More and more corporates re working to create separate companies out of their IT departments. Initially, it was thought to be just one of the companies big corporate houses create to manage their overall books and save some taxes, but eventually, the usefulness of this move is coming out loud and clear.
The early movers like 3i Infotech (IT wing of ICICI bank) and ITC Infotech (IT Company of ITC eventually ended up becoming a revenue generating companies with their parent companies just contributing to a small fraction of their revenue. This encouraged a few more who were not in IT arena before, to take this step including big ones like Reliance Industries and .
Many CIOs, who aspired to be CEOs running their own companies did show the business case and made themselves the CEO of IT companies the parent organisations gifted them. Some were able to show success, some remained without much outside growth and for some, the companies remained in just the books.
After all, what is this all about. IT departments were traditionally treated as support functions with no direct measure of productivity like sales and production. Initially, almost all IT departments reported to the CFO as the key function using the IT systems were accounts and finance. However over last decade, everything changed. IT has become the essential part of organisational growth and key differentiator in the market. CIOs have become more powerful and ambitious. The CEOs too feel that measuring performance of their IT function would be best done by creating a separate profit centre where their IT departments have agreements with user departments and charge a fee for service. This just not stop here. IT departments who were earlier protected get subjected to harsh reality of market dynamics where they have to become increasing customer focussed and openly compete with other IT service providers.
It has been seen that this move creates higher accountability and success from the IT folks as compared to the traditional IT function which still exists as a support function of the companies. Going ahead, it is not unwise to think that CIOs would start managing IT like a business as a default and as a function only as an exception.