Brown-Forman: Profiting on Corporate Computing

25 Pages Posted: 5 Apr 2010

See all articles by Brandt R. Allen

Brandt R. Allen

University of Virginia - Darden School of Business

Richard Lennon

affiliation not provided to SSRN

Abstract

Brown-Forman installed a profit-center control system for its information services department (IS) in 1991. The results were dramatic: costs were flattened, backlogs disappeared, and cooperation improved. Subsequent events raised more concerns: mainframe volumes dropped as applications moved to less costly platforms and new technologies became available, but there was no money to pay for them. To avoid cross-subsidization, all profits were remitted to users. IS requested new "investment funds" from the company's Executive Committee. The request raised the question: Is this the way profit centers are supposed to work?

Excerpt

UVA-IT-0011

BROWN-FORMAN: PROFITING ON CORPORATE COMPUTING

It was springtime in Kentucky and the running of the Kentucky Derby was only a few days away. But before Richard Lennon, vice-president of Brown-Forman's Information Services, could begin his own personal planning for Louisville's biggest social event of the year, he had to present his FY96 budget to the company's Executive Committee. Because Information Services (IS) operated as an internal profit center, the annual budget presentation was quite different than in most companies. Lennon's budget automatically adjusted to whatever his internal clients were willing to spend. He did not have to justify all the company's computer applications every year.

However, this year would be different. Lennon was coming to the Executive Committee to request that they make additional “investments” in his business unit just as if he were running a line division of the company. The importance of information systems was changing quickly and they were rapidly switching computer technologies as well; perhaps the profit center concept wasn't working after all.

. . .

Keywords: control systems information systems

Suggested Citation

Allen, Brandt R. and Lennon, Richard, Brown-Forman: Profiting on Corporate Computing. Darden Case No. UVA-IT-0011. Available at SSRN: https://ssrn.com/abstract=1583778

Brandt R. Allen (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924 -4842 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/allen.htm

Richard Lennon

affiliation not provided to SSRN

No Address Available

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