Turning IT Into a Revenue Stream

Susan Nunziata, Director of Editorial | 4/1/2014 | 17 comments

Susan Nunziata
IT has traditionally been thought of as a cost center in the enterprise, but one healthcare organization is changing that perception and, in the process, reaping substantial revenue.

The University of Pittsburgh Medical Center (UPMC) embarked on its journey to turn IT into a revenue source after doing some simple industry comparisons, according to Dan Drawbaugh, SVP and CIO of UPMC, who spoke at the InformationWeek Conference in Las Vegas on March 31.

"As a provider, 2 percent is the profit margin you make on healthcare," said Drawbaugh. "In the IT world, 46 percent is the average top tech company profit."

It was time for a transformation. "Our CEO said, 'No longer are we going to be only a healthcare company; I want us to become an IT company.' He said the IT organization must bring $100 million to the bottom line [in the first fiscal year] growing in our second fiscal year to $200 million."

Or, as Rebecca Kaul, President of the UPMC Technology Innovation Center and Drawbaugh's co-presenter on the session put it: "We aren't your mother's IT shop anymore."

By its fifth fiscal year, UPMC's IT operation is predicted to generate $300 million in revenue.

How are they doing it? One product at a time. According to Kaul, UPMC is leveraging its IT expertise and its clinical experience in a variety of ways, including:

  • Providing advisory services -- helping other healthcare organizations implement electronic medical records, analytics blue prints and program design, virtual care, and natural language processing.
  • As minority investors -– for example, the company is a minority investor in dbMotion. According to Drawbaugh: "The decision was that if we need this technology, so will others."
  • Joint venture development -– the company is involved in developing new solutions in efforts with GE Healthcare, among others.
  • UPMC companies -– the organization is creating its own companies, including Prodigo, Askesis, D3, Dialysis, and eBenefits.

According to Kaul, one of the joint venture development efforts is already bringing in $22 million annually, and it took only 18 months to sign 20 commercial contracts.

So, how does a CIO transform from running a cost-center to running a revenue-generating line of business?

Drawbaugh said he had to learn about development ventures and JVs, not usually the domain of the typical CIO. However, he said the biggest challenge/opportunity in healthcare came in realizing that the typical way of looking at healthcare vendors was skewed. Drawbaugh says the previous assumption was that the traditional vendors providing the products were bringing 80 percent of the value, while UPMC was bringing 20 percent with the clinical domain knowledge piece.

"We realized it's the opposite: Clinical domain knowledge and understanding the workflow of healthcare is really 80 percent of the value. Being committed to the project and then aligning the clinicians to work full time on that initiative has been truly the differentiator. Learning how to do that and how to structure it and how to align incentives has been the most important element" of UPMC's transformation, he said.

What do you think? Can your IT organization become a revenue stream? Is this kind of opportunity unique to the healthcare environment, or are other industries also missing out on an important earning opportunity? Share your thoughts in the comments section below.

Related posts:

— Susan Nunziata, Circle me on Google+ Follow me on TwitterVisit my LinkedIn pageLike EnterpriseEfficiency on Facebook, Director of Editorial, EnterpriseEfficiency.com

