Home > Blogs > VMware Accelerate Advisory Services > Tag Archives: cloud

Tag Archives: cloud

Competing with Shadow IT

By Daryl Bishop

Daryl Bishop-cropOver the last few years, business units have increasingly been bypassing IT and ordering services directly from external service providers (e.g., SaaS applications and cloud IaaS services). IT has been largely oblivious to this threat, believing that the business will continue to rely on IT for technology services.

We’re now seeing the next stage of shadow IT with business openly bypassing IT, in fact the business model for some external providers is now purposely built around dealing direct with the business rather than IT.

The main reason is that IT is seen by the business as being a roadblock to the agility it requires to deliver products to market quickly.

SHADOW IT 1

IT needs to reinvent itself and demonstrate how it can be a competitive differentiator for the business. Let’s look at some of the areas where IT has a natural advantage over shadow IT:

  • You understand your business
    The bottom line is that the IT department intimately understands the business and an external service does not. Use this knowledge to IT’s advantage, aligning and working closely with your business.
  • IT is not just a cost center
    Following on from the first point, elevate your people to work with the business, demonstrating how technology can be used to benefit the revenue generating side of the business.
  • Become a trusted broker of services
    By being a trusted broker of IT services, IT can both centrally manage the costs of external providers and provide internal services when required.
  • Keep your business safe
    External service providers understand risk in the context of the services they provide; however, they cannot understand the nuances of risk particular to your business. Capitalize on this “home field” advantage.

SHADOW IT 2

As shown in the diagram above, embrace new IT. Rather than being threatened by shadow IT, embrace it and use it as a catalyst to provide a superior level of service to your business. You’re bristling with capability, you just need to engage and demonstrate the ways you can help business thrive.

======
Daryl Bishop is a business solutions architect with VMware Accelerate Advisory Services and is based in Melbourne, Australia.

The 3 Rules for Making Confident IT Decisions

Author: Craig Stanley

When presented with a choice between two solutions with an obvious difference in cost and value, you should always choose the cheaper one, right?  We all know that’s not the case, as it’s just not that simple. In fact, many times the more expensive choice may be the right one when all factors are considered. But it’s important that the cost premium delivers a value that exceeds the cost differential and potential for failure.

The other intangible factors that influence decisions are what can be generalized as “risk.” The major components of risk are: risk exposure, risk tolerance, confidence and trust, probability and chance, and the size of the risk or decision. Counterbalancing risk is return, which is comprised of the same factors, but refers to the ability to achieve value goals. A robust risk analysis establishes a framework for identifying, measuring, evaluating, and objectively comparing these factors.

VMware’s process to analyze risk identifies specific areas of risk, assesses your reaction to the potential for problems to occur and risk tolerance, and computes an inherent risk/return factor that can be applied to the total cost of ownership (TCO). This process is used to create a risk-adjusted TCO by increasing or decreasing the benefit with respect to the perceived risk.

As an IT decision maker, your response to risk is an emotional reaction that influences your decision and even your ability to make a decision. When deciding between two options, the decision you make that will likely deliver the most favorable outcome adheres to three general rules:

  1. The ratio of the investment to the expected return influences the decision between financial risk and performance risk.
  2. The level of risk tolerance should exceed the level of risk exposure.
  3. The upside value potential should exceed the value being put at risk.

In the first rule, your emotional connection to financial and performance risk is evaluated. First, you have consider how the decision will impact you or your organization if the decision turns out to be a bad one.

  • What if this doesn’t turn out as expected?
  • What if it ends up costing more and taking longer to implement?
  • Am I getting locked into something I’ll have trouble getting out of?

As the uncertainty of these types of concerns increase, the likelihood of your decision stalling will increase as well, because it may appear that doing nothing is less risky. But making no decision carries risk exposure as well in terms of lost opportunities and unmitigated risk exposure. This type of risk can be categorized as performance risk as it is associated with the success and probability of failure in the competing solutions.

And, the size of the decision’s cost and the potential revenue or value being put at risk also makes your decision more of an emotional one. This type of risk can be categorized as financial risk, being associated with the ratio of the investment to the outcome. For example, the game of poker is basically the same whether you’re playing a friendly game for pennies or playing with $1,000 chips in Las Vegas. But you play the game very differently when the stakes of losing are significantly higher and, consequently you are less willing to take chances.

