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The newsletter was first emailed in 1998. In 2001 Benoît discontinued it in favour of professional writing for magazines.
The “From Cost Center to Opportunity Center, December 2000” page was archived in 2003 to preserve the original content of December 2000.
 
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Welcome to the 36th issue of Pineapplesoft Link! Most new subscribers come from word-of-mouth recommendations by existing readers. Please tell 2 friends about us this week! We rely on you to expand our subscription base. Thank you.

Once in a while I write a less technical issue. This month is one such issue where I discuss evolutions in the IT industry and how it affects web developers. Next month I'll be back with the usual technical discussion.

From Cost Center to Opportunity Center

When I was studying computer science, our teachers told us that, unless we worked for a software editor or an hardware manufacturer, we would work in a cost center.

At the time I didn't know what a cost center was but here's what they explained. The accounting department is a typical cost center. It costs money to pay the accountant and his or her secretary's salaries but they contribute nothing to the turnover. The law --not to mention good business sense-- requires a company to account for its revenues and expenses but it does not generate value. A cost center is an expense that is accepted as part of the cost of doing business but that does not contribute to the turnover.

As a young computer scientist, I was facing a life as a cost of doing business. Indeed it makes good business sense to install software and automate as much of the administrative tasks as possible but it does not contribute to the turnover.

This line of reasoning, common at the time, has led to the widespread belief that IT departments exist solely to serve the other departments. I meet many computer scientists who adopt this point of view. They use words like "the business comes first" where "the business" stands for "the money-making departments." IT, being a cost center, comes second.

Unfortunately, if that was a sensible attitude 10 years ago, it has become obsolete and even downright dangerous in the information age.

Indeed for an information-driven company, computer systems are like factories in the industrial age --the flesh and blood of the business. In the industrial age, businessmen would invest in good factories. Although building factories was expensive --a very serious cost indeed--, it was also the foundation of the business.

I think we need to review IT in the same light. Computer systems are the flesh and blood of tomorrow's powerhouses. Don't get me wrong, I'm not advocating unchecked investments in anything technical. The numerous dotcom failures are a keen reminder that turning a profit remains a business priority. What I'm saying is that to turn a profit information-age companies will need to invest in IT.

Want proof? I lack the space for a detailed explanation but look at distributors and supermarkets. To turn a profit they need more than good stores --the industrial age investment--; they need to manage the logistics efficiently. This, in turn, requires computer systems --the information age investment--.

Note

After I wrote this article, I found http://www.infoworld.com/articles/ca/xml/00/11/27/001127caechange.xml which discusses the same issue.

Why It Matters

You might think I'm word playing. Does it matter if we call IT a cost center or a factory-like investment?

It does because it changes our perception. As long as we think of IT as a cost center, it has to take a back seat to the other departments instead of pro-actively looking for new business opportunities. That's where the heart of the matter is, for me. Who better than computer scientists understand where to look for business opportunities?

I realize that what I'm writing might be misconstrued as investing in technology for the sake of investing in technology. That is not what I am suggesting either but I'm walking a fine line here.

Let me take an example to illustrate what I really mean by "investing in IT." As you know, I'm mostly active in business-to-business electronic commerce. For 20 years, business-to-business electronic commerce was EDI.

EDI however is a typical cost-center vision. The purpose of EDI is to lower the costs of doing business. Companies implement EDI essentially to process paperwork more efficiently and more cheaply. When done well, the payback is enormous.

However that is a cost-center vision because the goal of the IT solution is to make other departments (e.g. the purchasing department or the manufacturing department) more effective.

In sharp contrast, modern business-to-business electronic commerce aims to open new markets and new opportunities. For example, online marketplaces offer new channels for buyers and sellers to conduct business. They also offer new opportunities for collaborative working which results in new products, which result in more profits.

It's Affecting You

Ultimately how does it affect you, the web developer?

If you stop thinking that you are part of a cost center, you'll start looking for business opportunities. Maybe your company products could be sold in new ways (let's not forget that book sales in the US have risen for the first time in years thanks to electronic commerce), maybe you could sell new products (you might compile valuable market information that would have a serious market value).

In the information age, software is the storefront, warehouse and factory. In the information age, you work in an opportunity center.

Self-Promotion Department

XML by Example and Applied XML Solutions have received lots of positive comments. XML by Example is a great tutorial for beginners, Applied XML Solutions is the ideal complement for developers. Both books are available in your favorite technical bookstore or online at http://www.marchal.com.

I am considering a licensing option for Pineapplesoft Link. The idea being that you could distribute a "Your company" Link with the same feature article but your ads and your promotion. If you have a technical web site then a "Your company" Link is the perfect complement to retain and acquire visitors.

I would host and manage the list for you, use the same feature article as in Pineapplesoft Link but let you change the title, the ads, etc. I have not decided on the fee yet although I would expect to charge between $500 and $1000 per month. If you think you might be interested (no obligations), please let me know.!

About Pineapplesoft Link

Pineapplesoft Link is a free email magazine. Each month, it discusses technologies, trends and facts of interest to web developers.

The information and design of this issue of Pineapplesoft Link are owned by Benoit Marchal and Pineapplesoft. Permission to copy or forward it is hereby granted provided it is prefaced with the words: "As appeared in Pineapplesoft Link - http://www.pineapplesoft.com."

Editor: Benoit Marchal
Publisher: Pineapplesoft www.psol.be

Acknowledgments: thanks to Sean McLoughlin MBA for helping me with this issue.

Back issues are available at http://www.psol.be/old/1/newsletter/.

Although the editor and the publisher have used reasonable endeavors to ensure accuracy of the contents, they assume no responsibility for any error or omission that may appear in the document.

Last update: December 2000.
© 2000, Benoît Marchal. All rights reserved.
Design, XSL coding & photo: PineappleSoft OnLine.