IT Expenditure – Profit Centre Focus   Leave a comment


Why can’t IT be seen as a profit generator? Why is it that the default position when it comes to IT expenditure is efficiency and not investment?

For me the key here is that IT should not be seen as an amorphous whole. That its function is not the same across the entire organisation. An analogy. For example, don’t we view sales people differently to accounts staff? Isn’t the output from the operational people different from the executive? For if we have people in different roles with different purposes, can’t we have IT in different roles with different purposes?

Aren’t we aiming for effectiveness and efficiency from our operational staff, and income and opportunity growth from our sales staff?

Why can’t we view our information systems the same way? That is, that our information systems are dual use? That in different contexts in the organisation, IT should be viewed and used in a manner relevant to that context.

So, if IT can be viewed as a profit generator – what should our frame of reference be for making decisions? If technology is there to produce income – how do we decide what investments should be made?

If TCO is the measure for operational efficiency, isn’t ROI the measure for income generation?

And yes, there are other formulae for guiding investment decisions.

So, viewing IT from a profit centre focus requires an understanding of the range of potential gains from the investment. These include tangible and intangible factors. It requires a judgement about the additional cash flows from the range of projects under consideration. It requires an understanding of the opportunity costs of doing one project and not another. It requires alignment between the business goals and IT strategy.

For me, IT can definitely assist in the generation of intellectual capital. It can improve income generation potential.

Think about this – if the organisation you work for, whether for-profit or not-for-profit, is operating in the information space – doesn’t it stand to reason that information technology is fundamental to the creation of value?

 

 
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Posted September 22, 2014 by terop in Business Strategy, ICT Strategy, Innovation

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