« Motivational Management II | Main | Friday Five (Late) »

October 06, 2003

Motivational Management III

As an organisation, we have done "the right thing" (tm) and located our primary data center somewhere else (i.e. not where we are). Our backup and test data center is here but all the production systems are in the primary data center. This is a smart, sensible approach to managing computer infrastructure. The main data center is ours. We built it. We paid for it. It is in operation 24x7 (lights out). Apparently we are now going to sell it. Site is probably worth a coupla million ($~AU 2,000,000), maybe more. Instead we will rent some space at $~AU 500,000 pa (excluding conversion, electricity, services). We will have to get the new data center certified for our gear (that will take 6 to 8 weeks). We will have to cancel contracts with our users of the data center (maybe $~AU 1 million). We will have to cancel contracts with our service providers (telco's, network, etc) which will cost another $~AU 1.5 million. We will have to take an outage on the 24x7 systems because the disaster redundancy project is only partially completed. And as anyone in the IT business would know, not all of the gear will survive the transition. Bits fall off, machines won't restart, someone loses the cables, etc.

Why?

If you know about accounting, you know that there are P&L (Profit and Loss) and Balance Sheets that are prepared on a regular basis. One shows the Assets (and Liabilities) at a certain point in time. The other shows how this is changing (whether you are making or losing money). Governments (at least in Australia) do not use these style or reports. They present a "balance sheet" which is really more like a profit and loss statement except that they cheat on the definition of income. In a real business, if I have an asset which I sell for cash (say my filing cabinet - which is not normally something I would sell) then I have reduced one asset (my office furniture) and increased another (my bank account). The money I received is not income. If I am a government, I can take an asset and sell it and pretend that it is income and then claim to have "balanced my budget". I can even take a money generating asset and sell it and then claim to have made money even though I have destroyed the future cash flows from that asset.

If you are still awake, can you see what is happening. We can report the sale of the data center as "income" even though the loss of that asset will cost us a fortune in the future.

Posted by Ozguru at October 6, 2003 07:10 AM

Comments

The rumour mill is working overtime and the two big questions that are being asked are: 1. Is there a relationship between the MD and the owner of the new data center? 2. Did a senior IT manager get confused and tell the MD that the primary data center was actually the backup data center (with production being relocated in this building)? Sounds like SNAFU to me.

Posted by: A Nony Mouse at October 6, 2003 07:10 AM