Is IT a Cost Center? Evolving Towards Agility
Over a decade ago – and well before today’s cloud concepts – I was encountering limitations in defining and expressing the value of various IT initiatives, when I came across a Gartner article discussing how evolved IT organizations would move away from the concept of IT as a cost center. What exactly does that mean?
The idea of a cost center is basically a necessary expense of doing business. You need email, and your traditional client-server applications and these require servers and operational overhead. Thus IT was often perceived as a necessary cost of doing business, and the way to get projects approved was to demonstrate ROI and TCO benefits. But not all benefits can be effectively measured with either metrics or against alternative options, and thus we have intangibles.
Intangibles are essentially benefits which are not easily measured. What is the value of my sales force having access to SaaS applications on their iPads in the field? What’s the value of rewriting my legacy application to newer agile methods? What’s the value of choosing an IT strategy and architecture that enables IT to quickly respond to business demands – or in other words, Agility?
This is the horizon at which we realize that IT doesn’t need to be just a cost center, but it can be a vehicle to provide value to the organization. Long before this “cloud” thing, Bill Gates wrote about the value of quickly getting valuable information to the right people in “Business @ The Speed of Thought”. The concepts are the same but today in the cloud era we have a new set of technology enablers towards this end. Today we see this concept exploring new avenues such as leveraging “Big Data” to deliver analytics which could profoundly improve decision making at the highest level. And what is the value of improving decision making at the highest levels? What is the value of being first to market? What is the value of out-maneuvering your competitors?
Above is a value triangle I used in previous posts on Agility within the context of IaaS. At the bottom level we use virtualization to reduce our capital expense (CAPEX) by reducing servers and associated variable costs. But then as the organization evolves they discover new capabilities and methods to reduce operational expense with virtualization, automation and orchestration. Building on this foundation, the evolved IT organization will make strategic moves to capture the value within the Agility zone – such as converged infrastructure and self-service orchestration at the top of the stack. This is a paradigm shift in both how IT is utilized and perceived. No longer is IT a mere cost center – now the IT organization is a trusted business partner that can assist in the rapid execution of business strategy. What’s the value of that?
Some recent good posts I’ve seen that touch on this concept are Chuck Hollis’ post on The ROI Trap and also Mark Thiele’s “Cloud is a State of Business”. I’ll be expanding on this concept in future posts at multiple levels of the “stack”.