If you were presented with an opportunity to make a sizeable return on an investment, but the amount you needed to investment was large, then you might not be inclined to accept the opportunity without much consideration. But if the same situation was presented and you only had to make a very small investment, then you might accept the opportunity immediately.

The second rule of the decision process is that the level of risk that is acceptable to you should be greater than the level of risk you’re being exposed to. Analyzing these risk factors involves:

  • Identifying the most comment incident events that might occur
  • Determining how each event would impact your decision
  • Determining how much risk you can tolerate for each event
  • Evaluating the probability of the event occurrence in each of the decision choices

These risk factors are evaluated to arrive at a risk exposure and risk tolerance value for each solution. The gap between the tolerance and exposure is termed “inherent risk.” If this result is negative, then the inherent risk of your decision is unfavorable and indicates that there may be unmitigated risk in the decision since the exposure is greater than what you are willing to accept. Conversely, if the gap is positive, then inherent risk is favorable and suggests opportunity for you to assume some additional risk to gain additional value opportunities. The inherent risk can be applied to the decision investment to create a risk-adjusted investment value.

The third rule of the decision process is that the upside potential should value be placed at risk. The upside potential is based on the value differential between the solutions. The value being placed at risk, or downside, examines the potential losses that could be incurred within the context of the rated risks. Ideally, the former should be greater than the latter.

For example, let’s assume you can make $1,000 performing some task, but if anything goes wrong, you’re out $100,000. Would you take that risk?  Probably not, since there’s just not enough profit in that scenario to assume a 100:1 risk, unless you have extreme confidence that you have effectively removed the potential for failure.

These three rules describe results that can be integrated into an overall decision framework that produces a risk-adjusted investment or TCO in an IT decision; a return on risk; and an estimation of value impact.

The risk adjustment is a function of the inherent risk and the investment. When I’m working with IT decision makers, we compare the inherent risk of the decision that’s being evaluated with the competing TCO values to determine a mitigation-versus-value opportunity offset. This offset is applied to the TCO to arrive at a risk adjusted TCO, or a TCO that reflects the impact of the inherent risk. The risk adjusted TCO will reflect an increase or decrease depending on the inherent risk factors.

We can determine the return on risk by the ratio of the upside opportunity to the downside exposure as a function of the inherent risk and the investment ratio. If, as described in the first rule above, the financial risk of your decision is very small, then your return on risk may be largely driven by the inherent risk factors. Otherwise, a large financial risk tends to take precedence over the inherent risk. A positive return on risk suggests the potential for success in your decision is good, while a negative suggests a higher likelihood of failure.

Lastly, we can estimate the overall impact on the value stream by factoring the investment or TCO adjustments within the context of the investment ratio. This result will estimate the potential revenue or budgetary impact you may see of your decision with competing or comparison solutions.

Because the risk analysis process reveals both risk and opportunity, these three results enable you to make a more confident decision. Measuring your emotions and beliefs about one solution versus another helps your decision-making process and removes the fog of uncertainty.

The Accelerate risk analysis methodology described here is straight-forward to use and delivers results that are relevant, accurate, and easy to understand. The results are provided in a format that can be readily shared throughout the enterprise as needed. Applying risk analysis to the public/hybrid cloud decision process and other major IT initiatives will help you gain insight into the risk factors involved for each alternative, quantify the real value of the risk and opportunity, and increase your confidence in the decision.

Learn more in our white paper How Risk Analysis Streamlines Decision Making for Major IT Initiatives

=====
Craig Stanley is the Benchmarking Practice Lead for VMware Accelerate Advisory Services. You can follow him on Twitter @benchmarkguru.

If you’re at VMworld San Francisco tomorrow, stop by the VMware Accelerate Advisory Services demo booth in the Solution Exchange, and meet Craig in person!

Want to continue the conversation with your C-level executive peers?  Join our exclusive CxO Corner Facebook page for access to hundreds of verified CxOs sharing ideas around IT Transformation right now by going to CxO Corner and clicking “ask to join group.”

