IT As A Profit Center - InformationWeek

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IT As A Profit Center

Traditionally, IT operations departments are viewed as a mark on the expense ledger. Is there any way to change this perception?

In many companies, the lines of business are responsible for their own profits and losses. However, IT operations don't have a good history, traditionally, of coming out on top on the profit side.

"IT departments have, in the past, been great big buckets of cost, often struggling to offer products and services that are competitive with what their parent organization can get on an outsourced basis," says Michele Hudnall, a senior research analyst at IT advisory company Meta Group.

According to a Meta Group profile of Fortune 1,000 companies, 30% see IT as a cost, 55% are increasing their spending on IT but don't see it as an investment, 10% see IT spending more as a strategic move, and 5% manage IT as an investment. Meta suggests that companies continue to create value within their IT departments and operate them as service organizations to the parent companies exclusively.

Companies that offer shared IT resources across many lines of business must adopt an equitable way of charging for those services. Hudnall estimates that only about 30% of the world's largest 2,000 companies have adopted a way of charging different business lines depending on how much they use IT resources. This structure is favorable to the alternative, spreading the costs evenly among business lines that use fewer resources and would tend to disagree that more money should be invested in IT.

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