FDs to blame for IT stagnation

Link: IT budgets unlikely to increase

Instead of waiting until IT equipment is worth nothing before disposing of it, IT recycling specialist SML is urging companies to upgrade earlier to recoup costs.

But in order to do so, IT managers must work more closely with the finance director to bring in-house accounting policies into line with their IT strategies and change the way that the value of IT equipment is assessed in the accounts.

At the same time, financial directors need to realise that data centre assets have a longer-term value, but the company’s depreciation policy may not reflect the actual market value of the equipment.

Phil Reakes, managing director at SML, said many companies are unaware of how much their IT kit could be worth. And by holding on to old equipment ‘just in case’ they were wasting money on support fees and missing out on the opportunity to stay ahead of the competition.

‘Planned and timely recycling is good environmental sense of course, but missing out is like throwing away ten per cent or more of the IT infrastructure budget,’ he claimed.

‘Part of the problem is that things develop very quickly. People are upgrading their mission critical systems over two to three years and accounting policies haven’t kept pace. The net effect is that accounting policies are stopping IT managers from upgrading because it is seen that the company will lose money.’

And the fact that IT managers are under more pressure than ever to justify every penny of their IT budget is not helping matters, Reakes said.

But doing a better job of selling the business benefits of new investments in technology would also help, he added.

‘It opens up the debate of whether IT should report through finance. IT managers need to have a greater understanding of the detrimental depreciation policy on data center assets. A shrewd IT manager would probably find he had more money to spend on new kit if he purchased in line with the accounting practices.’

But Paul Booth, technical manager at the IT faculty of the ICAEW said: ‘If a company wishes to be leading edge it has a certain attitude to risk and reward and is more likely to look for the latest technologies.

‘But in practice it’s unusual that equipment is past its sell-by date before it is written off. There’s got to be a business case for new investments. A lot of IT users don’t exploit a fraction of the functionality of the technology but suppliers continue to throw more at them and there is a conspiracy to make everyone upgrade.’