Justin James
Cost Center
Profit Center
Dana Gardner
Closing Statements
Let's be realistic
Justin James
Reading and re-reading our debate, I think that Dana and I are in agreement on most of the fundamentals here. We certainly agree that IT cannot deliver value or ROI (the things needed to shift from “cost center” to “profit center”) unless the business knows enough about IT to really use it; and IT cannot be responsive enough to business to let this happen unless they have open ears and open minds.
If you look at our responses regarding the kinds of key hires needed, you’ll see that we’re both talking about the need for IT to be ingrained at the top and for the top of IT to be oriented towards partnering with the business.
Unfortunately, I have seen scant evidence to suggest that many companies can do this. They lack the leadership and vision. They treat IT like expensive janitors. And there is nothing wrong with that. If all you want is to “keep the lights on” an IT department can do that for you, and you don’t even need to hire top talent to make it work. Unless you are in one of the rare companies that can truly use IT to transform their business (a “profit center” kind of IT department), then you need to be honest and realistic about it, and that means treating it like a “cost center” and trying to minimize its damage to you budget.
It's about creating new business
Dana Gardner
The lines are blurred between businesses and IT as never before. Nearly all businesses need to exploit IT to grow and compete. IT needs to transform into a profit center mentality to allow the business then to thrive.
Success nowadays is not just survival of the fiscally fittest, it's about gaining dominance by bring the most technology capable. Let's face it, a lot of companies are not going to make IT a profit center, and they will be in trouble, and then deeper trouble. It will be very hard to transform a company that is dysfunctional in IT.
On the other hand, companies that do IT well, that integrate the technically possible with the business necessary, will be able to change, adapt and compete.
I'm seeing companies now following that model, taking their IT capabilities and making them the product, combining their digital services and market insights to forge whole new services, and bringing in whole new revenues.
IT needs to be at the strategy table to explain to leadership what can be done, or the best way to procure IT services to the same ends.
So the discussion has changed. It's not how will IT support the old business, it's how is IT able to create new lines of business, to be a driver of new business development.
IT's best days still ahead
Jason Hiner
This week's debate turned into a highly useful discussion about how IT got itself into its current mess and what it can do to dig itself out. Both of the debaters offered analysis that was right on target and that yielded a set of useful insights that our readers can use to better understand the situation and start driving useful changes immediately.
Justin did an excellent job of pinpointing many of the attitudes and approaches that are to blame for IT getting the reputation of a cost center and thus being targeted for cost cuts. On the other hand, Dana provided the vision for how an IT department can break out of that scenario, bring game-changing value that impacts revenue, and establish itself as a critical resource for making the company faster and more innovative. The real winner here is the reader who gets the benefit of some excellent insights from both commentators. But, since I think IT's best days are still ahead, I'm going to give Dana the nod for this debate.
Talkback
Depends on the IT department
Depends on the executives and the board
Otherwise, it's just IT thinking what's best for the company and becomes the tail wagging the dog.
Does your company have a strategy?
You are talking about IT and business leadership
"Most IT departments exist for the purpose of continuing the IT department."
This sort of derogatory comment is completely lacking perspective. Most of my users are still confused by the photocopier and the applications that they use EVERY day. What do you think the workforces chances are without an IT dept to help?
That is why we are here - to help augment other departments - and that is what we do.
Cost Center, but dont get lazy
For an IT department to prosper I think that it needs to be completely 'in bed' with the business - fully focused on what the company's needs are and always ensuring that it makes an objective choice between doing things in-house or outsourcing. If they don't do that they will find there are sharp-suited, smooth-talking cloud providers whispering tales of huge IT cost-savings in the ear of their CFO in no time!
One or the other depending
I think as a profit centre there is the best chance for agility, innovation and even cost effectiveness. However it is a perfectly ligitimate requirement of an organisation to perceive its IT department solely as a service arm to support its stratrgic objectives. This requirement is better served I think by a cost centre model.
Here's the truth
In return for your services, you often get a bunch of whining execs, sales people and project managers who know nothing about anything, 'rebelling against IT overlords' because they want an iPad... pure and simple.
The reason IT has a 'special place', is that unlike even a far reaching dept like Engineering/Maintenance, it is completely interwoven with the fabric of how EVERY dept, process and person works in every conceivable situation.
IT now touches everything and therefore the IT dept has to touch everything as well. Turn off IT and you might as well turn off your lights. This is a fact not appreciated by some.
A Lot of Both
Companies I've worked for in the past have been a lot of what Justin describes -- I've brought up ideas on how to generate revenue, but the mindset when it comes to dealing with external customers is so completely different that most minds were extremely closed to these ideas. These same people would bemoan insufficient budgets, but a mental block when it came to thinking of ways to overcome this.
History weighs on many decision makers & decision processes
Would you walk into a company's HR department and propose ways to make money? Their accounting department? Logistics? Plant/property? Please note I am specifically envisioning these situations in businesses where none of those internal business functions (which ALL businesses have, and need in order to simply exist) are the core competency of the company. A company that manufactures widgets is, generally speaking, not a company that makes money by selling IT services or HR services or Accounting services, or logistics, or facility maintenance ... they make money by making and selling widgets. If said widget manufacturer tries to leverage internal functions into some kind of externalized profit making enterprise, the usual result is abject failure since those functions are not the core expertise of the business.
The other difficulty with this question/concept is simply the definition of "IT". In many (most?) companies, IT means the technical infrastructure that supports the business, and not the business applications themselves. Apps can be part of the "money-making business" side of the house at the exact same time that "IT" is an internal cost-center. I've worked at/with/for a handful of large companies over the years, and in those companies, as well as in all large business that I have any reasonable knowledge of, "apps" or "app dev" have always been separate from "IT". This even applies in technology companies. A business can provide a service via computer applications and make money from those apps, and those profit centers are simply NOT considered IT.
IBM makes money by selling software, hardware, and services. They don't make money from their IT department ... it's an internal cost center.
Unless it's a tech company, in reality most are cost centers
Departments that are profit centers get a lot of respect and are often in the spotlight as the lifeblood of the organization, but the cost center departments remain necessary and it's not like companies can just do without them. To make money you have to spend money. The trick for the successful IT department is to do it wisely in a way that clearly supports the needs of the business in a cost-effective and strategic way. Both short and longer term.