Is IT Really a Cost Center

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CLOUDAt a recent CIOboston event by CIOsynergy, I met two folks from Apprenda: Chris Gaun, Senior Product Marketing Manager, and Dave Cohn who heads Northeast Sales for the company.  Apprenda is a ‘Private Platform as a Service’ company that sponsored the event with Microsoft. Both made the remark that IT needs to transition from being a cost center to being a profit center and do so by developing more customer-facing software for the business.

An intriguing concept and one that got the conversation flowing between the three of us and Al Ingram, Director of Operations in my IT department. And it got me thinking.  At Ipswitch, IT worked with R&D on our Licensing System within our products to communicate with an IT-created back-end for product fulfillment and activation. That project certainly would fit the bill. We also manage ecommerce. Plus, as one of the leaders in Salesforce implementation, we have developed many tools and processes that could be shared/sold in the Salesforce ecosystem.

But I think this view of IT and what is needed is too narrow. Traditional P&L models, with their roots in manufacturing, assign IT as a cost center. But the way out is to question whether the model needs to be updated, rather than insist that IT produce traditional products that can be sold to customers. There is a value-add to the business from today’s IT that goes beyond viewing it as a sequence of projects or as simply ‘support’ resources. There is sustained return for the business, beyond just the savings that IT may have delivered vs. doing a project using more expensive outside consultants.

Measuring the Impact IT has on Business ROI

Business ROI must have an associated IT fraction that indicates long term value that IT created – it is a shared benefit. I am not suggesting that modeling IT as a profit center will be easy.  Certainly, measuring just IT’s contribution to business productivity has been fraught with difficulty and controversy. But at a time when most IT departments can feel in their bones that they are making a difference to the business and every project is tagged as a business project rather than an IT project (as in the old days) we need these new models to evolve. Such measurement will lead to better valuation of IT: better funding, greater confidence by the business in IT spend, and expanded use of IT as a vital business leader.

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