EA Can Facilitate IT Cost Transparency

June 19th, 2009

Alex Cullen

Summary

IT is directly tied to most businesses' products and services, but in most cases 100% of IT's cost is allocated to the general and administrative (G&A) portions of the business' financial reports. While this produces a distorted view of financial performance — understating cost of goods sold and overstating G&A — the larger impact is that business executives get an inaccurate picture of the business financials, which results in ill-informed business decisions regarding product or service costs and profitability. Effectively allocating IT costs to the proper financial bucket is more than an accounting exercise, as it requires a mapping of the current IT assets to the business functions they serve. Enterprise architects should help IT finance make reasonable allocations that present IT costs in the most useful light to the business.

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