View Comments: Newest First | Oldest First | Threaded View
Page 1 / 2   >   >>
SunitaT   Turning IT Into a Revenue Stream   5/24/2014 2:21:31 PM
Re : Turning IT Into a Revenue Stream
Turning IT into a revenue system is not a bad idea. It is high time IT organizations advanced into being revenue streams. This is because very many environments are embracing IT and enjoying its benefits. By making it a revenue stream, some of the people who fail to appreciate the importance of IT and even abuse it will be forced to stop. IT can also use its experience in the ways mentioned by Kaul such as acting as minority investors in some companies so as to earn revenue.
The_Phil   Turning IT Into a Revenue Stream   4/28/2014 9:38:48 PM
Re: Re : Turning IT Into a Revenue Stream
This is the internal v. external customer debate when it comes to IT. You would think that external is always revenue-generating & internal is only sustaining the business. Truth is that it's a mix of both that makes the company money. But the systems that facilitate those processes are still beneficial either way.
singlemud   Turning IT Into a Revenue Stream   4/28/2014 3:26:05 PM
Re: Re : Turning IT Into a Revenue Stream
Totally agree, that is the core value of IT.
Anand   Turning IT Into a Revenue Stream   4/14/2014 6:36:11 AM
Re : Turning IT Into a Revenue Stream
Has IT not been beneficial for every organization already? Do the organizations think that they are investing in their IT departments for the sake IT professionals? Besides, every person or department in the organization is not supposed to bring in the money. Some do business for the company, while others facilitate those people and the company. This is exactly what IT is doing.
Anand   Turning IT Into a Revenue Stream   4/14/2014 6:35:31 AM
Re : Turning IT Into a Revenue Stream
It is a strange and amazing proposition. All the departments in an organization including IT are supposed to work in tandem and harmony to bring benefits for the company. Organizations invest in one department and reap the benefits in other departments. That is how it works everywhere.
kstaron   Turning IT Into a Revenue Stream   4/10/2014 2:34:22 PM
Value yes, revenue not sure
I'm really not certain if most IT departments could pull off revenue streams, but without an IT department costs usually go up siginificantly. IT departments are stellar at helping the company work efficiently by automating repetitive tasks and forms, and making sure all your programs play nicely with all your hardware fit to the needs of your day. Sometimes it's about the value not the money the IT department can bring to the company.
DBK   Turning IT Into a Revenue Stream   4/7/2014 11:06:25 AM
Re: Show Us the Money - Hard dollars vs. soft dollars
@ jastro - Certainly the manufacturing world is different from other businesses.  My point about Cisco is that they create this type of mentality that IT should be cash flow positive.  The create this mantra in the IT world and then all of a sudden companies adopt this philosophy.  Then those IT teams go back and try to figure out how to develop a business model that can generate cash flow.  And here comes Cisco to the rescue at least that is the way it is presented.  The reality is much different but in the end Cisco created a top down need for IT to generate cash flow and then Cisco themselves is the benefactor.  Create a need and act like you have the solution.  A false economy if you ask me.
Broadway   Turning IT Into a Revenue Stream   4/6/2014 9:18:20 PM
Re: Show Us the Money - Hard dollars vs. soft dollars
Perhaps the key to revenue would be to own the company client data, and then selling it and the expertise to analyze it?
batye   Turning IT Into a Revenue Stream   4/3/2014 3:51:27 AM
Re: Doh!
agree, I trust you are right... as the way IT think... 
batye   Turning IT Into a Revenue Stream   4/3/2014 3:50:18 AM
Re: Turning IT Into a Revenue Stream
it not an easy task nor simple... as the process... have many factors in play...
Page 1 / 2   >   >>


The blogs and comments posted on EnterpriseEfficiency.com do not reflect the views of TechWeb, EnterpriseEfficiency.com, or its sponsors. EnterpriseEfficiency.com, TechWeb, and its sponsors do not assume responsibility for any comments, claims, or opinions made by authors and bloggers. They are no substitute for your own research and should not be relied upon for trading or any other purpose.

