by Minda Zetlin

IT makeover: From cost center to revenue driver

May 14, 201812 mins
CIOInnovationIT Leadership

If your company views IT as a function to be managed cost-effectively, it may be time to get innovative and elevate the perception and role of IT — to the benefit of your company and career.

innovation idea
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When the leaders of your company think about IT, do they consider it a necessary support function like legal or HR? Or do they see IT as a revenue driver that helps move the whole organization toward its financial goals?

Most experts agree that your team, your budget and your own role as an executive will benefit if IT is seen as a source of revenue, innovation and competitive advantage, rather than a function to be managed as cost-effectively as possible. And because you’ll be helping your company’s leaders use technology to gain competitive advantage, find new markets or strengthen relationships with customers, your organization will do better as well.

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“IT for a long time was considered back-office only,” says Merim Becirovic, global managing director for global digital infrastructure at Accenture. “But there’s much more to it than legal and finance and all those other support functions.”

If your company’s leaders see IT as a cost center, and their main concern is how to pay less for it, how do you change their minds? It won’t be a quick process. And it will mean altering both how IT is perceived and what it actually does, Becirovic says. But it’s well worth the effort. Here’s how to make the transition.

1. Propose innovation to the business

Beginning in 2015, Accenture rolled out Skype for Business to the entire organization. “We don’t have phones on our desks in the offices anymore,” Becirovic says. “That was a big change for our organization. Nobody asked us to deliver that capability but we did it. We showed the entire organization where we could have video, where we could review content together and remove the requirement of physical presence.”

This is the kind of initiative that can change both the perception and role of an IT department within an organization. “If the business brings an idea for creating greater efficiency to you, that’s the business driving revenue,” says Josh Collins, vice president of architecture at consultancy and technology provider Janeiro Digital. “To go from cost center to revenue driver you have to come to the table with your own recommendations.”

That’s an uncomfortable role for many IT leaders, he adds. “IT wants to feel like an equal partner with a seat at the table — not an order taker,” he says. “But at the same time, on the ground the mentality of a lot of technical people is, ‘I did what you told me to do.’ If you want to have an equal seat at the table, you have to have an equal stake in accountability. You can’t sit back and wait for people to give you work and expect to be seen as a partner.”

IT departments have the ideal vantage point to see where innovation has the potential to make a big difference throughout their organizations, adds Becirovic. “We’re in the middle of all the requests from all the components of the business. IT has the clarity to see things that might not be visible to an individual unit or area.” But, he adds, “IT needs to reinvent itself to think about it that way.”

2. Measure IT’s impact

Once IT has proposed a new initiative or successfully implemented a project, don’t just go on to the next thing. Be sure to measure the effect of what you did on the bottom line. You can’t skip this step, especially if you want to change the perception of IT to something other than a cost center. “What we do right now is not really measure it that well,” says Debbie Krupitzer, practice lead of Industry 4.0 at Capgemini. “We know the cost to create this system; so it’s all cost. So define what you want and then actually follow up and show what was achieved.”

IT organizations don’t often go back and measure the effects of their work, experts say, sometimes because rapid turnover in the profession means that the team that put new technology in place is no longer there by the time its effects can be determined. But it’s well worth finding out if a new initiative has brought in revenue or decreased cost, and if so, by how much.

In the beginning, getting Accenture employees to use Skype was slow going, Becirovic says. But his team sold the idea to departments with big travel budgets, suggesting they could cut down on employee travel and its cost and disruption by using video chat instead. “Those folks who were the recipients of those savings started becoming our champions,” he says. “And then the adoption curve went way up overnight.” Today, he says, Accenture runs 330 million minutes of audio every month over Skype.

IT leaders who don’t measure the effect of what they do may be missing an opportunity to increase their own budgets, Krupitzer says. “If I do something that creates operational cost savings, I’m going to track that and show it, and you’re going to give that back to me to create innovation. Instead of having it go back into the books and be absorbed somewhere else, I would say, ‘Uh-uh. That’s my P&L.’”

3. Give external customers data they never had before

“Every company is a technology company,” the saying goes. Whether or not you think that’s true, it’s undeniable that companies of all types are adding technology to their offerings in one way or another.

“We’re working with a large customer whose core business is industrial internet of things (IIoT) devices,” says Mike Lunt, vice president of engineering at IT monitoring company Zenoss. “But what they want to do is sell additional services such that they can provide management and monitoring of these devices so that end users can actually see where items are and how they’re functioning.”

