Have you ever heard stories about HR people who get called in to fire lots of people and then get fired themselves when they finish the job? There’s a parallel here with IT managers who are told to focus all their time on cost cutting. If cutting costs is all a company wants from IT, then once the job is finished, the company will inevitably decide to get rid of lots of their senior IT staff because why do they need high paid people to run low cost operations?

The future of in-house IT groups lies in making the transition from cost center to profit center. Unless an IT group becomes part of how a company makes money (instead of just how it saves money), then it will be outsourced. IT operations that are viewed as cost centers will be outsourced because large outsourcing companies can always perform those operations at lower costs than most in-house IT groups. Many traditional IT activities such as running data centers, providing help desk services and operating standard application packages like ERP and CRM will be (or already are) outsourced for this very reason.

The best opportunity for IT groups to become profit centers (and avoid being outsourced) is for them to become the means by which their companies produce and deliver tailored bundles of information based value-added services that enhance otherwise commodity products so as to attract new customers and meet unique and evolving needs of existing customers. This also means that sales people at companies need to understand how to sell those value-added services and get customers to pay a higher price to recieve them (here's an example showing how I used IT to help my company earn 2-4% more on their otherwise commodity products).

All too often sales people are motivated to move high volumes of products regardless of profit margins so they throw in the value added services for free and that destroys any chance of IT becoming a profit center. If senior IT management wants to insure their own future in a company then they need to get involved with their company’s sales people (easier said than done but absolutely necessary). In-house IT managers need to understand their company’s sales cycle and see where they can assist in selling and delivering tailored bundles of information based value-added services that customers value and will pay extra for. If companies cannot sell value-added services like this, then IT is just another cost center and companies will keep finding ways to outsource more and more of their IT operations.

So if all your company wants you to do is cut IT costs (and if you don’t have any other ideas), then take your time; don’t be too much in a hurry. And when you’re finished with that job make sure you’re ready for what will inevitably follow.

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