Join Us For a Software-Defined Data Center Twitter Chat on June 27th 8am &11am PST

Author: Rob Jenkins, Director VMware Accelerate Advisory Services EMEA

We’ve been talking a lot lately about the software-defined data center (SDDC) as it relates to financial services, information security, and emerging IT cloud careers.  As the Accelerate team meets with customers, we find that there are still many questions around how this infrastructure will eventually transform IT from the traditional model to one focused on business agility. And their business issues range from how to drive down cost and streamline their IT organization to be more efficient and responsive, to managing expectations of internal IT business stakeholders.

So, we’re pleased to announce a Twitter Chat around this topic—to hear what others in the industry are thinking and to provide our insight.

Please share this information with your teams, and I look forward to an open dialogue at the chat.  (You can find me on Twitter here @cloud_rob)

HOSTS: VMware Events (@VMwareEvents) and IDG (@IDGtechtalk)

WHAT: Live Twitter Chat on Software-Defined Data Center (SDDC)

WHEN: June 27, 2013, 8-8:30a and 11a-12p PT (3p & 6p GMT)

WHERE: Twitter or any Twitter client, recommend using Twubs

Hashtag: #vSDDCchat

Mark it on your calendar!

Download the white paper: Catching the Tide: IT as a Service (ITaaS)

_________________________________________________________________________

More Details on Twitter Chats: 

What is #vSDDCchat?

#vSDDCchat is an online Twitter Chat scheduled on June 27, 2013 at 8a & 11a PT (3p & 6p GMT). The topic is the software-defined data center (SDDC), and everyone is welcome to join.

What are some sample questions that will be posed during #vSDDCchat?

  • “What are the core technologies that enable SDDC?”
  • “As an IT professional, what is your opinion of SDDC?”
  • “What is the biggest challenge or misunderstanding about SDDC?”
  • “Will SDDC change the role of IT in your organization?  If so, how and why?”

…and more!

How do I participate in #vSDDCchat?

Is this your first time participating in a Twitter Chat? You can use Twubs to help you easily follow the conversation.  Enter in our hashtag #vSDDCchat to see only this specific chat stream (after signing in, it will ask you to authorize Twubs to use your Twitter account).  Then you’re ready to go and can post your thoughts in the text bar to be added to the action.  If you’re a more advanced Twitter user, you can also use tools like HootSuite, TweetDeck, or TweetGrid to filter for all posts marked #vSDDCchat.

If you’re planning to take part through just the standard Twitter site, please remember to add the hash #vSDDCchat to all of your tweets so your comments aren’t overlooked.

Get ready! It’s a fast-paced conversation with 140 characters or less at a time. Every 10 minutes the moderator will pose a new question. It’s not necessary for you to answer/comment on every question, but it’s a terrific way to get a variety of perspectives and to keep the conversation moving. 

Technical Steps for Participation 

  1. Your first tweet should include your name, title, company you work for, and hashtag #vSDDCchat
  2. Subsequent tweets should start with the question number you are responding to and include the #vSDDCchat hashtag. For example, “@VMwareEvents A2: Agreed, SDDC is actually an architecture and not just one product #vSDDCchat
  3. Be yourself and please don’t push your product during the conversation.
  4. Use common sense and don’t say things that might come back to hurt you or your business.
  5. Be nice to your fellow tweeters.

Chat Tips

  1. Don’t worry about catching and reading every tweet—find the ones that speak to you and go from there.
  2. Remember that your tweets go to all your Twitter followers unless you DM someone (to DM someone, they have to be following you).
  3. Try to tweet complete thoughts whenever possible- this will help followers outside the chat learn from you.
  4. Consider sending out a tweet in advance letting your followers know that you’re participating in this Twitter Chat, and encourage them to take part in the convo with you.

The On-Demand Services Effect

Author: Michael Francis

 A business model describes the rationale of how an organisation creates, delivers, and captures value.1

When I consider the way on-demand services has changed business models, I think of the traditional retail model, which was a bricks-and-mortar store with trained staff to sell the goods. The value proposition—what was really being sold—would be the variety of goods combined with the knowledge of the sales team. For example, a video store of the ’90s provided me with the value of a physical location plus a relatively large assortment of videos that I could either purchase or rent. The value was the physical repository of videos and the selection.

