How big data is transforming IT from a cost centre to a profit centre

How big data is transforming IT from a cost centre to a profit centre

IT departments driving revenue with big data

The rise of big data is turning IT departments into “profit centres” for businesses, according to Hitachi Data Systems chief economist, David Merrill.

In an interview with CIO Australia, Merrill also predicted an end to organisations owning most of their own IT infrastructure.

While many companies are still exploring the potential value of big data analysis, the companies that have decided to go forward are realising major return on investment, Merrill told CIO Australia.

“We’re in the first trimester” of big data analysis, Merrill said. Some big retailers are doing it, but most companies are still trying to determine whether there is any business value or “if this is just another IT exercise to spend more money on some kit.”

“Even if we don’t have the big data in the analytics sense, we are seeing a growth curve that is not slowing down at all.”

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Merrill believes that big data heralds a major shift for IT’s role in enterprises.

“This is the new role for IT,” he said. “Now IT is not just processing payroll and running a time card; it’s now generating real-time business value and driving new business markets and new business opportunities.”

“This is where IT people have got to turn from being reactionary to where you’ve got to have CIOs and CTOs who are really agents for change and saying, ‘We will make IT drive value and drive revenue and drive new business opportunities.’”

“In your leadership, do you see IT as a cost centre or a profit centre? It’s as simple as that.”

Big data can drive profits for nearly any type of organisation, but businesses must determine how, Merrill said. “Everybody has big data; it just may not be that big.”

“Everybody is keeping data for legal reasons [or] for compliance reasons, and now they’re starting to see the harvest value of going back to that data and extracting meaningful business analytics out of it,” he said.

How to get started depends on the industry, Merrill said. The business has “got to be able to understand what kind of data do we generate and how do we use this. What are the potential opportunities?”

The CIO must determine how to “make some money out of this” and how to be “entrepreneurial” with the data generated, he said.

Owning Less

Merrill predicted an imminent shift to consumption-based pricing of IT services.

“I believe that capitalisation of IT infrastructure is largely going away in the next five years,” he said.

“There’s some huge political and transformational problems with that statement, but I believe that depreciating IT assets for four or five or six years gets in the way of cost reduction efficiencies and IT agility.”

The National Australia Bank is one organisation moving toward infrastructure-as-a-service. In a recent speech, NAB executive manager of enterprise transformation, Adam Bennett, said the bank’s IT department would become an “orchestrator of services” rather than run them itself.

Merrill believes some core systems will continue to be owned by the business, but that “the majority of our IT assets in the next five years will go ... to a utility-based model of some sort,” he said.

“That doesn’t mean it’s going to be in the cloud. The asset could still be on their floor [and] still be behind their firewall. They just won’t own it.”

“It could be a rent, it could be a pay-as-you-go, it could be a flex lease,” he said. “You pay for what you use.”

Follow Adam Bender on Twitter: @WatchAdam

Follow CIO Australia on Twitter: @cio_australia.

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