Opinions

It's time to position your IT organization as a profit centre. Here's how

For years now, we CIOs have been hard at work consolidating data centres, systems and software licences. We've saved our companies millions. But as the saying goes: "You can't save your way to greatness". Greatness in business requires making money.

And so we need to change our thinking about what IT contributes to an organization. We're used to viewing computing as a back-office function - a cost centre. But we have to turn it into a profit centre. We need to ask ourselves what we can do with IT that our customers will pay for.

CIOs must exercise leadership here because IT is becoming central to how companies make money in our global economy. While important for all CIOs, it's essential for CIOs at mid-market companies, where survival depends on finding new revenue opportunities.

Think Like a Salesperson

Using IT to make money means getting close to your sales force and helping them sell more of your company's products. It's that simple. But it takes commitment to shift from a money-saving to a moneymaking frame of mind.

The first thing to do is delegate cost cutting to some of those very competent people who report to you. Lay out any remaining money-saving plans you may have, encourage your team to develop their own ideas and let them run. Stay informed, but leave the day-to-day decision making to them. Now you have cleared your desk and you can focus on making money.

Next, get to know your company's salespeople, the products and services they sell, and the customers who buy these products. Go on sales calls. Take note of how the salespeople talk about products and the questions that customers ask. Concentrate on what customers like and don't like about your products. Find out what your competitors are doing. How do their products and prices compare with yours?

Now ask yourself, what will make the products your company sells more attractive? How can IT improve the things customers like and eliminate those that they don't like? As you ponder these questions, remember that all products have two components. The first component is the basic product or service itself. The second component is the information that surrounds the product. This information is what enables customers to search for and select your product, understand how to use it, and get the results and benefits they want from it.

Most products quickly become commodities because your competitors have similar products, and the prices you can charge for them get ratcheted down. This makes the information component more valuable. Through creative use of the information component, you can wrap any commodity product with a mix of value-added services that make it more useful, and for which customers will pay. Let's say your company sells electrical wire to building contractors. You can increase the value of the wire by collecting information about the builders' needs. You can use this information to offer wire pre-cut into the lengths customers require, to splice specified plug connectors onto each end and to deliver the wire to job sites right when it is needed. Your company can charge builders extra for these services.

Because value-added services are information based, the CIO is a key enabler of them. CIOs are best equipped to design ways to collect information about customer needs. And CIOs understand best how to present this information to the people in their companies who deliver new services to customers.