AUTHOR: Michael Hubbard
Enterprise IT services are maturing rapidly, in areas of both standardization/commoditization (email, general ledger software) and inversely in areas of true innovation (cloud operating systems and software defined data center operations and management software). This rapidly changing landscape presents CIOs, and as importantly, the rest of the C-suite the opportunity to re-calibrate the portion of the IT budget consumed by creating and producing IT services to one that truly creates business advantage.
Traditionally the IT budget has been focused on code development, maintenance and “keeping the lights on” in datacenters full of infrastructure and business critical applications. As we discussed in a previous blog, a savvy CIO has the ability to affect massive change for the company by leveraging IT as a competitive differentiator in the marketplace. This business advantage could be based upon reduced cost to provide services to customers, reduced time to market, which allows them to stay ahead of their competition, unique functionality built into their products, and so forth.
To leverage this opportunity, the first step is to recognize the fact that the CIO role is changing at the same pace as IT services. The modern CIO has to analyze their department in an entirely different light given the opportunities that exist today. Essentially, the CIO is facing the same opportunity for optimizing the IT supply chain that a COO has been tinkering with for a hundred years. The modern CIO should be asking themselves: “Where do I remain vertically integrated in my IT supply chain?” If I were to start a company (for example) that wanted to have its primary business be the manufacture of springs, should I mine the ore, coal fire my own blast furnace, make the metal, extrude and coil the metal, package and sell the springs?
Or, should I allow supplier relationships to permeate deeper into portions of that supply chain? That is, should I buy coiled metal from a company whose primary business is creating coiled metal and then cut out all of the operational steps necessary just to get to that point at the benefit of a huge reduction in time to market and expense of building all of those pieces into our business and having to manage them? After all, the coiled metal manufacturer is able to produce its product at a fraction of the cost that I can produce it myself, because it produces its product as a supplier to many large manufacturers. As the manufacturer, it has a much more robust factory and process.
Similarly, I should challenge myself to think of all of my IT services in the same way. That is, I don’t produce my electricity today; do I really need to own my own datacenter floor space, hardware and OS images? Or, should I begin to leverage supplier relationships to offload the commodity IT service delivery, so I could spend the majority of my time and effort driving true innovation within the company? Never before has the ability to make this trade off been available to the C-suite. In the past it was more “all or nothing” outsourcing whereas today it can be focused on a single service such as email or application DR through the cloud.
The basic premise is that you outsource all that is tactical and keep in house all that is strategic. To make the decision around which stages of this process “to own” should depend on the strategic advantage or niche market position of the company. If the goal is to be the lowest-cost provider in the industry, then I may want to focus special attention on material procurement or processing to ensure lowest cost. If our strategic advantage is high-end springs used in high-performance vehicles, then it may be better to focus on R&D and outsource the manufacturing. If our strategic advantage is in the marketing and distribution of the springs, then I should outsource everything up through product packaging.
Similarly, CIOs need to determine the strategic advantage of the business and ensure IT’s supply chain model aligns. For example, mobile devices may be fairly tactical to most companies, so CIOs might want to outsource this. However, a bottled water company in China uses mobile devices to track inventory and collect payments—for this CIO, this is a competitive advantage that needs focused attention and can not be outsourced. Email may be fairly pedestrian for most IT organizations, so it’s often outsourced or given low priority. However, for a legal firm in the Northeast U.S., emails are used in conjunction with Adobe PDF files to exchange confidential documents and obtain client signatures. For this CIO, outsourcing email is out of the question. The old adage still holds true: If you want something important done right, you need to do it yourself. Everything else—outsource.
In many of our Accelerate customer engagements, we are being brought in to help the CIO look at how they should examine their existing IT environment to determine what services should be kept internally sourced and what services are better served from vendor partners. In this way, the CIO is transforming themselves into a role of a service broker—continually looking for the best bang for the buck for each service that IT provides the company.
In the same way that computing replaced paper processes and allowed those services to be performed more efficiently, so too cloud computing allows CIOs to spend more time focusing on business impact rather than spending the majority of their time worrying about the stability and efficiency of their internal infrastructure, the majority of which is not providing business differentiation. Paul Strong, CTO, Global Customer and Field Initiatives at VMware, has a great quote that points to the core of this: “It is my goal to transform the CIO from the Chief Infrastructure Officer back to the role of Chief Information Officer.”
One of the primary challenges to making this transition is the question of whether or not the CIO has the information needed about service delivery to make timely, data-driven decisions to make versus buy, own versus rent, and so forth. Many companies’ IT organizations have not made the transition to operating their groups “as a service” and do not measure themselves in ways that service providers do. This makes it extremely challenging when trying to compare supplier-based IT services to those of internally-produced services.
We believe the place to start is to develop an actionable strategy that will put the appropriate processes and tools in place to fully understand what your internal capabilities are versus those of the industry suppliers. The next step is to look for a suite of tools that are built to provide the ability to manage software defined datacenters and centralized datacenter management from the top down. I know that last thing a CIO wants is yet another set of management tools, but are you getting the information you need from your existing suite of cobbled together management and monitoring tools?
VMware Accelerate has been helping CIOs get the information they need through a comprehensive set of offerings designed by CIOs for CIOs—offerings that can navigate you through your transformation efforts. Our portfolio combines benchmarking, transformative offerings, and in-depth strategic offerings to assist you in each step of information gathering and strategic planning. We will collaborate with you to assess your current environment and help you begin to look at how VMware can help you change the way you provide services in the future.
Accelerate can help you undertake your journey to the cloud and IT transformation. Visit our Web site to learn more about our offerings, or reach out to us today at: email@example.com for more information.
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