IT as a revenue center

When the Security Benefit Group’s IT department hit the streets in 2004 to try selling a homegrown service to external customers, there was skepticism in the ranks. “I can’t say anybody believed we would actually make a sale,” CTO Brent Littleton says.

After developing a state-of-the-art contracts processing platform for internal use, Littleton and CIO Dave Keith had decided to see if they could sell extra capacity externally, potentially opening a lucrative new revenue stream for the company. But when word came that the first sale had been made, Littleton recalls: “It sent the IT department into shock.”

Two years later, the venture has become a full-blown technology services unit called se², with CIO Keith as president. The fast-growing division boasts several large Wall Street clients, including one that does more business with se² than with parent company Security Benefit. “There’s a renewed energy here,” Keith says. “The IT department is standing tall.”

Around the globe, there’s a new entrepreneurial spirit percolating in IT. Perhaps more a re-awakening — recall that the first high-profile money-making venture to emerge from an IT shop, the Sabre reservation system, was born decades ago.

The stars may be uniquely aligned today, however, for a resurgence of money-making ventures developed in IT. More products and services than ever have software at their core, playing to IT’s strengths. IT has grown closer to the business, affording a better view of market opportunities. Commodity projects are getting outsourced, freeing up development resources. And finally, entrepreneurship has become cool again, if not obligatory, for IT. (See also "How to know when to keep great ideas in-house or launch a startup.")

“There’s a lot more pull for innovation now,” says Forrester principal analyst Alex Cullen. “CIOs are getting dinged in their performance reviews for not being innovative enough. IT is saying we have to do more to help the business grow.”

Although most IT shops deliver innovations that support their company’s current products, Cullen notes, far fewer develop offerings that can be translated into new, monetizable revenue streams. Yet examples are cropping up everywhere, from Boeing to MasterCard to Harris Corp. The models vary, but it’s clear that more and more innovations born in IT are coming to market and generating new revenue.

Security Benefit Group: The New Business Unit

Security Benefit’s IT department didn’t set out to build a revenue generating product. Instead, in 2002, it was given the task of transforming the company’s legacy contracts processing system to support faster growth.

“We were your typical slow-moving insurance company,” CTO Littleton recalls. “It took a long time to get products out to the street, and we were spending 70 to 80 percent of our IT dollars on maintenance.”

The 650-employee provider of financial services and retirement plans for employers, founded in 1892, was running a traditional Amdahl and IBM mainframe environment, Littleton explains. Product rules were embedded right in the source code, requiring “massive coding changes” for any product modifications or introductions.