That’s the big question to be answered…. And the answer must be YES. Otherwise most internal IT organizations will increasingly lose “market share” to the Public Cloud and in some cases will become largely irrelevant outside core networking and security services.
Disconnected Supply and Demand: Let’s face it… in the pre-ITaaS world most IT shops are run like regulated monopolies where the supply of IT Services is fixed – defined by an IT budget set at the beginning of the year, based on last year’s run rate. IT spends much of their effort rationing their limited capacity and budget amongst Business Units that have insatiable and possibly unreasonable demand for those IT services. In the face of service rationing, Business Units’ demands increase even more, just to make sure they get enough to fulfill their line operational objectives. Many shops do not charge back these shared and scarce services, or if they do, the basis for chargeback is something that does not lend itself to intelligent and optimized consumption. Consequently, the only forces that can possibly reconcile the supply and demand are:
- IT managing the demand down to match the limited supply (aka Demand Management)
- IT finding ways to scale the supply without increasing cost, which usually means cutting corners or reducing service levels
What happens when IT pushes back on requests and cuts corners to scale capacity? Quality and agility both suffer, and the Business Units’ operational objectives are placed at risk. IT feels caught in an untenable situation of being unable to live up to the expectations and needs of its customers. In short, it’s a death spiral.
These situations became the fertilizer for “shadow IT”, when the BUs take control over their destinies and do what they need to do in order to IT-enable themselves. Five years ago, the BUs would buy servers and stand up applications under their desks or in labs. The amount of “shadow IT” was regulated because there was a real cost of buying servers, storage and applications not to mention the ongoing maintenance and support of the applications and infrastructure. IT could afford to take the ostrich (head in the sand) approach and pretend that shadow IT didn’t exist, because the business was only capable of doing so much with servers underneath their desks, and would eventually have to come back to IT for enterprise-class applications and support.
The Public Cloud has changed everything. Including shadow IT. What used to require servers now only requires a URL and a P-Card. The Public Cloud is instant gratification, easy to use and Public Cloud services cater to what their target markets need, including enterprise-class capabilities. Oh, and Public Cloud providers are constantly trying to increase demand for their services by developing new services and refining existing ones.
Contrast this against the typical internal IT organization. How many IT organizations are trying to increase the demand for their services? In the pre-ITaaS model, no IT organization can afford to encourage incremental demand, therefore they don’t actively sell their services nor do they look for incremental unmet needs that they don’t have funding to address.
So whereas Public Cloud providers are doing everything they can to INCREASE the demand for their services, internal IT shops are doing everything they can to DECREASE demand for theirs. I wonder who’s going to win this market share battle?
Winning the business. Now, there are good reasons for large enterprise IT shops to embrace and broker Public Cloud services (application capabilities that surpass what can be developed in-house) and there are also bad reasons to lose business to the Public Cloud (because it’s faster and you don’t need IT involved). Security should be a primary consideration. No matter how secure the Public Cloud provider is, whatever data you put there will be accessible by those service provider staff with root access, and if the service provider ceases operations your data is inaccessible. Enterprise IT should be prepared to embrace the Public Cloud for all its good reasons, but definitely avoid losing business to the Public Cloud for the bad reasons. But in order to avoid losing business, IT has to have a compelling and competitive alternative. That’s where Private and Hybrid clouds come into play.
The good news is that the Private and Hybrid Clouds provide IT shops with the technology platform they need to compete for their business more effectively than they’ve ever been able to in the past. Especially with platforms like Vblock, IT shops can introduce multi-tenant, automated, highly secure, tiered, self-provisioned capabilities that can deliver lower unit costs and better SLAs than what’s available in the Public Cloud for IaaS and PaaS. However, if these capabilities are not SOLD to the lines of business and instead are RATIONED in any way, IT will remain non-competitive.
So, will IT-as-a-Service result in better IT? Only if the IT business model and organization undergo very fundamental, and potentially disruptive, change.
What is needed:
1. IT leadership needs to be held accountable for IT unit costs (they need to be cost competitive with, or cede business to, external alternatives).
2. Business leadership needs to be held accountable for IT service consumption. In some very mature organizations, this may be achievable with “show-back” of costs to the consuming BUs, but in most enterprises, “charge-back” will be a necessity. Human behavior only changes when the rubber hits the road, and that happens only when real $$ are at stake.
3. Increasing consumption of IT services can’t be seen as “bad news”. In a charge-back world, increased consumption of IT services means that the marginal benefit of those IT services exceeds the marginal costs of those services so increased consumption is a sign that IT services are more valuable than other things the Business could be spending their budget on. The CIO must not be penalized for this!
4. IT needs to organize and staff more like a Service Provider. That means IT organizations need to develop capabilities and accountability around marketing and selling IT services, connecting and communicating with consumers of the services, managing the packaging, pricing, and lifecycle of IT services, and effectively integrating those services into a broader framework of business capabilities in addition to what they do today, which is principally designing, building, running and supporting technology stacks. The ITIL v3 framework is VERY HELPFUL in understanding what a services model entails and how different it is from what you have in place today.
5. When services are charged back and IT is competing for its business, IT needs to treat its users as true customers, which means making SLA commitments and measuring itself against those commitments.
6. Everyone in IT needs to shift their thinking to this new world. Our history as a regulated monopoly has left us with ingrained reflexes that resist business requests instead of aggressively seeking out opportunities to deliver greater value. Our future viability as an organization requires us to take market share, and we can only do that with a competitive mindset.
So, in summary, the Public Cloud represents a competitive threat to traditional-thinking IT organizations. This threat is fueled by technology capabilities and also the dramatically different business models employed by service providers versus internal IT organizations. The Private and Hybrid clouds, enabled by converged technology stacks and pervasive virtualization provide internal IT organizations with a technical platform that can deliver unit costs and service levels competitive with Public Cloud offerings, however this in and of itself will not enable true IT-as-a-Service and alone will not improve IT service delivery.
To make Private and Hybrid Clouds truly effective, and to win IaaS and PaaS business that would otherwise go to the Public Cloud, CFOs will need to embrace a new funding model which places the financial responsibility for consumption on the shoulders of the business consumers. Additionally, IT organizations will need to change the way they think and operate in order to effectively compete with Public Cloud alternatives. To become competitive, the quality of IT services will need to meet what’s commercially available at the price point the business is willing to pay. No longer should the BUs be in the position of having to do their own thing because IT is too slow, too expensive or not high enough quality.
When we talk about “crossing the chasm” to IT-as-a-Service, this is the essential challenge. A move toward a free-market economy in IT services. Technology helps, but the ultimate deciding factors are ones that the laws of physics don’t apply to.