Now consider online retailers and what they are selling—and you might think it’s the goods. But what I think online retailers are selling is the ease of access to goods that are relevant to the consumer, delivered in a consistent and predictable timeframe, at a known cost. The important aspect to this value proposition is that the value is not in the goods themselves. The online retailer has created a marketplace for consumers ready to consume through its procurement and delivery channel.

This business model allows the online retailer to place any product or service  into its consumption process and deliver value. Which gives the online retailer the agility to seek out different suppliers to capture more consumers without changing its core value proposition or redeveloping its consumption process.

The value proposition changed between the bricks-and-mortar and the online businesses. And, on-demand services was the enabler of this business model—the ability to easily consume a product or service that is relevant to me with consistent delivery and known costs. And, it has changed the value proposition of the retailer from the goods and trained staff.

The Effect on the IT Department

Similarly the internal IT organization has a B2C relationship with the business side of the organization. The value proposition offered to the consumer (the business) by the IT organization has historically been the skillset as an integrator/developer of required technologies and the foundational compute services provided. With a largely captive market in the past, IT has operated like a traditional B2C retailer.

As we know, the captive market is no longer captive—IT’s consumer can now access a broad range of services, including many that previously have only been available through their internal IT organization. However, just as the retail consumer doesn’t necessarily want a relationship with hundreds of suppliers, the business consumer also doesn’t want to manage hundreds of suppliers to get the IT services they need. Business consumers want the ability to easily access services that are relevant to them in a timely manner and at a known cost —ideally from a single point. These requirements now provide more value to the business consumer than highly customized, perfectly-fitting IT solutions that involve extensive integration and development and have varying delivery times and costs.

The business consumer has changed what’s important to them. As a result, the internal IT department is being challenged to align with this change in their consumers’ requirements and value proposition and provide known outcomes, known delivery times, and known costs. Failure to do so will likely increase the use of “shadow IT” and potentially relegate IT to a diminished tactical role.

IT needs to operate a business model similar to an online retailer. The value is not in the compute good or service itself—the value is ease of access to many suppliers through a single store front, with known delivery time and known cost. This requires a significant change inside the IT department to a mindset of understanding the consumer to ensure that relevant goods are offered, and in doing so, leverage external suppliers and defer the risk to them when introducing those goods. This is especially important while the demand for an offering is being evaluated.

If used effectively, the pay-as-you-go finance models and automation offered by established public cloud providers can provide improved delivery times and greater agility to the business, while also deferring up-front costs to provide the goods until the actual demand is fully understood.

My point is that it’s important to understand the rationale behind consuming public services—in this case, to provide capability while evaluating actual demand. Public cloud solutions are not necessarily the most effective means of reducing costs of IT services in every situation. And, to make the most effective use of public cloud requires that an organization understand the services it provides and cost of those services.

In my next blog in this series, I’ll discuss the implementation of an on-demand services business model—an implementation that transforms the IT department from a traditional B2C retailer to the equivalent of the online B2C retailer. To deliver on this requires a transformation within the IT department from organizational structure, technology, and operational perspectives. I’ll also cover the ideal organizational structure, product offerings, associated service definitions and how to leverage public cloud to defer risk and understand your consumers’ demand.

—-

Michael Francis is a principal systems engineer at VMware, based in Brisbane.

Would you like to continue this conversation with your C-level executive peers? Join our exclusive CxO Corner Facebook page for access to hundreds of verified CxOs sharing ideas around IT Transformation right now by going to CxO Corner and clicking “ask to join group.”


1Alexander Osterwalder and Yves Pigneur, Business Model Generation, Wiley; 1 edition (July 13, 2010)

 

A New Key Financial Metric for IT’s Cloud Journey

Author: Mark Sarago

Working with numerous customers on their journey to the cloud has exposed the Accelerate team to a number of metrics that are used to determine an organization’s health and overall value to the business. Let’s focus on a new financial metric that is gaining popularity: private cloud versus public cloud cost per workload.