More Blogs from Susan Nunziata
Susan Nunziata   5/28/2014   111 comments
For more than four years, EnterpriseEfficiency.com (E2) has been the best IT community on the Internet. As with all good things, soon our time together here will end.
Susan Nunziata   5/20/2014   95 comments
Is it time to ask for a raise? If you're a female IT executive, or more than 55 years old, your answer might well be a resounding "Yes!" Let's take a look at highlights of the ...
Susan Nunziata   4/14/2014   15 comments
If you're looking for more than conjecture to back up the point that IT is increasingly crucial to the business, you'll find what you need in the report "The Gartner CEO and Senior ...
Susan Nunziata   4/7/2014   3 comments
Do you know what your CEO really wants from your IT team? Do you have a grasp of what matters most to your organization's chief marketing officer?
Susan Nunziata   4/1/2014   9 comments
There are plenty of challenges involved in leading an IT organization in the era of Bring Your Own Everything (BYOE), but there are also plenty of opportunities.
Latest Archived Broadcast
We talk with Bernard Golden about accelerating application delivery in the cloud.
On-demand Video with Chat
Register for this video discussion to learn how tablets can provide true business usability and productivity.
E2 IT Migration Zones
IT Migration Zone - UK
Why PowerShell Is Important
Reduce the Windows 8 Footprint for VDI
Rethinking Storage Management
IT Migration Zone - FR
SQL Server : 240 To de mémoire flash pour votre data warehouse
Quand Office vient booster les revenus Cloud et Android de Microsoft
Windows Phone : Nokia veut davantage d'applications (et les utilisateurs aussi)
IT Migration Zone - DE
Cloud Computing: Warum Unternehmen trotz NSA auf die „private“ Wolke setzen sollten
Cloud Computing bleibt Wachstumsmarkt – Windows Azure ist Vorreiter
Like Us on Facebook
Twitter Feed
Enterprise Efficiency Twitter Feed
Site Moderators Wanted
Enterprise Efficiency is looking for engaged readers to moderate the message boards on this site. Engage in high-IQ conversations with IT industry leaders; earn kudos and perks. Interested? E-mail:
[email protected]
Dell's Efficiency Modeling Tool
The major problem facing the CIO is how to measure the effectiveness of the IT department. Learn how Dell’s Efficiency Modeling Tool gives the CIO two clear, powerful numbers: Efficiency Quotient and Impact Quotient. These numbers can be transforma¬tive not only to the department, but to the entire enterprise.

Read the full report
The State of Enterprise Efficiency in the Virtual Era: Virtualization – Smart Approaches to Maximize Gains
Virtualization is a presence in nearly all enterprise data centers. But not all companies are using it to its best effect. Learn the common characteristics of success, what barriers companies face, and how to get the most from your efforts.

Read the full report
Informed CIO: Dollars & Sense: Virtual Desktop Infrastructure
Cut through the VDI hype and get the full picture -- including ROI and the impact on your Data Center -- to make an informed decision about your virtual desktop infrastructure deployments.

Read the full report
SPONSORED BY DELL
CASE STUDIES
EBOOKS
PUBLIC SECTOR RESOURCES
VIDEOS
WHITE PAPERS
WINDOWS SERVER 2012 RESOURCES
A Video Case Study – Translational Genomics Research Institute
e2 Video


On the Case
TGen IT: Where We're Going Next

7|11|12   |   08:12   |   10 comments


Now that TGen has broken new ground in genomic research by using Dell's storage, cloud, and high-performance computing solutions, the company discusses what will come next for it and for personalized medicine.
On the Case
Better Care Through Better Communications

6|6|12   |   02:24   |   11 comments


The achievements of the TGen/Dell project could improve how all people receive healthcare, because they are creating ways to improve end-to-end communication of medical data.
On the Case
TGen IT: Where We Are Now

5|15|12   |   06:58   |   6 comments


TGen is breaking new ground in genomic research by using Dell's storage, cloud, and high-performance computing solutions.
On the Case
TGen IT: Where We Were

4|27|12   |   06:45   |   10 comments


The Translational Genomics Research Institute wanted to save lives, but its efforts were hobbled by immense computing challenges related to collecting, processing, sharing, and storing enormous amounts of data.
On the Case
1,200% Faster

4|18|12   |   02:27   |   12 comments


Through their partnership, Dell and TGen have increased the speed of TGen’s medical research by 1,200 percent.
On the Case
IT May Improve Children's Chances of Survival

4|17|12   |   02:12   |   8 comments


IT is helping medical researchers reach breakthroughs in a way and pace never seen before.
On the Case
Medical Advances in the Cloud

4|10|12   |   1:25   |   5 comments


TGen and Dell are pushing the boundaries of computing, and harnessing the power of the cloud to improve healthcare.
On the Case
TGen: Living the Mission

4|9|12   |   2:25   |   3 comments


TGen's CIO puts the organizational mission at the heart of everything the IT staff does.
On the Case
TGen Speeding Up Biomedical Research to Save More Lives

