Rule of thumb: No CapEx, no future

Consultant pilot fish is on the team for an automation project at a steel mill, and the software is going to require a screen handler to manage how information is displayed on the new terminals.

"I went to my manager to discuss the options and costs," says fish. "I was told that we couldn't buy one. Instead, we should write our own.

"While I had never done so, I was familiar with some existing screen handlers so I had some ideas. From those ideas, I could estimate costs -- and I knew that number would be much higher than the cost to buy an off-the-shelf product, without any significant advantage in features.

"Then I was informed of the actual situation."

It seems that buying is out of the question. The steel mill's owner -- call it Big Steel Company -- isn't willing to make any capital investments in this mill.

So how are the mill's engineers implementing the process improvements for this automation project? Turns out all the new hardware and software are officially being classed as "repairs."

That has included acquiring multiple minicomputers, terminals and networking gear -- all the invoices for them have been reported to Big Steel's accountants as equipment repair costs.

Eventually, fish realizes that his own company must be playing this accounting game too. Parts and labor are being billed for real repairs such as replacing failed controllers on electric motors, but also for computer systems -- which are likely billed as "replacement parts" -- along with the "servicing labor" of programming time.

"They just couldn't figure out how to bill through things like off-the-shelf software, such as the screen handler package I wanted," fish says.

"By playing this game, the Big Steel engineers spent a lot more money getting what they wanted, since they had to pay more per hour for our time, and we had to write software that would've been better bought. And though they did make improvements to productivity and quality, Big Steel shut down the mill a few years later."

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