Profitability (or lack thereof) has been a hot topic in IT management circles since the dawn of the CIO. Unfortunately, many of the discussions quickly move from looking for legitimate opportunities to generate a profit via products or services to accounting gimmicks like chargebacks and overwrought ROI calculations. Some CIOs, however, have been able to break this cycle and generate true profit using their internal IT operations to create a product that is sold to external, paying customers. While speaking to a group of CIOs in Greece a few months ago, I had the pleasure of meeting Michalis Moraitis, the CIO of Nissan Greece and someone who has done exactly that.
While Nissan's products obviously employ a great deal of technology, IT is generally not the prime revenue source for the automaker. Mr. Moraitis, however, realized that he was sitting on a goldmine: the data about Nissan's vehicles, dealer network, and customers, when presented in a useful and effective manner, is something that Nissan's dealers are willing to pay for.
Leveraging this data, his IT organization built what amounts to an eco-system: each dealership allows their employees to do everything from showroom management, workshops, warranty claims management, CRM, etc., all tied into Nissan's backend systems. This system has replaced local Nissan systems and systems developed by individual dealers' personal efforts. A centrally hosted and centrally managed ready-made solution is obviously compelling, especially when it ties directly into the automakers' systems. Dealers pay what amounts to a licensing fee to use the system, and it is based on data that Nissan already collects and maintains for internal use, essentially taking an existing resource, adding a new front end, and turning it into a compelling and profitable product.
Mr. Moraitis detailed the use of "private cloud" functionality in deploying the application, but in my mind the technology plays second fiddle in generating profitable products from internal IT. Generally, data or a superior process are what customers are willing to pay for, and once it is "packaged" using the appropriate commodity technology, it can function as a standalone product or service. Perhaps the most difficult part of identifying what would make a good product is that these types of data and processes are often so central to your business they are often taken for granted.
Examples like Nissan Greece abound: Walmart "packages" and sells the myriad data they collect at point of sale to their suppliers, and several companies I have worked with sell internal data ranging from customer preferences to detailed logistics information to their customers. Quite a few companies have developed such exceptional technical talent that they have "sold" their people as consultants to other companies, leveraging a particular skill or capability unique to that company. What is so compelling about this process is that it uses data and expertise you would collect and build anyway and that is already inherently valuable, essentially generating a bonus return on an asset you already possess.
Too many IT departments ignore these assets when considering how they can generate a marketable, profitable product. Follow Nissan Greece's example and consider what assets you have that might be valuable to another party. In many cases, customers or suppliers may already be asking for this information, and in the worst case, you may be providing it for free, essentially giving away a valuable revenue stream. With these potential opportunities identified, solicit the help of your marketing and product development staff to determine whether you have a true winner on your hands and how to best approach potential customers.
While these opportunities probably will not supplant your company's main revenue stream, cashing customer checks makes a far more compelling case for IT's ability to generate revenue than any accounting gimmick. Just ask Nissan Greece!
Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent over a decade providing strategy consulting services to Fortune 500 and 1000 companies. Patrick can be reached at email@example.com, and you can follow his blog at www.itbswatch.com. All opinions are his and may not represent those of his employer.