CIO — A rallying call of corporate strategies for IT in recent years has been to run the IT department "like a business." When the technology-centric first generation of IT strategies reached a point of diminishing returns, this next stage was both inevitable and beneficial. With the bulk of IT spending shifting from investment in new and exciting technologies to maintaining and replacing existing ones, applying sound business discipline has kept that spending under control and has driven a necessary focus on IT operational performance and efficiency.

But with these benefits come pitfalls, especially if you take the IT-is-like-a-business approach to extremes. If you've tried managing an internal IT department as a bona fide business you already know that you can't take that very far, for the obvious reason that your IT department isn't a business. It is, after all, a part of a business: a significant contributor to a value chain, not a self-contained value chain of its own. And the harder you try to create a separate value chain for IT, the harder it becomes for the IT department to become integrated with the business of which it is truly part.

A strategy founded on running the IT department like a business will reach a natural point of diminishing returns, if it hasn't already. Innovative companies have moved to the next-generation strategy, in which the CIO's purpose is not necessarily to run a traditional IT department at all. Her primary role is to provide corporate leadership to business functions which are investing in and exploiting IT in the context of their business strategies and operating plans.

The Pitfalls of Running IT as a Business

The drive for IT departments to manage themselves in more businesslike ways followed the technology-centric strategies that effectively ended once the 21st century got into its stride. People learned—often the hard way—that technology deployment alone does not guarantee business success. And they have been putting those lessons into practice ever since. As executives called time on deploying IT at potentially any cost, technology-centric strategies gave way to ones founded on IT operational efficiencies: IT departments would deliver more for less.

The benefits of running an IT department in a more efficient, businesslike way are well known. The department's purpose is clear to its staff and stakeholders: People know what IT is accountable for, and what it isn't, and therefore how to organize their own part of the business to get the most from technology. The IT department's internal processes become ever-more efficient, costing progressively less with no loss of value to the business units which fund them. Any activity that contributes to the department's purpose and processes—but is not core to them—is constantly market-tested to find and exploit the best sourcing option, whether that be in-house or outsourced.

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