IT Success!: Towards a New Model for Information Technology

3.9. Should IT be run like a business (i.e. an ESP)?

The less than acceptable performance of IT has led to the proposal in some circles for IT to be run 'like a business'. After all, ESPs, unlike IT, have the basics like costs, schedules, utilization rates and full project costings under control, otherwise they wouldn't be in business. This reasoning seems sound on the surface, but in practice things are not that simple. While any IT department would certainly stand to gain by emulating certain practices of ESPs, there are some fundamental differences between internal and external service providers which limit just how far the two can converge.

To start with, an ESP, by definition, adheres to the traditional business model and its contractual client–vendor relationship, with all its inherent faults when applied to building software. This book is all about moving away from this type of relationship. Secondly, and probably most important, an ESP has a different agenda from that of its clients, namely to maximize revenue and profit by getting clients to use as much of its services as possible (nothing wrong with this – after all, it's a business).

Running IT like an ESP would therefore mean defining financial success criteria based on revenues, costs and margins (implicitly with some sort of comparison or benchmarking with respect to real ESPs, which would represent the 'competition'), and introducing internal invoicing based on the actual consumption of human and technical resources ...