In their seminal paper, The Balanced Scorecard—Measures that Drive Performance, published in the Harvard Business Review, Robert Kaplan and  David Norton introduced the balanced scorecard as a performance measurement framework. It built on traditional financial measures by adding important non-financial performance indicators to the mix. As a result, it gives executives and managers a more balanced view of organizational performance.

The balanced scorecard has proven to be an effective method of communicating an organization’s overall strategy by establishing a balanced set of tangible goals and the framework of measuring progress toward those goals. The balanced scorecard suggests that we view the organization from four separate perspectives, and to develop metrics, collect data, and analyze the data relative to each of the perspectives, which are:

  1. Financial Perspective – To succeed financially, how should we appear to our shareholders?
  2. Internal Business Perspective (Process) – To maximize our business value, at which processes must we excel?
  3. Customer Perspective – To achieve our vision, how must we appear to our customers?
  4. Innovation and Learning Perspective – To achieve our vision, how will we sustain our ability to change and improve?

CIOs quickly saw the legitimacy of the balanced scorecard and have successfully used it when communicating strategy to their team members, and the value of their information technology activities in relation to their organization’s business executives and customers.

Each of the four perspectives is important, but the one that gets the most attention from business executives — and seems to cause the most concern and confusion for CIOs — is the Financial Perspective performance measurement. It can also be said that the Financial Perspective performance measures are the most important for business executives because the primary language of business is conducted in financial terms – How much will it cost? How much will this save over time? What is the financial break-even period? What is the ROI? — and so forth.

CIOs have responded to the Financial Perspective performance measures of their balanced scorecards by tracking financial metrics such as:

  • Actual to Budget: How does actual OpEx spend compare to the original OpEx budget?
  • Forecast Accuracy: Is the accuracy of the OpEx spend forecasts over the past 12 months within plus/minus two percent?
  • Cost-Per-Business-Unit Trend: Is the IT total cost of ownership (TCO) per unit of business output (e.g., airline seat mile flown, mortgage transaction count, automobiles manufactured) increasing or decreasing over time?

With the advent and popularity of cloud concepts and technologies for IT organizations, we now ask:  What would a CIO want to see as a financial metric in the balanced scorecard to represent their organization’s journey to the cloud?

A few organizations I have met with recently, and which have mature metrics tracking and reporting in place, have already answered the question. They measure their IT TCO per workload in their private cloud against the price of hosting the same workload on a public cloud service such as Microsoft’s Azure or Amazon Web Service’s EC2. When doing so, they also add data transfer into the cost, that is, the cost of communicating the data in and out of the service to computational workload costs incurred.

The metric that compares private cloud workload cost versus all-in public cloud workload pricing is extremely valuable to the CIO. If your private cloud workload cost is lower than public cloud workload pricing, you are showing immediate business value through your IT operation. Conversely, if your private cloud costs are too high, business management is certainly justified to ask: Why should we use your service if we can get it cheaper from a public cloud provider?

Some organizations are so confident in calculating the cost of their private cloud costs per workload and the efficiency of their operation that they have started to build in an added twist. These efficient operations are using the difference or spread in costs between private and public solutions as IT operational “profit.” In turn, the “profit” is used to acquire new equipment and software as they refresh their private cloud going forward. These organizations are truly running IT like a business.

If you aren’t familiar with the balanced scorecard for IT, please give it a deeper look. While doing so, also consider including a new metric to the Financial Perspective performance measures, and include the private cloud versus public cloud cost per workload.

——–

Mark Sarago is a strategist with VMware Accelerate Advisory Services.

VMware AccelerateTM Advisory Services can help you define your IT strategy through balanced transformation plans across people, process and technology. Visit our Web site to learn more about our offerings, or reach out to us today at accelerate@vmware.com for more information.

Would you like to continue this conversation with your C-level executive peers? Join our exclusive CxO Corner Facebook page for access to hundreds of verified CxOs sharing ideas around IT Transformation right now by going to CxO Corner and clicking “ask to join group.”

Is the Software-Defined Data Center a Good Fit for Financial Services?

