Information Technology

According to Austin, Nolan, and O’Donnell in The Adventures of an IT Leader (2009), it is impossible to ascertain the expected expenditure on IT since it is dynamic. It occurs that what had been budgeted on is insufficient due to the changes in technology. As time goes by, the equipment needs in technology improve, thus, an increase or a decrease in the expected cost. This makes it difficult to determine what is to be spent or what has been spent. There are also dynamic changes in the service provides of the IT systems. The service providers determine the cost of maintaining the system. With time, the prices of subscribing to networks are decreasing as many service providers join the market. Therefore, it is impossible to determine the expected cost of IT system over a long time.

The IT systems are both assets and expenses in a business. They are assets because they are used in the business to generate income and can also be sold out to earn revenue if need be. Another reason is that IT systems are a part of what the company owns. An asset is every property that a company owns. Thus, IT systems qualify to be called assets. They are expenses because they need a lot of capital input for them to operate effectively. For every IT system to function, there must be recurrent expenditures for maintenance. Maintenance includes keeping the system in a good condition as well as subscribing for credit to keep the system running.

Austin, et al. in The Adventures of an IT Leader (2009) argue that IT department is a service department in the organization. In cost allocation, costs, the service department in organizations incurs, are allocated to other departments. The service departments incur a cost in providing services to the other departments; therefore, the other departments ought to bear that cost. Every department gets a percentage of the cost that the IT department incurs according to the basis of allocation used.

Austin, et al. (2009) claim that the IT department normally has very low control in the amount it spends. This results from being a service department. Most of the spending is from the other departments. What the IT departments spends in operations is minimal compared to the other departments. Therefore, the maximum cost that the IT department can control is what it spends. That makes the figure very small compared to the whole amount spent in that department.

Austin, et al. (2009) state that it cannot be said that a certain amount or percentage should be used on maintenance since the amount usage hinges on the company or organization in question. The percentage can be determined, depending on the number of operations in that organization. This also depends on the extent of expertise of the personnel. With highly experienced personnel, the cost of maintenance will be low as opposed to low experience personnel who are likely to tamper with the systems. Therefore, it is possible to determine a percentage but custom based. That is specific for every organization.

According to Austin, et al. (2009), it can be generalized in respect to the type of company and a number of sales the company makes. Although there will be a difference, it will be negligible. If companies of a type use the same systems which vary from those in other types of companies, then, it is possible to set a percentage on this ground. The companies that provide services used IT systems differently while compared with the production companies. Therefore, this can be a ground for differentiation in generalizing the expected cost.