Why is IT still Portrayed as the Cost Center?

Digital CIOs have to have a clear and big picture of the company's core business and goals, in order to reinvent IT reputation and lead IT strategically and profoundly.

With the abundance of information and emerging digital technologies, opportunities, dangers, and disruptions are around every corner. IT touches both hard business processes and soft human behaviors, and plays a crucial role in driving changes and making a leap of the digital transformation. However, based on the fact that most IT organizations still get stuck at the lower level of maturity, forward-thinking IT leaders should ask themselves: Why is IT still portrayed as the cost center, and how to reinvent IT as the growth engine of the digital business?

IT is portraited as “order taker” only when they only react to the business's request: Traditional IT organizations focus on keeping the lights on, taking orders from the business to fix immediate problems. When IT departments that are set up as a shared service, and consider their "customers"  internal users only, they end up as order takers. This is when IT organizations are often in businesses or business units where IT offers little or no competitive advantage. In order to reinvent the digital reputation of IT, IT leaders should make an objective assessment of IT organizational maturity. Is IT strategic or tactical? If the organization is strictly tactical, yes, IT is an order taker. Is IT a service provider or a business solutionary? If IT is equal to the help desk mechanism or being thought of as “unnecessary overhead,” yes, IT is an order taker and cost center, you have effectively become a commodity. To reinvent IT reputation as the value creator, CIOs need to be able to recognize the struggles of the company by understanding the business beyond IT, CIOs should be invited to the big table,  bring the table real value and contribute to the top line of the business. So, it is an advantage if the CIO has diversified experience, interdisciplinary knowledge, or technical expertise to identify IT visions and gaps between IT service and business operation, and ultimately, eliminate the gaps. Instead of reacting to the customers’ requests, IT should be running to take business initiatives proactively, either for leading changes systematically or optimizing organizational structure and business ecosystem to improve its effectiveness and fluidity continually.

Traditional IT organizations are perceived as the controller, slow to change: Traditional IT has a reputation as a controller and traditional IT leaders often apply “Command and Control” (C&C) management style to either manage people or control the technology usage of the business. However, with the service-on-demand model and the lightweight digital technologies, the business can bypass IT easily to order IT services from the third party if internal IT does not present a competitive advantage. IT needs to become more competitive for building a great reputation as a trustful business partner. The reason most of IT organizations get stuck in the lower level of maturity and being perceived as the controller and digital laggard is that they are too busy on fixing the symptoms or taking care of immediate problems. To reinvent its reputation, digital IT need to become the change agent of the company. IT is also something to have the IT resources (people and operational IT processes) refined to the point that they are nimble, can adapt to changing business demands in a timely fashion, can be reapplied to altering business priorities and be effective with the little down curve.

Traditional IT is often portraited as the cost center because doesn't have a full picture of IT contribution: IT performance is only evaluated via inside-out lens, with the measurement that the business is not interested in, often, it is perceived as the cost center, because businesses don’t know how IT can contribute to the revenue growth of the company. The right set of ROIs is the best way to demonstrate the value of IT, to make IT investment more transparent and measurable, to create the synergy and differentiated capability for business growth. IT should also help the business improve net profit, by reducing the cost of doing business, leveraging right sourcing and sizing, and maximizing output, etc. IT must be measured through a business viewpoint. Set right KPIs to measure the level IT contribution. If CIOs are perceived as business executives, they should be able to demonstrate revenue generating expertise. Exemplify how IT directly impacts productivity or innovation. if IT part cost remains constant in terms of value compared to gross; IT is then contributing to productivity increase. If IT leaders can articulate their effort on business innovation both qualitatively and quantitatively, IT is on its way to becoming the innovation engine of the digital business. CIOs are taking on responsibilities outside of the IT domain, and in some cases with direct revenue generating responsibilities. They can articulate the existing and potential value of IT via a language and measurement senior executives understand quantitatively.

To reinvent IT reputation as the value creator and running a high proficient IT means a lot of things IT has to master, such as operational excellence, innovation, performance, change, integration, modernization, optimization, intelligence, value creation, speed, and maturity, etc. CIOs have to have a clear and big picture of the company's core business and goals to lead strategically and profoundly, manage a “run, grow, and transform” portfolio skillfully, and accelerate IT performance and unlock the full digital potential of the business.

Posted in: Change Management,IT Transformation