Shifting IT From an Operational Cost to a Driver of Value

March 5, 2019 | Becca Sundal

Shifting_IT_BlogIt’s no secret that Information Technology is a key enabler of nearly everything we do. It’s also begun a significant shift from its origin as a pure support function and cost center to a revenue-generating profit center. Gone are the days of IT only providing user and system support, companies are now using the IT function to not only transform their operations through improved cycle times and efficiencies but are looking to IT to create unique value and drive revenue.

While no two businesses do the exact same thing, all provide a product or service to their customers. All have people, goals, business processes, strategies, and infrastructures in place to maintain and grow the business.

Within all these business functions, IT is intertwined as either a support service or a value-added service.

Basic services include phones, Internet, servers, routers, laptops, tablets, printers, and basic user support. These services are always an operating cost of running the business and are virtually the same regardless of the type of company. They also don’t enhance the business in any way, they’re simply needed as a part of the core foundational functions that drive any business.

Value-added services are those that drive the business forward and aid in achieving growth, goals, and strategies. This class of technology gives a business an edge against competitors and provides solutions that enable revenue. These value-added services can come in many different forms depending on the nature of the business. They could include CRMs, artificial intelligence, electronic health records, and business intelligence dashboards, to name a few.

Naturally, software companies see IT as a profit center. But how do other businesses approach the transformation? Most businesses allocate 70-80% of their IT budget for maintaining existing applications and infrastructure in-house. There’s very little left over for innovation. If most of your IT budget is going towards critical services, it could be time to take an inventory of what systems you have and categorize them into standard operating cost vs value-added services.

An inventory allows you to see where your IT dollars are being spent and better positions you to reevaluate your IT budget. Changing how to allocate IT budgets takes communication and buy-in from top executives with a clear strategy. As executives begin to examine their processes, they’ll begin to see areas where they can streamline their daily processes and bring about change management to let go of inefficient practices and solutions.

When restructuring IT departments from cost centers to drivers of value, businesses need to flip the script on how IT is seen and how IT can revolutionize their business. Change management is a necessary part of keeping up with the ever-changing landscape of business today, and when done effectively, it can help IT to step away from its supporting role and instead help to lead the company’s strategic growth and direction.

Will the investment increase time to market, efficiency, and productivity? More times than not, the answer is yes. Often, improvements in technology will naturally increase efficiency and free up both human and capital resources to invest elsewhere. For many, a shift to cloud-based solutions has proven to be a cost reduction agent. Companies can invest that cost savings by shifting the role of IT staff from pure user support to becoming key resources in strategic development. Housing IT staff in business units to collaborate with end users enables employees to become part of the change in process without feeling obsolete. Additionally, tool consolidation and platform-based solutions are becoming the star component in businesses today. They allow for a common framework and flexibility in collaboration and development.

The sky is really the limit when it comes to possibilities for turning your company’s IT department from a cost center to a revenue driver. Align your IT department in support of your organizational goals and where it makes sense, identify areas where you can reduce costs and increase productivity & efficiency. Invest those savings in innovation and see how IT can add value and drive profit.

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