You know that place that pays your salary.
Business bits?
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Businesses provide value
to a market…
value: services, products, etc.
markets: other businesses or people.
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Businesses have costs
while the statement is obvious,
the details can be quite complex.
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Businesses make money
most businesses are for profit
and the value of business itself goes to shareholders.
An aside on non-profits and governments…
they are no different, just think of the shareholders as
charities or constituencies
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Businesses have goals
lots of little goals, some big goals…
but all goals add up to maximizing shareholder value.
… before you go attack corporate greed,
remember shareholders may value something other that money.
(most do not)
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Your Job
is to enable the business to achieve its goals the best way you can
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Your Job : ⇗ shareholder value
sometimes that’s not so clear or true.
your job could be to guard against the erosion of shareholder value
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ROI : return on investment
Simply, this is the £/€/$ you make for every £/€/$ you spend.
Consider the law of diminishing returns.
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TCO : total cost of ownership
Total costs, these can be surprising.
Finite.
Should never be super-linear with respect to growth.
Will never be zero.
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TCO vs. ROI
You don’t want to have a TCO argument
if you can have an ROI argument
Why?
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Money terms…
Count du Monet
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Revenue
how much money comes in
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Expenses
how much money goes out
this includes a lot of things that people should consider separately
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Earnings = Revenue - Expenses
This is the bottom line.
But it isn’t that simple
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Expenses : COGS
cost of good sold
this is how much it cost your business for the inventory item sold
this doesn’t apply to companies providing services.
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Expenses : interest
money owed on debts outstanding
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Expenses : taxes
turns out you can’t stick it to the man
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Expenses : depreciation
the things you have this year are not as valuable as they were last year
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Expenses : amortization
the spreading of monies over time
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EBITDA
Earnings…before Interest, Taxes, Depreciation and Amortization
Why is this number useful?
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P&L : profit and loss
why is it not profit or loss?
can you have both at the same time?
it helps to break things out into pieces
to understand what is working and what is not
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Budget
a budget is nothing more than a money plan…
money in
money out
and how they are tied.
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CAPEX
Capital Expenditure
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OPEX
Operating Expenditure
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CAPEX vs. OPEX
this could be a multi-day discussion
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Web Operations
Enables businesses on the web.
Costs a lot of money.
Can increase returns.
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Putting this to work
First and foremost…
you cannot improve what you cannot measure.
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Diving into expenses: people
“Human Capital Management” - Horribly unflattering, eh?
salary • bonus • benefits
administrative overhead
recruitment • continuing education
office space • supplies
Guesstimation: 2x salary
Do some practice math with contractor vs. employee.
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Tracking people
One of the most valuable things you can track in your organization
is what people do.
People tend to hate this.
Engineers lie (to themselves) about how long they spend on things.
This misleads the organization w.r.t. how much efforts cost.
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Expenses: architecture
The software you deploy bought (free or not, open or not).
Human capital is required to operate it.
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Expenses: infrastructure
Data centers, systems, networks (virtual or real) that run your software.
Human capital is required to operate it.
This is not software developed in-house.
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What about open source?
This is still challenging to model.
Building things in-house is an investment…
If the resulting intellectual output isn’t property/assets, what is it?
…expense.
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The Cloud
Let’s test our budgeting skills… TO EXCEL!
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Think like an MBA
Does what you are doing add more value
than anything else you could be doing?
You are in a unique position to truly understand value and risk.
The bigger the company, the more we think about risk.
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Risk and liabilities
Liabilities are debts and financial obligations.
Risk is simply financial exposure to loss.
Risks and liabilities are not avoided, they are managed.
Technical debt is a wickedly complex subject;
it is not real debt in accounting terms (for a reason).
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Risk: vendor lock in
This goes for hardware, datacenter, SaaS, PaaS, IaaS, etc.
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Derisk: vendor lock in
Prefer replaceable components
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Risk: knowledge loss
Losing employees with unique knowledge of corporate assets
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Derisk: knowledge loss
Require as an artifact of work performed
Prefer automation
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Risk: schedule delays
Both in development and deployment.
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Derisk: schedule delays
Project managers in general can
• enable teams
• communicate with stake holders
• and general control risk in projects
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Risk: operational failure
Your shit is busted.
It doesn’t work.
It doesn’t scale.
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Derisk: operational failure
Test your shit:
deployment • functional • load • security
!
Perform game day failure exercises.
Perform game day security release exercises.
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Three basic traits of awesome:
Amplifying return on investment.
Controlling risk in projects.
Reducing total cost of ownership.