the group must bill each division for its work. Project responsibilities can become convoluted, but Account4 helps break through that complexity, Anderson says.

"Our work-breakdown structure is complicated," Anderson says. "But at the end of the month, we can know exactly what the costs are for each division and precisely how much we spent on each type of project."

While IT resource planning tools have an advantage over existing solutions, they can be difficult to implement and run. Perhaps most challenging, IS managers must work overtime to ensure that the culture and processes in an IT department adjust to these new systems, which will fail without rigorous implementation practices, says Carl Henderson, systems manager in the electronic-business services group at Canadian National Railway Co. in Montreal.

Henderson brought in Changepoint's Front Office for IT software in April 1998 to help his 850 employees track costs on 150 projects. Accounting practices at Canadian National changed radically when the company went public, so the IT department must now track IT resources as expenses rather than as depreciable assets. But Henderson says he's struggled to implement the software because of difficulty he's had instilling new procedures into IT employees. For example, he's still trying to get his staff to report their hours on the appropriate projects accurately.

"It's been difficult to make sure the management framework is set up properly to support Changepoint," Henderson says. "The problem most organizations will have is overcoming embedded cultural practices."

Not Plug-And-Play
Henderson isn't alone. IS managers using these new tools have faced similar challenges. Debra Speight, CIO at Harvard Pilgrim Health Care in Lexington, Mass., is enthusiastic about her experience so far with Agile Manager, a specialized private-label version of Power Steering from Cambridge Interactive sold by Agility Management Partners. Agile Manager helps define departmental and project goals and track resources and costs, and links the two to assess the cost and success of IT initiatives. But Speight has come to realize that the software isn't necessarily plug-and-play.

The tool has forced her to take a long, hard look at how her department runs its business. To use Agile Manager properly, she must clearly define within the product's parameters the hierarchy of activities in her operations model. "You can't be sloppy about how you develop this kind of tool," she says. "There's lots of up-front work involved." But, Speight adds, it's worth the effort. "We desperately needed this kind of tool," she says. "It recognizes the evolution of IT departments into businesses that sell their services within a company."