IT: Cost Center or Internal Business Service?


Guest Blogger: Don Sears

Is IT a cost center or a provider of vital business services? Seems to me that those roles are not mutually exclusive, but I understand the desire to make IT more business focused while driving the cost out, keep risks at bay and customers somewhat happy.

One way some CIOs attempt to accomplish business and IT alignment is the ITSM (Information Tecnology Service Management) process. Here is a decent explanation of what ITSM is meant to be--a way of boiling down IT into services that can then be compared to products that outsourcing companies provide. The effect is to allow you to know what to keep internally and what to potentially outsource.

From the link above, one executive finds this as a key finding in doing a few ITSM reviews:

What I've found twice now in performing this [ITSM] exercise with two different companies is that when you map the IT services to the business processes, there is a disconnect as to where the IT services are focused. A huge percentage of time and resources from IT are spent, not in direct support of the core business processes, but in support of the Support or Innovation processes...
By having the larger percentage of IT services focused on support processes, you are one layer removed from the transaction and the IT department is doomed to be a cost center forever. Instead, look for outsource partners that can support the support processes while you and your team focus on supporting the transaction and how the business makes its money. This way you insure IT's role in adding value to the organization.
This makes sense, but how easy is it to get away from supporting the support? I'd like some stronger examples of what supporting the support really means.

When looking at IT through the lens of business services, what tends to get lost is that every IT environment has its own ecosystem, and finding an outsourcer to manage and support your environment will require potential trade-offs in: risk management (think access, security issues, who controls root passwords); asset management (think not owning hardware/software/licensing/data/vendor relations), costs associated with changing outsourcers, and challenges when you don't control, say, customer service.

This is not an argument against outsourcing, just a real-world take on the complexity of outsourcing supporting functions. It can work, but it's not the end-all-be-all for making IT more of a service. Supporting the support may have efficiency and perception benefits that could make all the difference in rough, money-making times.

Make sure you have a clear, flexible backup plan in supporting the support if things don't work out. In the end, outsourcing or no-outsourcing, your head is on the line when problems arise.


3 Comments for "IT: Cost Center or Internal Business Service?"

  • IT Outsourcing March 26, 2010 7:55 am

    As per my experience of such collaboration in the consumer world, people would increasingly expect the same facilities in the enterprise enabling more productive and innovative ways of investment time into learning and sharing ideas and experiences.

  • Patrick von Schlag February 27, 2009 9:01 am

    I think you are missing the big idea here...we spend too much of our resources on reactive firefighting and not nearly enough on IT/business alignment and proactive service planning (like proper testing and change mgmt). ITSM has demonstrated that substantial cost savings, improved service quality and availability, and increased customer satisfaction come when orgs mature into more proactive service providers. We also get to demonstrate the real value of IT in driving the business's competitive position.

  • Tom Lodahl February 27, 2009 8:44 am

    When we measure IS Contribution by business functions, we often find the same thing: support departments get better service from IS than operational ones. The best way to improve overall IS contribution (and company profit margins) is to reverse this split, giving more and better support to operational units.

Leave a Comment