How to Make ‘IT’ a Profit Center and Not Just a Cost Center
In the old days of doing business, a company’s profitability was based almost exclusively on their sales. Improving profitability meant reducing costs on everything, while still supporting sales. Of course, when companies realized IT and tech strategies were absolutely crucial to functioning, business owners accepted the fact they would have to live with the costs, but that didn’t mean they wouldn’t make every effort to keep them as low as possible.
Wait, is this really just a memory?
If you are stuck managing IT from a cost center POV, you are missing out on the benefits technology can contribute to your company’s profitability. In fact, if you view technology simply as a tool for helping people do their jobs within the company and not a crucial component of your business strategy, you are leaving a huge competitive advantage sitting on the table.
Don’t get me wrong. I’m not minimizing how important it is to keep your hardware up and running efficiently or the time and effort needed for maintenance and system updates. However, there is a side of technology that offers an edge on growth and increased profitability when it’s used to make what you want to do with your company a reality. Then, technology becomes a part of your vision. Here’s the thing…cost centers are not visionary.
Here’s a quick look at two common examples of situations I’ve ran into when IT consulting with companies that have let IT languish as cost centers. First, the IT budget is highly limited with the only goal being to support users. Since investments are only made when a fix needs to be made, keeping on top of technological advances is impossible. Sure, things look like they are running smoothly until internal staff runs into challenges when working with external business partners who are using newer versions of software. It’s just a matter of time before chaos erupts. Faulty hardware, outdated systems, and malfunctioning software eventually result in a significant (and unplanned) technology investment. Of course, there’s also the fallout related to employees leaving in disgust and lost revenue.
The second example involves IT that is content to fly under the radar with no desire to be involved in planning for the company’s future. After all, as long as the users are happy, there’s no reason to be concerned about tomorrow, right? When management doesn’t ask for anything more, things go along swimmingly until it’s blatantly evident that a system needs to be replaced. So, they select a vendor, get a new system installed, and…it doesn’t work. When the finger pointing finally comes to an end and the smoke clears, the solution needs to come from IT. Of course, they require an unexpected and probably REALLY expensive investment in terms of cash, time, and most important, finding people who can make things work right.
Both of these emergencies can be prevented by making IT a profit center. Begin by incorporating technology into your business strategy, plan, and execution as a key player. Additionally, include IT when establishing objectives and goals, while defining exactly what contributions technology can make to improve your business processes.
To do this, bring in an experienced IT consultant who can help you begin managing both sides of technology, meeting user needs and anticipating/ planning for the future. Now, IT isn’t only a cost, but a committed partner intent on making your company both more successful and profitable.