From cost centre to revenue generator

There are those in business that see the role of IT as a support function and therefore a cost centre. But in the technology-driven 21st Century, technology can generate revenues.

“Technology as a whole has made a huge leap forward in all businesses to become more and more important in delivering value to customers,” says Tony McAlister, Chief Technology Officer of betting exchange Betfair.

McAlister thinks that CIOs can only be successful in achieving revenue and customer value if they develop a broad understanding of the wider business strategy.

CIOs need to consider how they can use technology to solve their organisation’s business problems.

“Those who have successfully realised this have become hugely important to the strategy of the business as they are no longer just cranking a handle in the back office,” he says.

The evolution of mobile and internet business models means organisations have become more reliant on their CIOs to create services for their customers’ benefit.

This trend is supported by Forrester’s Forrsights Budgets and Priorities Tracker Survey, Q4 2010, which revealed that 52 per cent of businesses agree that technology is a fundamental part of their business model.

“Many companies are starting to use technology as a business differentiator, and many businesses rely on technology to provide critical information for making strategic business decisions,” says Forrester analyst Khalid Kark.

Kark also says that “empowered social, mobile, video and cloud technologies” are making it easier to bypass CIOs and IT departments as “they are easy to acquire and to bring into the corporate environment”.

To combat this, CIOs will need to adapt their roles to drive business growth and customer engagement, manage demand and orchestrate sourcing delivery.

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They will have to become responsible for developing a strategic business technology plan and will also need to move beyond simply aligning IT with the business.

Kevin Gallagher, CIO at Channel 4, acknowledges this changing business role.

“I think historically it has always been fundamental to most businesses, but IT has been seen more as being about efficiency and automation to maximise the organisation’s return on investment, and yet the changes in technology enable us to reach more channels to connect with our viewers in a way that allows us to have a deeper relationship with them,” he explains.

By investing heavily in data and analytics, he can provide a more personalised experience and as a result the channel becomes more attractive to advertisers.

The focus is not on cost, but on improved service delivery.

Fleet of foot
Addison Lee, a taxi company which has 3000 minicabs, 200 VIP cars and a van-and-motorbike courier fleet, is using technology to scale its business.

“We had an excess of demand that could only be serviced by switching to an IT-driven fleet,” says Peter Ingram, Addison Lee’s IT director.

He explains that the application of IT helped him to remove an ‘allocation bottleneck’, and helped the firm to manage a period of massive growth in revenue.

“More importantly, it allowed us to stop worrying about handling the day to day running of the business to start concentrating on making decisions to grow the business while improving service delivery,” he says.

The key revenue, growth and loyalty generators for Addison Lee sit around the handling of reservations and ensuring that a driver arrives at the pick-up point on time.