IT as an insurance center

Not all companies view IT in the same way. Some see it as an expense to be tolerated (a.k.a. a cost center). Others view it as a way of making (more) money (a.k.a. a profit center). A company’s industry, age, and management demographic are significant influencers of how a company treats its IT organization. A while back, a post on Reddit described a third view: IT as an “insurance center”.

It’s an interesting idea. The thought of IT being a mitigator of loss instead of simply a money hole certainly helps sell expenditures to executives. On the other hand, it seems that a lot of the risks mitigated with IT services are a direct result of the services themselves. An email system may be more efficient than typewritten memoranda, but does the email system really prevent or mitigate loss? If anything, it’s more likely to introduce loss when the system that everyone depends on goes down.

The more I thought about it, the more I’m convinced that it’s folly to treat IT as a monolithic organization, at least when it comes to characterizing the kind of center. Characterizations should be made at the service level. Basic infrastructure, no matter how necessary, will almost always be a cost center. Services that enable the business to do more of whatever business it does, to expand into new areas, or to otherwise bring in more money are profit centers. Services that protect the company against loss are insurance centers. A healthy company will have all three, but they can’t be managed the same.

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