For decades, the mid-market C-suite (including many IT leaders, sadly) has been conditioned to view Information Technology through a single, limiting lens: the Expense Line.
In the typical P&L, IT is buried within SG&A (Selling, General, and Administrative expenses). It is treated as a utility, a necessary friction, like electricity or rent, that must be paid to keep the lights on and the doors open. When the CFO looks at this line item, the reflexive instinct is to compress it. How can we do this cheaper? Can we delay that upgrade? Why are we spending so much on licenses/hardware/services, etc. etc.?
This “IT as cost center” mindset is the single greatest barrier to scaling in the modern economy.
While many mid-market organizations are busy optimizing IT for cost efficiency, the market has shifted beneath their feet. Financial analysts, Private Equity firms, and sophisticated acquirers have stopped viewing technology as overhead. They have begun valuing it as a multiplier.
If you are still managing IT as a cost center, you aren’t just saving pennies; you are actively suppressing the valuation of your company. It is time to reclassify your technology stack not as a liability to be managed, but as an undeveloped asset class waiting to be monetized.
The Valuation Gap · Why “Tech-Forward” Wins
There is a bifurcation occurring in business valuations, particularly within the mid-market.
Consider two companies in the same sector – let’s say, logistics or professional services. Both have $100M in revenue and $15M in EBITDA.
- Company A runs on legacy on-premise servers, uses Excel for forecasting, and treats IT as a “break-fix” helpdesk function.
- Company B has clouded its infrastructure, utilizes automated workflows to reduce headcount dependency, and aggregates customer data to predict demand.
On paper, their current financials look identical. However, in a liquidity event (sale, merger, or recapitalization), Company B will command a significantly higher multiple. Leading to a valuation of millions more.
Why? Because analysts know that Company A’s growth is linear; to add 20% revenue, they likely need to add 20% more staff/overhead. Company B is far more likely to be exponential; their technology allows them to scale volume in some or all aspects of their value chain, without a corresponding linear increase in costs.
In other words, technology is leverage. The market pays a premium for operating leverage. If your IT strategy is focused solely on “keeping the lights on and the hackers away”, you are building a linear business in an exponential world.
The Invisible Asset on the Balance Sheet
The accounting rulebooks have struggled to catch up with the digital reality. GAAP (Generally Accepted Accounting Principles) contains strict rules about what constitutes an “asset”. Buildings, trucks, and inventory are assets. They sit on the balance sheet and are depreciated over time.
Data, however, is conspicuously absent.
Despite being arguably the most valuable component of a modern enterprise, your proprietary data does not appear on your balance sheet. It has no book value. This accounting anomaly tricks many CXOs into treating data as a byproduct, digital exhaust left over from doing business, rather than the fuel for future business.
This is a strategic error. Data possesses unique asset characteristics that physical assets do not:
- It is non-depleting: Using data doesn’t consume it; in fact, data often becomes more valuable the more it is used and enriched.
- It has zero marginal cost of reproduction: Once captured, data can be deployed across infinite applications simultaneously without additional cost.
- It creates defensive moats: A competitor can buy the same trucks or rent the same office space as you. They cannot buy your historical customer behavior data.
We must stop waiting for the accounting boards to change the rules and start acting on the reality of the market. Your data should be treated with the same rigor, governance, and investment strategy as your cash reserves or real estate portfolio. Wall Street made this shift over a decade ago; it’s time everyone came to this realization.
From “Utility” to “Strategic Capability”
How do you bridge the gap between “IT as a cost” and “IT as an asset”? It requires a fundamental shift in how the C-suite engages with the IT function and its leader.
In our work at Innovation Vista, we often see organizations stuck in the “Stabilize“ phase. Their IT investment goes entirely toward preventing downtime and blocking cyber threats. While critical, this is merely the baseline. It is the equivalent of paying for insurance; it protects value, but it does not create it.
To treat IT as an asset, you must move into “Optimize“ and “Monetize“ phases.
1. The Asset of Velocity (Optimization)
When technology is deployed strategically, it removes friction. It integrates disparate systems so that data flows without manual re-entry. It automates low-value cognitive tasks.
The ROI here is not just “saving time”; it is velocity. A company that can quote a complex project in 2 hours (via automated estimation tools) vs. 2 days (via spreadsheets) wins the deal. That speed is a marketable asset. The technology that enables it is directly responsible for that revenue capture.
2. The Asset of Insight (Monetization)
This is where the “undeveloped” nature of the asset becomes apparent. Most mid-market firms are sitting on terabytes of historical data regarding customer churn, pricing elasticity, and operational bottlenecks.
A “Cost Center” IT department stores this data because the law requires it. A “Strategic Asset” IT department mines this data to find the next $10M in revenue.
If your technology can identify that a specific client segment is 30% more profitable than another, or predict a supply chain disruption three weeks out, your IT is no longer supporting the business. It is steering the business.
The Call to Action for the Mid-Market CXO
You do not need to be Tesla, Google, or Amazon to leverage this mindset. In fact, the mid-market is uniquely positioned to capitalize on this shift. You are agile enough to pivot faster than the enterprises, but resource-rich enough to invest in serious tools that small businesses cannot afford.
However, this transition requires a different kind of leadership. You cannot unlock this asset class if your IT leadership is siloed in the server room. You need a strategic partner at the table, a CIO who speaks the language of EBITDA and market share, not just uptime and bandwidth.
Look at your IT budget for the coming year. If 90% of it is allocated to “keeping things running,” you are managing a utility. If you are carving out significant capital to deploy data, automate workflows, and create operating leverage, you are managing an asset.
The market knows the difference. And when the time comes to value your company, the difference will be worth millions.
Start the Conversation.