Author: Mark Sarago

Most of my career as a chief information officer was in the financial services field, including mortgage banking, insurance and auto lending/leasing. Financial services companies, as well as healthcare providers and insurers, have heightened sensitivity to industry compliance rules and customer privacy concerns. As a result, the IT organization often prioritizes its focus on a tight security profile.

Compliance and privacy concerns range from restricting access to customer Personally Identifiable Information (PII), patient healthcare records (HIPAA compliance), and the company financial data or customer equity and bond trading transactions (SEC compliance). Breaches to data security that result in violations of compliance and privacy rules can result multi-million dollar fines or severely tarnishing a well-established brand.

It was not uncommon for my organization’s chief risk officer or chief legal counsel to forcibly mandate that no company or customer data move beyond the “four walls” of our dedicated data centers.

Recently, as a VMware Accelerate Advisory Services strategist working with a global financial institution, I saw this security mandate extend to a prohibition against the use of public cloud services or the use of multi-tenant, co-located data centers for business software application development, quality assurance procedures, and high-volume stress-testing activities—even when the underlying test data was completely fictitious! (click on image to download related case study)

The main concern with using a public cloud is that services are typically provided in multi-tenant environments. Multi-tenancy is the norm because it significantly reduces the operating costs for the public cloud provider. As a result, financial services, healthcare and insurance companies usually bypass pubic cloud solutions in favor of implementing private clouds within wholly owned or dedicated data centers.

The capabilities offered by the software-defined data center (SDDC) are perfect for private clouds, and accordingly, are an appropriate fit for financial services, healthcare and insurance companies that operate dedicated data centers.

SDDC provides software systems and technologies to virtualize networks and storage, as well as servers. SDDC implementations result in reducing overall CapEx and OpEx costs while enhancing automated workload provisioning, pooling resources and application security.

Financial institutions, healthcare and insurance companies that are early adopters of SDDC technologies are focused on implementing the components in dedicated private clouds. I expect this trend to continue as SDDC features become more widely adopted in the near-term future.

—–

Mark Sarago is a business solutions strategist with VMware Accelerate Advisory Services.

VMware AccelerateTM Advisory Services can help you define your IT strategy through balanced transformation plans across people, process and technology. Visit our Web site to learn more about our offerings, or reach out to us today at: accelerate@vmware.com for more information.

Would you like to continue this conversation with your C-level executive peers? Join our exclusive CxO Corner Facebook page for access to hundreds of verified CxOs sharing ideas around IT Transformation right now by going to CxO Corner and clicking “ask to join group.”

NYSE Technologies’ Capital Markets Community Platform

 

Figure 1: End-to-end solution completely owned and delivered by NYSE Technologies

Jason Hill, VMware’s Head of Strategy and Transformation – Technical Services EMEA, recently presented at Cloud Nation, the Enterprise Architecture Leadership Forum, where he introduced how companies like NYSE Technologies are helping financial services firms achieve business agility through cloud computing, including faster product launch, real-time data management and support for trading in new markets.

In this video, Saurabh Misra, Solutions Consultant, NYSE Technologies, illustrates two use cases of the NYSE Technologies Capital Markets Community Platform. The first use case (in figure 1 above) features a client case study of a US firm looking to extend services to Tokyo with no local footprint.; the second is an investment firm looking to reduce technology costs, gain access to new technologies and reduce time-to-market for new strategies. 

The ever-changing role of IT in today’s business world.

AUTHORS: Eric Ledyard and Michael Hubbard

It seems that every day we get asked “What is ‘The Cloud’ and should we be looking at it?” We feel the very first challenge in answering the question is the fact that the question references a thing and not a method. What we mean is that there is no such thing as the cloud and it isn’t a place. Even more importantly, Cloud is a Means and not an End. Without a business-impacting end state or benefit statement, (prepare to be shocked) you actually don’t need cloud!  Cloud computing is a way of running your IT organization that makes you more agile and efficient in order to improve the quality and value of services that IT provides to the business. Where in the spectrum of IT projects and budgets could/would agility create revenue, competitive advantage and customer service?  Conversely, where are the areas where efficiency (capital, operational, or organizational) could reduce the cost basis of IT?   The need for this change arose out of the fact that IT’s role is changing in the modern business world. Many of us feel that there are 3 catalysts for this change: The first is the overwhelming desire for the commoditization of IT services.  The second is the social technology impact that is permeating everything around us causing business to take note at what is available in their personal and daily lives and seeing a gap between those technologies and services and those that are available in their day-to-day business world.  The third is the exciting yet ominous market effect of “fine-grain choice.”

