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What It Means to Run IT Like a Business

Evolving from a cost center, IT is taking on the character, rigor and practices of a business within a business. It won't be easy, but for CIOs it's a matter of survival.

By Stephanie Overby

May 01, 2004 — CIO —

busi-ness

n. The buying and selling of goods and services, especially on a large scale.

You can’t throw a rock in technology circles these days without hitting some soul sounding off about the importance of running IT like a business.

But what does it mean to "run IT like a business"? It sounds logical. It sounds beneficial. And for many, it sounds like just another in the long line of ill-defined catchphrases that the IT community latches onto to no avail.

But this one is different. It’s not a flavor of the month; it’s a mutual mandate from the CEO, the CFO and the CIO. This one will turn IT from a credibility-damaged cost center into the aligned business partner it needs to be -- and always should have been. But only if IT leaders understand what it really requires.

In this special report, we explain what it means to run IT like a business, and analyze how CIOs are doing it. We’ll draw insight from a new in-depth CIO survey of more than 100 organizations selected for the study because of their exceptional IT reputations. For these CIOs, running IT like a business is the defining principle for IT functions reborn in the post-Internet-bubble recession. We learn why they’re doing it, why it’s so difficult and why it’s worth the effort. We identify the most prevalent practices and determine which deliver the greatest ROI. Among these are internal IT marketing, which turns out to be the secret success factor for running IT like a business. We cap off the report with an up-close examination of how one exemplar (financial services company USAA) reinvented IT as a business within the business.

To explain the concept, it’s important to clear up some misconceptions.

1. It’s not all about finance. "It’s about instituting common business practices in IT," says Robert Urwiler, vice president and CIO of software company Macromedia. "It’s more about corporate governance and responsibility than it is about sending out invoices to your customers."

2. It doesn’t necessarily mean incorporating the IT department. Though some organizations operate a profit and loss IT subsidiary, most don’t. And they don’t need to. The IT department is already positioned to act like a business within a business. The only major difference between IT and a typical business is that instead of revenue going in and profit coming out, IT receives funding and delivers value, says Meta Group Executive Vice President Howard Rubin.

 

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