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Ismg 4 - Essay Example

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Even though, a company can determine the cost of running an IT department, firms shy away from noting the actual price of running an IT department. This is because running an IT business is extremely expensive and…
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Ismg 4 Question It is costly to meet the expenses needed to run an IT business. Even though, a company can determine the cost of running an IT department, firms shy away from noting the actual price of running an IT department. This is because running an IT business is extremely expensive and requires a lot of effort (Austin, Nolan and ODonnell 49). Companies tend to look at the advantages that are brought about by IT departments forgetting its disadvantages. This is because the cost is so high that it can make them consider cutting their spending on IT.
Question 2
Running IT systems requires a lot of resources. The question whether IT systems is an expense or an asset depends on the business being operated (Austin, Nolan and ODonnell 49). Some businesses need IT systems to help them in running their operations. However, some businesses can do well without IT systems. If IT systems lead to the high cost of a business, then the business should consider the systems as expenses (Austin, Nolan and ODonnell 50). However, if an IT system brings more profit to a firm than when it lacks the system, then the firm should consider the system as an asset.
Question 3
The purpose of cost allocation is to offer relief to shared services in an organization (Austin, Nolan and ODonnell 50). Allocating cost is similar to spreading the cost amongst those who use it. Firms allocate costs in order to assign accountability of those who use the cost, either a single department or numerous departments in the company. For instance, a firm, which offers complex IT systems, can allocate duty to various departments to people who have specialized in specific fields of IT.
Question 4
IT departments should have full control of spending with regards to IT systems. This is because every field of occupation knows best the cost of running their business (Austin, Nolan and ODonnell 51). IT departments should have their own system of administration separate from the whole company. This will enable the department to spend what is appropriate regarding their activities. It will also enable the department to avoid any financial hitches that might face the entire company since they control their own funds (Austin, Nolan and ODonnell 51). However, this is not to mean that the company should not monitor the spending of the department. The overall management should monitor the spending of the IT department to ensure that their spending is in line with the company’s objectives.
Question 5
There should be a percentage cost that an IT department can spend on the maintenance of their IT systems, and this should also be in line with a department’s spending (Austin, Nolan and ODonnell 50). If the cost of maintenance is lesser than the original price of the system, and it does not eat much into the operations of the company, then it is essential to keep on with the maintenance of the systems. However, when the cost of maintenance exceeds the cost of operation and eats into the operations of the business, the firm should consider doing away with the system.
Question 6
Generalizing the cost of spending with regards to the type of company being considered is an excellent idea (Austin, Nolan and ODonnell 52). A company with complex operations should incorporate expensive systems, which will enable the company to do its operations well. However, a small firm can also spend little on IT systems due to its reduced processes.
Work Cited
Austin, Robert, Nolan, Richard and ODonnell, Shannon. The Adventures of an IT Leader. New York: Harvard Business Press, 2009. Print. Read More
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