Making IT a profit centre

It's great to use IT to cut costs, but people expect that. How can IT be used to increase your company's revenue? How can IT be used to differentiate your company from similar ones? How can IT be used to better please the people your organization serves?

Think about this: how can you employ IT to enhance the value of your company's products or services by adding additional features that your customers will value? Let me illustrate the idea. I work for a company that sells basic commodity products: food service disposables such as paper cups, napkins and plastic spoons, and cleaning supplies such as mops, floor wax and paper towels. Our customers can buy these things from many suppliers. One of the main reasons they buy from us is that we use IT to significantly increase the value of the products we sell.

When customers buy from us, they get a customized package of value-added services that fit their specific operating needs. They can order using our Web-based order entry system or their EDI systems. They can use XML or FTP. Or they can phone or fax us. They get daily updated sales history reports through our Web site that show their usage of our products at each of their locations, by supplier, product and volume over any time period, from one day to three years. To invoice customers, we can send them electronic invoices or statements in any format they need in order to automatically import them into their accounts payable systems. We format and preprocess the invoices or statements to insert whatever special general ledger codes or other data their accounting systems may require.

All of these services enhance the value of our products. We work with customers to enable them to control who in their company orders our products and which products they can order. We then provide them with sales information that lets them do a much better job of planning and budgeting their purchases and monitoring daily usage of our products. We help them streamline their back-office accounting procedures. We even provide customers with weekly or monthly report cards that track our performance against certain agreed-upon key performance indicators.

These services enable us to provide tangible proof that we do indeed lower customers' overall costs. And all of these services required IT in order to become a reality.

Because of these services, we don't have to compete on price alone. Our prices need to be close to those of our competitors, but we don't need the lowest prices to win new business. In this way, IT delivers part of all the products we sell. IT helps my company actively manage its profit margins.

Try this: write up a description of the value-added services your existing IT infrastructure can add to the products or services your organization provides to its customers. Work with managers in your sales department to educate salespeople about these value-added services and train them in how to spot opportunities to sell these services to customers. When salespeople ask you to come out and meet customers and help them win new business, you will know that you have succeeded in jump-starting your career. Through helping your company add new value to its products, you have added new value to yourself. And, unlike my company's paper cups, you're no longer a commodity.

Michael Hugos is CIO at Network Services Co, and author of Essentials of Supply Chain Management (John Wiley & Sons, 2003)

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