[ein0p]

This is an interesting corporate paradox that existed forever. It boils down to this: profit centers are always more frugal than cost centers. With cost centers you can say “you gotta spend money to make money” and PHBs will nod their heads. With established profit centers the most profitable (in the short run) course of action is to cut cost.

[ggm]

I would say this slightly differently. Cost Centres are increadibly focussed on the bottom line costs, but they fight fiercely to defend necessary spend and are not scared of spending astronomically higher amounts to get to a better place longterm. Mostly I believe because cost centres retain staff and have to have a long term outlook.

Profit centres, lacking any understanding of costs, are scared to increase them and fixed on reducing them, even when short-term profit destroys long term market share. Mostly because profit centres reward on a short cycle and have high turnover as staff seek bigger profits.

[ElevenLathe]

Is this backwards? A cost center is something that (management believes) doesn't makes money, only spends it. A profit center is something that (management believes) makes money AND spends it. The former is (in this framing) pure cost, to be cut to the bone, while the latter gets more leeway since it is an "investment". In reality, I think the causality works the other way: stuff management wants to cut is defined as a cost center (requiring cost cutting), while stuff management wants to spend money on is defined as a profit center (requiring investment).

[ein0p]

No, not backwards. That’s how it is. I’ve observed this in several companies in the industry, starting with Microsoft. At the time the most profitable business unit was Office, and you couldn’t even get a t-shirt or other swag.