Anticlue

IT Value: Is it an Expense Center or a Value Center

Historically in most healthcare enterprises, IT is viewed as an operational expense. In order to change how IT is used, one has to have executive agreement to change the way IT is viewed and used.

There are some key indicators in how IT is utilized. First, a common item is to identify the percentage of the health system’s operating budget dedicated to IT. Standard is between 15 – 30% of the capital dollars and 2 – 3 % of the operating budget. Another comparison is if IT is being asked to cut expenses?

Another key component is the level of IT participation in the strategic planning process. One level of the organization’s maturity is where IT is included in the strategic plan. Is the CIO a partner in developing the strategic plan, or after all is said and done, does someone say, hey implement this to the CIO.

Discretionary dollars to keep the lights on are another indicator of how the organization views IT. As budgets come out, are there discretionary dollars to perform needed system upgrades and replacements? How long has that telecom equipment been in the closet? Are there broken piece and parts? A quick check is to see how far behind you are on core system updates. Are computers and equipment charged back to the departments?

Another “red flag” is that the IT steering committees are separated from and not integrated with operational and clinical IT decision-making groups. Are there even IT steering committees? Or does IT just decided to consolidate the clinical system, because it is expensive? This type of decision would need to be reviewed and discussed with a clinical leadership. Is there a clinical IT decision making group? Or is it general anarchy? Do cardiologists just email the CIO asking for a completion date to projects not even budgeted?

From Beyond Return on Investment, here are key difference is the expense center versus value center

There is also a signification distribution of IT Resources Compared to Customer Needs. This cyclical because of the treatment of It, when It is viewed as an expense, the sophistication level of the resources or integration of different components are just not there. So a significant amount of resource utilization is done as break/fix and operational maintenance.

How does one grow an organization from an expense center to a value center? Well it takes a team and a guiding vision. The place to start is with governance leading the IT principals or IT maximums based upon business strategy. (Along with decision rights)

First, organizationally determine what is important to your corporation and weight the ranking appropriately:

• Cost-effective use of IT
• Effective use of IT for asset utilization
• Effective use of IT for growth
• Effective use of IT for profit.

If cost effective comes up as the key weighted criteria, then you have an opportunity education and coaching at the exec level. For clarity asset utilization is the approach to share and reuse IT across the business units, process, and region. An approach would be to first reuse, buy, then build. Enterprises seeking profit tend to have a centralized governance approach, often having a centralized coordination and approval of IT investments. Leaders on revenue growth walk the tight walk on the entrepreneurial spirit with the enterprise’s business objectives. However, given the spirit of intent and strategic goals, clearly defining principals of IT, will clarify corporate usage and change the usage from an expense to a strategic partner.