As it pertains to the commoditization of IT services, businesses want to see more options available to them when they are looking at acquiring IT services and are tired of the expensive, hard-to-manage, custom services they have had to build internally for so long and are eager for this to change. There is a significant barrier to entry of any company wanting to get into business for themselves having to first acquire IT services for their organization. It isn’t just IT services that are the target of this, either. One of the types of “Cloud” services that Gartner highlighted in a presentation a year ago was the creation of “Business-Process-as-a-Service” companies that they said would pick-up considerably as a result of the “cloud” movement. Many new companies instinctively look to procure services for functions such as accounting, payroll, and tax services from 3rd party providers or brokers today, rather than building those organizations internally. Nicholas Carr made these connections in his books ‘Doesn’t IT Matter’ and ‘The Big Switch’ when he discusses the fact that IT in the modern era is perceived as a commodity input from a business perspective, in the same way that electricity and telecommunications are. In his books, he ties together the concepts that because of the fact that IT is seen as a commodity, the modern company would never want to build their own IT environment and datacenter if they don’t need to.

The second major pressure that is facing business IT in the modern world is the explosion of technology adoption throughout society as a whole. Smart devices and on-demand services are training young generations that access to information should be ubiquitous and on-demand from any location at any time. When they get to the business world, there is a dramatic gap in the way these people perceive how business is done and there is typically a negative reaction as to why the company does not operate like many of the services they are used to in their personal lives. A very strong example of this is how the iPad and iPhone have permeated society. You can walk into a café anywhere nowadays and overhear people saying: “Oh, I have an app for that… you should get it.” Then, the other person goes to their app store immediately and downloads the app so they have access to those services. Then, that same person goes back to the office and someone says to them: “Oh, you need an application for that.” And then that person has to go to IT, fill out a request form, submit that form, wait for managerial approval, schedule a time to have their laptop sent into IT so the application can be installed and then get their laptop back. Once this happens even once, those people begin to ask: “Why can’t our company operate in the same fashion as my phone provider?”

Third, how does “fine-grain choice” impact the consumption of IT services?  And are IT organizations (the suppliers) adapting to the associated consumption behavior transitions?  Quite some time ago, a company’s IT Organization was the ONLY game in town; IT had to meet ALL the needs of the business.  In more recent history choice began to emerge and a bevy of firms and consultants cropped-up to provide extremely rough-grain choice via full IT outsourcing and then business process outsourcing. These were long term contracts, of huge commercial value.  Each decision to outsource changed the financial balance sheet of the business, and each contract award changed the balance sheet of the outsourcer. Today, consumers and corporate IT both have “fine-grain choice.” We have choice between what application services we will run ourselves or subscribe to a service run by someone else (Salesforce.com, SiriusXM, iTunes, for example)  Even more fine-grain, we can choose to run and manage our own application, but allow someone else to provide the application platform and infrastructure (cloud foundry for example).  We can even continue to own everything except the physical infrastructure and consume empty, unmanaged VM or physical capacity (think Terramark, Amazon EC2 or Rackspace).  Of course, the CIO is a provider of choice as well, where all aspects of the service are safely controlled and delivered by the corporation itself. 

Because of these pressures, most CIO’s are now trying to figure out how to change their practices and operations to function as a service provider to their respective businesses. A CIO told us recently that a Line-of-Business president recently shared with him “find a way to become a service provider to me, or I will find a service provider that can.”   This is what most organizations mean when they say they want to “do cloud” but they don’t necessarily know this is what they mean. That is where our Vision organization can provide help by providing a roadmap for how they can go from where they are today to where they want to go tomorrow. At the end of the engagement it will be clear what it will take to transform the IT organization into what the business needs it to be.