Wednesday, April 15, 2009

EA and Finance

This post come out an initial simple twitter question, "Should EAs understand finance?" The conversation went all over the place. In 144 character bursts. It is hard to get the essence of what I was thinking in these short bursts.

Some of the slices:

How does EA justify its own costs? Interesting, important, but not where I had hoped to take things.
General discussion on values - again interesting but not what I was looking for.
Simplification - again, doesn't get to the meat.
IT should understand spend on everything (not just IT) - this is getting closer. It isn't necessarily about spend, though.

I guess what I should have asked is broader and better categorized than what I did ask.

When I say finance, my first thought was should the EA be able to understand (at a deep level) the balance sheet OF THE BUSINESS?

Second when it comes time to look at an annual report, should the EA be able to interpret the financials? Including the footnotes?

When it comes to investment decisions - should the EA bee in a position to understand the implications of different kinds of investments and tradeoffs? A new airplane hangar vs increase in parts inventory vs a new data center?

Note these are ALL: business decisions.

Now, since the spend on "IT" is so relatively large (1.3% to 5% of turnover or revenue) - depending on what's counted and how you count it, should the EA be an active participant in the allocations of this spend (budgetary vs actual)?

As technologies evolve - the shift from inhouse data centers to outsource (back to insource - outsource costing, in house operated), cloud, the economics become driving factors. How well should the EA understand these economics? How much should the EA be involved in these discussions? Is the EA involvement any different in these IT kinds of decisions than in other technology shifting decisions. For example changing the delivery fleet from gas (petrol) burning to biodiesel/electric/hybrid/CNG, LPG, LNG. All of these have huge effects on the business and its bottom line.

When a business has the opportunity to allocate "money" across its various operations, should the EAs be in that discussion? Normally it is an hierarchical, line of business, roll up approach with little input from EA except the CIO might ask, "What's your budget?" This is nonsense. The EA must have a budget, for sure, but to properly assist the business, it must be an active participant in budgeting decisions.

So as the EA has the opportunity to influence the business (used loosely) that s/he supports, where are the lines around finance?