Running IT like a business isn't so easy, execs say

Computerworld - MIAMI -- Ask any small business owner, and they will tell you that starting and running a business takes a massive amount of work. Some IT executives who are trying to run their IT operations like a business are beginning to discover the same thing.
"We started a chargeback system on Day 1 of [establishing] our services corporation, and it was miserable. We didn't really know what we were doing," said David Pelosi, an IT business partner at Public Service Enterprise Group Inc. (PSEG), a diversified energy holding company. In 2001, Newark, N.J.-based PSEG formed a shared-services organization that included its IT, legal and human resources activities.
PSEG's IT shared-services operation has since developed a mature chargeback system for IT services delivered to business units. It has also built credibility with business peers by benchmarking costs with external IT providers and reducing IT expenses by $63 million between 2001 and 2004.
Still, Pelosi said that getting PSEG's 300-person IT organization to run smoothly took a fair amount of time and effort. "You have got to train the technology folks" with high-level definitions of financial concepts such as financial plans and return on investment, said Pelosi, who spoke at the IT Financial Management Week conference here this week. The event was presented by the International Quality & Productivity Center, a conference organizer in New York.
"Most IT people don't give any thought to the financial side," Pelosi said.
Other problems can crop up even after years of evolving an IT shared services business. For instance, Carlson Companies Inc. has had an IT shared-services organization since the late 1990s. Since 2001, the Minneapolis-based provider of travel and hospitality services has automated its chargeback system to the point where business-unit customers can view invoices online with a detailed summary of services and pricing, said Bev Swanson, director of business strategy at Carlson.
Despite that kind of progress, there have been snags. For example, Swanson's group once charged business units for storage on a per-gigabyte basis on the 15th of each month. But last year, it learned that some business directors were moving data from one set of disk drives to another on the 14th, resulting in zero-sum charges, she said. Then they would move the data back to the original disk drives on the 16th.
Swanson's group called one of the business directors to try to ascertain how they had suddenly gone from very high storage requirements to very low charges. The business director was candid about how they had been moving the