Setting the record straight: Showing IT’s value to the bottom line

IT’s long had a reputation as being a cost-center. The argument goes that the entire IT department is a drain on resources that could be better utilized making the company money. Of course, this isn’t accurate – but setting the record straight won’t be easy. 

According to a recent report by Gartner Inc., IT’s share of the budget has actually decreased in recent years. In 2008, the average spending on IT as a percentage of revenue was 4.1%. In 2013, that dipped to 3.5%.

That’s a decrease of about 17%.

To put it bluntly, IT often doesn’t wind up costing companies all that much compared with the amount of profit the organizations take in. It’s only in some peoples’ minds that IT is eating away at resources.

Fair or not, this is reality

The study is compelling because it looks at IT spending through a new prism.

Rather than many surveys which just ask for a straight up or down vote on whether IT is spending more or less money than it has in the past, this report considers another factor: how much money is coming in.

This illustrates a common bias IT departments are hurt by: They’re seen as a cost-center for organizations, but at the same time, the outcomes they deliver aren’t even thought about. Any other department can ask for additional funds if they show the effect it can have on profits. But with IT, it’s assumed that there will be no payoff – just money leaving the organization.

According to Gartner, some indications of this mindset include:

  • executives focusing on direct costs of IT operations instead of how spending money on IT could lead to earnings in other departments
  • project proposals focused on budget instead of outcomes
  • funds being spent outside the IT budget on IT services (i.e. the sales department going outside of IT for a service that could be provided in-house if IT was given the budget resources), and
  • maintenance and replacement of business-critical equipment is deferred even on critical systems to reduce overhead.

Changing the thinking

Showing IT as not just an essential part of the business, but one that can help companies’ bottom lines won’t be easy. But it’s an essential part of getting the funding needed to support your important role in the organization.

Here are three ways to get higher-ups to change their thinking about IT:

  1. Start from within. Make sure your team is the first group to buy into IT’s new role. Explain to techs how everything they do, from helping a user with a problem to fixing bugs in critical software, provides value to the company.
    Instead of treating internal IT work as in service of the user, externalize it. Explain that the things you’re doing to help your own co-workers will have a positive outcome on their ability to help outside users, and ultimately bring in profits.
  2. Discuss value, not costs. It’s easy to fall into the trap of thinking that IT’s initiatives fall into the category of expenses, not value. When people ask how much an initiative costs, you don’t want to ignore the question. But you will want to rephrase it.
    Ask them how much it’s worth to have the outcome. For instance, is extra up-time worth it to the organization? Probably so, but discussions of cost alone ignore that fact.
  3. Track successes. John F. Kennedy once told the CIA, “Your success are unheralded, your failures are trumpeted.” That probably sounds familiar to IT pros.
    Don’t let a good success story go unrecognized. Benchmark and track your progress so you can always present higher-ups with evidence of your improvement, solid track record or future needs.