4|5|12   |   1:59   |   6 comments


The Translational Genomics Research Institute is revamping its computing to improve speed, storage, and collaboration – and, most importantly, to save lives.
On the Case
Computing Power Helping to Save Children's Lives

3|28|12   |   2:13   |   3 comments


The Translational Genomics Institute’s partnership with Dell is enabling them to treat kids with neuroblastoma more quickly and save more lives.
Tom Nolle
The Big Reason to Use Office

3|18|14   |   02:24   |   46 comments


Office and personal productivity tools come in a first-class and coach flavor set, but what makes the difference is primarily little things that most users won't encounter. What's the big issue in using something other than Office, and can you get around it?
E2 Editors
SPONSORED: Mobile Security — A Use Case

3|4|14   |   04:27   |   16 comments


New mobile security solutions can accommodate a wide array of needs, including those of a complex university environment.
Tom Nolle
Killing Net Neutrality Might Save You Money

1|16|14   |   2:13   |   16 comments


The DC Court of Appeals voided most of the Neutrality Order, and whatever it might mean for the Internet overall, it might mean better and cheaper Internet VPNs for businesses.
Tom Nolle
The Internet of Everythinguseful

1|10|14   |   2:18   |   19 comments


We really don't want an "Internet of Everything" but even building an Internet of Everythinguseful means setting some ground rules to insure there's value in the process and that costs and risks are minimized.
Tom Nolle
Maturing Google Chrome

12|30|13   |   2.18   |   25 comments


Google's Chrome OS has a lot of potential value and a lot of recent press, but it still needs something to make it more than a thin client. It needs cloud integration, it needs extended APIs via web services, and it needs to suck it up and support a hard drive.
Sara Peters
No More Cookie-Cutter IT

12|23|13   |   03.58   |   21 comments


Creating the right combination of technology, people, and processes for your IT organization is a lot like baking Christmas cookies.
Sara Peters
Smart Wigs Not a Smart Idea

12|5|13   |   3:01   |   46 comments


Sony is seeking a patent for wigs that contain computing devices.
Tom Nolle
Cloud in the Wild

12|4|13   |   02:23   |   15 comments


On a recent African trip I saw examples of the value of the cloud in developing nations, for educational and community development programs. We could build on this, but not only in developing economies, because these same programs are often under-supported even in first-world countries.
E2 Editors
SPONSORED: Is Malware Evading Your IPS?

11|18|13   |   03:16   |   4 comments


Intrusion prevention software is supposed to detect and block malware intrusions, but clever malware authors can evade your IPS in these five main ways.
Sara Peters
Where Have All the Mentors Gone?

9|27|13   |   3:15   |   38 comments


A good professional mentor can change your life for the better... but where do you find one?
Tom Nolle
SDN Wars & You Could Win

9|17|13   |   2:10   |   5 comments


VMware's debate with Cisco on SDN might finally create a fusion between an SDN view that's all about software and another that's all about network equipment. That would be good for every enterprise considering the cloud and SDN.
Ivan Schneider
The Future of the Smart Watch

9|12|13   |   3:19   |   39 comments


Wearing a bulky, oversized watch is good training for the next phase in wristwatches: the Internet-enabled, connected watch. Why the smartphone-tethered connected watch makes sense, plus Ivan demos an entirely new concept for the "smart watch."
Tom Nolle
Cutting Your Cloud Storage Costs

9|4|13   |   2:06   |   3 comments


Cloud storage costs are determined primarily by the rate at which files are changed and the possibility of concurrent access/update. If you can structure your storage use to optimize these factors you can cut costs, perhaps to zero.
Sara Peters
Do CIOs Need an IT Background?

8|29|13   |   2:11   |   23 comments


Most of the CIOs interviewed in the How to Become a CIO series did not start their careers as IT professionals. So is an IT background essential?
Ivan Schneider
The Internet Loves Birthdays

8|27|13   |   3:25   |   69 comments


The Internet has evolved into a machine for drumming up a chorus of "Happy Birthday" messages, from family, friends, friends of friends who you added on Facebook, random people that you circled on G+, and increasingly, automated bots. Enough already.