Creating a service like that will take that company’s IT department beyond its traditional role of providing systems and support to internal users and into a role where it can actually produce top-line revenue. And, Lunt says, offering these sorts of add-ons will be increasingly commonplace for technology and non-technology companies alike. “If you’re selling a widget and your competition is also selling a widget and the price of the widget goes down, the only way you can keep your margin is to add some sort of technology play to it.”

In many cases, he adds, this is simply a matter of opening up what had been internal monitoring systems to external users. But doing that comes with some meaningful challenges. “That level of user interface is very different from what operations are typically used to seeing,” Lunt says. “And it does require the notion of being multi-tenant scalable. Typical operations tools aren’t meant to have millions of people looking at them.”

4. Learn to take risks

IT professionals are typically risk-averse, which makes perfect sense if your main objective is to make sure the systems that users depend on to do their jobs are always there when needed. But if your objective is to innovate and find new ways to create efficiency or new revenue streams, then a different approach is needed. “IT departments need to understand that risk isn’t always a negative thing and that without risk, you can’t have innovation,” says Mike Kail, CTO of the security company Cybric.

“The biggest mistake is not being bold enough to take some chances and risk trying something different,” Becirovic says. “Try it and fail fast if you’re going to fail. This is something new you’re trying, if it doesn’t work, try something else. That iteration and risk-taking is necessary.”

Of course, this only works if your boss sees things the same way. “You have to be in an environment where it would be OK to fail — that becomes really important,” Collins says. “IT can’t have it both ways — it can’t be an order-taker and a strategic partner at the same time. But stakeholders can’t have it both ways, either. They want change whenever they want it, IT that can turn on a dime, but simultaneously, they want zero down time.”

5. Organize for success

Shifting IT to capitalize on revenue-generating opportunities doesn’t mean you are no longer in charge of keeping the systems humming. Traditional IT support functions still have to be completed. So how do you organize IT to tackle both innovation and operations successfully?

“IT falls into two camps,” Capgemini’s Krupitzer says. “Keep the lights on — keep my computer going — and then there’s the innovation piece of IT, which I think is the most critical.”

The thing is, she says, operational IT and innovative IT demand completely different skill sets and completely different approaches, and trying to combine the two into one IT group makes no sense. Instead, she says, keep traditional IT focused on maintaining operations, increasing efficiencies and cutting costs, and create a separate group to focus on innovation, perhaps headed by a chief digital officer or chief innovation officer.

“What you’re trying to do is break the mold, get people to question,” she says. “Operations people aren’t there to question. They’re not there to say, ‘How can we do this differently?’ I’ve never seen an operational person innovate.”

But splitting IT into separate entities may not be the right path for every organization. One issue: talent.

“So you have IT over here and that’s the cost center — the evil empire,” says Lifesize’s Beckmann. “And over here, the innovation side. Where are your best people going to want to work?”

Separating innovation into a separate function “often fuels jealousy and sabotage within an organization,” says Cybric’s Kail. “You want everyone aligned as much as possible.” Besides, even when it comes to operations and maintenance, creative thinking is an asset. “You want them thinking about innovating rather than another group way out ahead because that chasm will just grow,” he says. “Then it will be hard to transform the entire organization.”

Of course, not every organization will benefit by making a radical shift, depending on their priorities. “You almost reflexively view being a cost center as bad because you’re just taking up space,” says Janeiro’s Collins. “But being in IT and running an efficient technology organization is already hard to do well. So maybe being seen as a revenue driver is not necessarily what your goal should be.”

6. Rethink your relationship with users — and the C-suite

If you want to change how IT is perceived in your organization, start by finding out what those perceptions are, advises Bobby Beckmann, CTO at video conferencing provider Lifesize. “Ask a CIO or an IT department, ‘What do your users think you do for the company?’ If they don’t know the answer or if they have to guess because they never asked users, that’s problem number one.”

Having users see IT as a source of innovation should help top-level executives see it that way as well, he says. In an ideal world, that might also mean changing who you report to. “If the CIO and the IT department is reporting to the CFO, that’s probably not a great starting point to make this change because it’s all about capex and opex,” Cybric’s Kail says. “The way to get out of that is to start spending time with other C-level executives and seeing how you might start helping them.” Some tech leaders have managed to change their reporting structure, he adds.

Whoever you’re reporting to, there’s one important thing to remember: It’s your career and your IT department, and it’s up to you to drive change, not anyone else. “If you’re whining about not being seen as a strategic partner, at the end of the day, that’s your fault,” Kail says. “There’s a lot of passive feeling sorry for yourself.” In other words, he says, if you want a seat at the table, “Pull one up!”

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