How to Run IT Like a Business

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

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 flavour 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 centre 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 (US) 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.

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.

3. It's not just another IT quality initiative. This goes way beyond a Capability Maturity Model-level rating or Six Sigma status. "CIOs are figuring out it's not so much how IT is done that really makes the difference," says Michael Gerrard, vice president and chief of research for IT management at Gartner. "It's additional competencies like product development and management and financial capabilities that make the difference." Not to mention IT operations, supplier and human resources management, customer focus, marketing and governance.

It's about institutionalizing all these business functions and processes in a manner compatible with the larger corporate culture.

And it's about time.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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