From Builder To Broker

By Jason Klein, Technologist

There’s a shift occuring within organizations.

Over the past few years, the IT industry has seen massive consolidation, convergence, and modernization of IT, all in the name of Cap Ex savings – trying to spend less. As a result, organizations, in most cases, have seen significant cost reductions. VMware claims to have seen a 50-70 percent reduction in overall IT costs. Now we see organizations asking the all-too-common question of their IT leadership: What have you done for me lately? The way this question is answered will define us as IT strategists over the next few years and, ultimately, define our success within our respective industries.

True Cost of Business

Many organizations will continue to chase cost optimization as a primary driver. We’ve seen the market adjust accordingly. Public cloud offerings, such as Amazon, provide cloud services at a low cost to entry. These offerings are introducing low-cost competition into the market not only for solution providers but for the IT organization. A common reaction is for one to think that there’s no way your business could transition core IT services to Amazon. There is truth to this … for now. The bottom line is that when optimizing a cost model you’ll always be competing against the lowest cost provider. Unless your IT organization has massive economies of scale, you’ll not be able to compete and, therefore, will become irrelevant. The core belief here is that the past was about cost savings. The future will be represented by the strategic value that IT provides to the business, as well as innovation. So … what is the true cost of IT? Most organizations wouldn’t be able to do a comprehensive “build versus buy” analysis. When organizations procure on a per project basis they create “siloes” of locked capacity and inherent inefficiencies. Comparing IT costs in a traditional model with cloud services is an unfair comparison. For example, service providers thrive on the ability to leverage efficient process and capacity management. A critical factor to cloud computing is the concept of “right sizing”; pay only for the compute, network, and storage capacity that you’re actually using. The concept of private cloud is extremely important, as it allows organizations the ability to obtain accurate cost comparisons without third-party outsourcing.

I.T. As a Service

Cloud computing presents a unique opportunity for IT organizations to provide a service-oriented approach to consuming IT’s resources. In their book Transforming IT, Keith John and Rebecca Lawson describes a service as “a single, irreducible unit of value delivered by IT and consumed by the business.” Today, every IT organization provides services, but not all are formalized and/or packaged into a menu of services. Start with two or three core services to the business and develop a formalized services offering. When making this decision, recognize that not all applications will go through modernization. It’s important to throw things out. This is a transformational shift. Focus on optimizing applications and services that can embrace the future. Automating legacy process and procedures will not provide value. Think about creating new processes through eliminating steps. These new processes provide your services the efficiency and automation aspect. Similar to any other services organization, you’ll need to understand utilization, capacity used, capacity available, costs of resources, SLAs, etc.

This information will provide insight into the efficiency of your new services, which, in turn, provides insight to the business on costing and consumption. In addition, SLAs now become more important than ever. The performance and availability requirements of your services will be the leading contributor to their success and/or failure. When creating SLAs around services, you must develop the requirements with the service’s key business stakeholders. Requirements may include:

• IT must not and cannot develop SLAs within a vacuum
• Intelligent automation is critical in enabling the ability to make decisions based off of metrics (i.e., business requirements, performance SLAs, availability SLAs, security, and compliance)

Most organizations don’t have a way to capture this information today and are delivering services ad hoc. Typically IT takes a stance somewhere in the middle of the two approaches. They either provide “no guarantees,” which usually results in new leadership being hired within a couple of years, or they lock down everything to the highest level, which is extremely costly. With the help of IT, SLAs need to be developed and agreed upon by the business units. These are all steps to take in order to help you understand what the true cost of IT is and how the organization is consuming those resources.

Throughout this transition we see IT organizations shifting from primary builder of resources to more of a broker. Think about the concept of creating a digital supply chain for your business. In his blog, Chuck Hollis, VP and Global Marketing CTO at EMC, states, “Many IT organizations are taking a hard look at themselves and realizing they have to learn to compete for internal customers. To do so, they need to start looking more like a modern IT organization and less like your father’s IT shop.” As IT develops services and continues to gather data on usage and utilization, they’ll begin to see what services are core to the business. As a result, they’ll begin to see what services aren’t core or primary to what the organization needs to consume. IT can make the decision to build or buy. This allows IT to align their resources with the needs of the business, and leads to fully optimizing your digital supply chain by creating and brokering services that map to business requirements. Continue to focus on the core business services, value engineering, and innovation that are necessary for your business.

In order to accelerate this process, it’s important to have a strategy and clear vision:

• First, create a definition of cloud computing that aligns with your organization’s requirements.
•  Develop early phase architecture around that definition that will allow your teams to map people, process, and technology to outcomes. Align with your business units to help them with defining SLAs, provide them a construct and cost structure to begin making decisions.
• Leverage a gap analysis/maturity model to understand where you are today versus where you want to go. This will accelerate the ability to create and implement a short and long-term project portfolio

You should be able to design, build, and implement a cloud computing strategy within 180 days. Don’t try to boil the ocean all at once.