I’ve spent quite a bit of time this week trying to make agile projects look like waterfall projects to help clients get various pieces of work through financial control and procurement processes on their side.

It’s kind of frustrating. The world has know for around a quarter of a century that software development works better when approached in an iterative manner where it’s simply not possible to detail out deliverables and timelines at the outset because that method of planning is simply doomed to failure.

However, it’s not just a matter of yelling “get with the agile program, people!” to the purchasing and accounting teams. It’s much more complicated.

In the rise of the Cloud computing era, the tech industry in many cases got itself to a point where it believed that operating cost was better than capital investment. It’s never been entirely clear whether the big tech companies, sniffing the sweet, sweet smell of recurring, lock-in revenue, ever really got further than “for us” in their analysis of what “better” actually meant.

But for many organisations, spending money from the Capital budget can be hugely preferable because of the way in which investment in capital assets is treated.

For example, in my last organisation, the annual operating surplus (which was reinvested) that the housing landlord made was a number closely watched and guarded. The accounting rules meant that if I spent £500,000 on operating costs, that would reduce our operating margin. If our operating margin got too slim, our regulator and investors would start ringing alarm bells. Alarm bells that could in turn reduce our credit-worthiness and increase our costs of borrowing.

However, if I spent £500,000 on capital investment then that wouldn’t impact our operating margin, and the bells would all remain silent.

Don’t ask me how any of that worked – ask an accountant. But the impact was that many things that we were increasingly being asked to fund as recurring costs like Microsoft subscriptions were far easier for us to manage as capital investments like Microsoft licenses.

There’s a bit of my head that turns off at this point, frustrated how the dark arts of accounting can seemingly play such elaborate tricks of the mind. But that’s how it works, and that’s just one of things we have to suck up in working life.

Coming back to the point, though, about agile masquerading as waterfall for procurement processes, and the need becomes possibly a bit clearer. If an organisation is making investments into capital assets, it surely has to have an idea about what those assets are likely to be if they are going to end up on a balance sheet? No wonder then that defining activities rather than tangible outputs doesn’t cut the mustard when spending from the capital budget.

Ultimately it all comes down to compromising from purist positions, I guess. That, and being eternally grateful that I didn’t become an accountant because my brain just doesn’t work that way.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.