[HN Gopher] If you want to transform IT, start with finance ___________________________________________________________________ If you want to transform IT, start with finance Author : feross Score : 94 points Date : 2021-07-13 19:32 UTC (3 hours ago) (HTM) web link (zwischenzugs.com) (TXT) w3m dump (zwischenzugs.com) | 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. ___________________________________________________________________ (page generated 2021-07-13 23:00 UTC)