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From CIO to CEO: Shaping Your ITaaS Transformation Approach

Jason StevensonBy Jason A. Stevenson

In this CIO to CEO series we’ve discussed how to run, organize, and finance an ITaaS provider. In this blog, we will discuss how to approach the ITaaS transformation to gain the most value.

Barriers to Success

Transforming a traditional IT organization to be a private cloud provider and/or public cloud broker using ITaaS contradicts many basic human behaviors. To undergo a transformation we must convince ourselves to:

  • Put other people first; specifically customers paying for the service and users receiving the service.
  • Place ourselves in a service role from the very top of the IT organization to the very bottom and allow ourselves to be subservient to others.
  • Give up the notion of self-importance and recognize each and every person plays an equal role in the chain when delivering an end-to-end service and accept a fair amount of automation of what we do on a regular basis.
  • Redistribute control from individuals to processes that leverage group intelligence and center authority within service ownership and lifecycle.
  • Become truly accountable for our role in service delivery and support where all involved can clearly see what we have done or not done.
  • Approach problems and continual service improvement in a blameless environment that shines light on issues rather than covering or avoiding them.

In other words, we must be: humble, honest, relaxed, and trusting. Not the kind of words you often hear in a technology blog but nonetheless accurate. In essence, we must change. That is different from he must change, she must change, or they must change; and that is very different from it must change. In the IT industry, we tend to abstract change by focusing on “it” which is often hardware and software and then deflect change to “they” which is often users or another department.

Are You Ready for Change?

The first two questions an ITaaS CEO (CIO) needs to ask are:

  1. “Do I really want change?”
  2. “Are we really willing to change?”

Initially the answer seems obvious “Of course I do, we have to.” In that subtle nuance of “I” and then “we” lies our challenge. As we wade in we realize the level of resistance that’s out there and the effort it will take to overcome it. We begin to realize the long term commitment needed. For the faint of heart, change dies then and there. But for those who take on challenge the journey is just beginning.

Many IT organizations are focused on service/technology design and operation and therefore do not have the necessary level of in-house expertise to guide their own organization through a complete people, process, and technology transformation. To ensure the greatest return on their investment, many organizations look to a partner that is:

  • Specifically experienced in transformation to instill confidence within their organization.
  • External to their organization and somewhat removed from internal politics to increase effectiveness.

Assuming a partnership is right for your organization for these or other reasons the question becomes “How do I pick the right partner?

Personal Trainer vs. Plastic Surgeon

You’ve heard the saying “Be careful what you ask for you might just get it.” This is very true of an ITaaS CEO looking for a partner to relieve some of the effort and commitment associated with change. Becoming a cloud provider/broker is hard work. The analogy of personal trainer was specifically chosen because of its implication that the hard work cannot be delegated. Though counterintuitive, the more an ITaaS CEO or his/her team attempts to push the “hard work” to a partner the more the partner becomes a plastic surgeon, “delivering” a pretty package with no guarantee that your organization won’t slip into old habits and lose all value gained.

A personal trainer doesn’t exercise or eat for their client, but coaches them along every step of the way. A personal trainer does not usually deliver exercise equipment, assemble the equipment, or even necessarily write a manual on how to use the equipment. What personal trainer does is show up at regular intervals to work side by side with an individual, bringing the knowledge they have honed by going through this themselves and assisting others.

For an IT organization that is looking to become a cloud provider/broker, reduce cost, or just be more consistent or agile, a partner can help more by providing consultation than deliverables. This isn’t to say that a partner shouldn’t develop comprehensive plans or assets, but your organization will get more value out of developing plans and assets as a team, coached by your partner, to ensure a perfect fit. Though the partner may recommend technology and then implement it, this is just one piece of the puzzle. Establishing a trusted relationship between the partner and the IT organization takes regular workouts/interaction.

My Approach to “Personal Training”

We all wish we didn’t have day jobs or family responsibilities when we want to spend time at the gym but reality mandates we spend short but regular amounts of time with our personal trainer. This is also true of the IT department and their partner. Though 100% of the organization must be involved in change at some point these workshops equate to approximately 10% of the time of 10% of the organization. When I am engaged in large-scale transformation with my customers, I find the optimal cadence for hands-on consultation is every two or three weeks, with three days (usually in the middle of the week) that feature half-day workshops consisting of a 2-hour morning session and a 2-hour afternoon session. These workshops are both timed and structured using principles that build goodwill with all stakeholders involved whether they are proponents or opponents to change.

