Infrastructure and Throughput Accounting

You said in the HP book: “The entire infrastructure (your technology stack) is ordinarily considered as an asset that you acquire; but in this economic theory it is considered as working capital. It is like the raw material that you transform by developing your own work (code, in the case of software) on top of it, adding economic value.”

And you said elsewhere in HP book: “Investment is all amounts needed to put in place the software development systems and to discover, create, or elicit the requirements.”

I do a lot of work with large company infrastructure organizations. How do I square thinking about it as ‘working capital’ while considering it as ‘Investment“ in the TA ROI formula? How does thinking of it as working capital and not ‘asset’ make any difference? (Any comments about how to think about infrastructure will be appreciated!)

First: the quote about infrastructure as working capital must be put in context. It was in reference Baetjer’s work, and has nothing to do with TOC or Throughput Accounting. The purpose was to make the connection between software seen as capital goods and as an embodiment of knowledge. It was one of the first big ideas I came across to figure out how to classify software in economic terms

Second: If you reason in terms of Throughput Accounting, then of course it makes more sense to classify infrastructure as Investment. One of the best reference for this is: Ricketts, J. A. (2007): Reaching The Goal: How Managers Improve a Services Business Using Goldratt’s Theory of Constraints . IBM Press.

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