After years of focusing on the bottom line, CIOs are setting their sights on top-line growth
- Can't afford an R&D group? Make innovative thinking everyone's job to inspire leading-edge work
- Keep core customers happy. Test a new technology and its revenue-generating potential but spread its benefit to as many constituents as possible
Money was very much on the mind of Dr O'Neal Smitherman as he tested and implemented a bleeding-edge broadband wireless network for Ball State University and the surrounding community in 2004. University president Jo Anne Gora had just challenged administrators and educators to develop new business opportunities that could generate much-needed revenue. The VP for information technology knew his organization was as capable of contributing moneymaking ideas to support the university's core business - developing and distributing knowledge - as any other academic or administrative department. And the wireless project had real revenue potential.
Smitherman had secured $US850,000 in US federal government funding and an additional $US500,000 in donations to test the educational and social value of delivering high-bandwidth wireless technology to local elementary schools, surrounding homes and Ball State itself. "We were learning things that everyone else in need of wireless solutions had been struggling with and would want to know," he says. "We were discovering the answers and realized we could generate revenue by providing them [to others] for a fee."
The Digital Middletown Project, as the wireless initiative was called, won the respect of telecommunications companies who now view the university as an essential resource for developing and testing long-distance wireless technologies. Its most impressive achievement, however, is the $US500,000 to $US1 million in annual revenue generated by the Office of Wireless Research and Mapping, the business IT spun off the wireless project. Smitherman expects that revenue stream to grow 10 percent each year. "As [US] state-level support declines and the cost of providing education increases, universities are looking for alternative ways of supporting themselves," he says. "The general perception has been that IT is a cost rather than an opportunity to generate revenue. We're changing that perception."
Smitherman is not alone. Smart CIOs are reclaiming their roles as revenue enablers (which diminished during the cost-cutting years) either on their own or in response to renewed interest from the top. "IT is playing a more central role in revenue generation," says Jeanne Ross, principal research scientist at Centre for Information Systems Research (CISR), who's studying the IT organization of the future. "It's partly because there may not be a lot more costs to cut, and the efficiency gains left to be made are marginal."
And during their cost-cutting days, she notes, many CIOs "got sophisticated in their knowledge of IT-enabled business process and have put themselves in a better position to enable new ways of doing things".
It's not just happening in industries where technology is the business, like financial services or software. Organizations contributing to the top line range from law firms to universities to trucking companies. "The Holy Grail of IT is: 'How do we become better business partners? How do we get a seat at the table?'," says Michael Rapken, CIO of YRC Worldwide.
YRC focused on seeking M&A efficiencies over the past few years but is increasing IT's involvement in making money again. "If we in the technology group don't have a focus on cultivating new business opportunities and revenue," says Rapken, "we're nothing more than a cost clog."
IT is uniquely situated to help the business identify and generate new revenue opportunities. For one thing, says Laurie Orlov, VP and research director at Forrester, "there aren't too many revenue-generating ideas left in the world that aren't dependent on technology". In addition, IT is the gatekeeper of data across the enterprise and understands business processes intimately after years of streamlining.
Introducing revenue generation into IT's portfolio of responsibilities has its challenges. Years of emphasizing consolidation and standards to keep costs low have created a rigid IT environment that's resistant to change and unfriendly to the needs of new business opportunities. IT also tends to be removed from the end customer, from whence all new revenue generates. Finally, many technology organizations are stretched too thin to invest in revenue-generating projects that may - or may not - work out.
But CIOs who want to contribute to the top line should take a page from the CIOs in this story, who are putting in new processes or reviving dormant ones to support this revenue-generating renaissance: harnessing the creativity that exists in IT, engaging with the end customer, ramping up for high-speed projects and letting go of some rules to take a chance on revenue-generating opportunities.
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