A simplified version of my approach to overcoming resistance and obtaining commitment is to:

  1. Start by sharing a common vision, how the vision has value, and how we all contribute to producing that value.
  2. Raise awareness and understanding through orientation to allow as many people as possible to reach their own conclusion instead of trying to tell them what their conclusion should be.
  3. Establish trust with all involved by involving them in an assessment. Not an assessment of technology or the environment; rather an assessment that draws people out and engages them by asking what is working and shouldn’t be changed, what isn’t working and needs to be changed, and what challenges do we foresee in making a change.
  4. Openly and interactively draft a service model that includes features, benefits, and commitments and a management model that includes roles, responsibilities, policies, processes.
  5. Automate and enforce the service model and the management model through tool requirements.
  6. Review and revise after group workshops and through great finesse. Over time the group will progressively elaborate on these models and tools, going broader and deeper just as a personal trainer would by adding more exercises, more weight, and repetitions.

Avoiding Burnout

At the gym, we may overcome the initial challenge of understanding health and exercise only to discover how painful our aching muscles can be. This stresses the importance of rest and cross training. Much like a personal trainer, our IT partner must not push an organization to gorge on change or focus on one particular component of change for too long. This can sometimes seem sporadic to our team so the approach must be clearly communicated as part of the vision.

You may have noticed the use of the word “team” and wondered who is it? We can consider team in this context as the service’s stakeholders. That is everyone involved in delivery of service and yes that does include customer and user representatives.

An ITaaS CEO that involves his or herself… and not only chooses change and discipline, but also a partner focused on promoting team change and self-discipline over short-cut deliverables, will find their organization in a much better position to transform to a cloud provider/broker using ITaaS.

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Jason Stevenson is a Transformation Consultant with VMware.

From CIO to CEO: Financing your ITaaS Organization with Charge-back

Jason StevensonBy Jason Stevenson

In my latest CIO to CEO blogs, we discussed How to RUN and ORGANIZE an Information Technology as a Service (ITaaS) Provider. In this blog, we will discuss how to FINANCE an ITaaS Provider.

One of the loftiest goals as an ITaaS Provider is the ability to charge-back, or at least show-back cost of services. It can also be daunting to do so in a fair manner for all customers.

Leonardo da Vinci said “Simplicity is the ultimate sophistication” and Albert Einstein said “If you can’t explain it simply, you don’t understand it well enough.” In this blog I’ll walk through a quickly executable IT cost model to calculate Total Cost of Ownership (TCO), using mostly tools and data we already have, to establish a price that is:

  • Simple
  • Accurate
  • Equitable
  • Scalable
  • Agile

STEP 1: Establish Labor Costs

Bob worked 40 hours this week. 16 hours in support of services including day-to-day operations, online training every other day, and daily staff meetings. 24 hours were spent working on a migration for Project 2. All employees had a holiday the first Monday of this particular month. As it happens, none of our employees took any leave for the rest of the month. Out-of-office equals $0 cost and is excluded. The reason for this will become more evident when we discuss burdened rates.

IT Cost Model

Highlighted in blue, each project is associated with a service. It is important to note Project 2 is associated with Service B. The cost of Project 2 is derived from our employees’ wage and a rate of 1.5. The wage is multiplied by this rate to equal a burdened rate. Burdened rates reflect wages plus benefits and fee if any. Bob worked 24 hours on the Project 2’s migration in Week 2 per our example and contributed to Project 2’s cost of $5,724.00 this month.

Highlighted in orange, Bob worked 16 hours in support of services in Week 2 per our example. Tickets (requests, incidents, problems, changes, etc.) are associated with each service. Out of the 112 total tickets this month, 30 were related to Service B or approximately 27%. Using the number of tickets per each service and total labor for service gives us the cost of service. In this case, $17,172.00 * (30/112) = $4,599.64 for Service B this month.

Highlighted in green, the total cost of Service B labor for this month is $10,323.64 by adding $4,599.64 for project labor and $5,724.00 for service labor from our previous calculations. Our service organization must recover $36,252.00 this month for just labor.

IT Cost ModelIT Cost ModelIT Cost Model

STEP 2: Distribute Operational Expense

Services may require operational expenditures (OPEX) like: leases, utilities, maintenance, etc.; some of which may be indirect and need to be fairly distributed across services based on relative service size. By dividing subscribers of a service by the total number of subscribers we arrive at a fair percentage of monthly operational expenses for Service B of 28%. Indirect operational expenses for Service B are calculated fairly by $18,000.00 * (250/900) = $5,000.00.

Some expenditures are so large that the expense cannot be recognized at one point in time and need to be amortized (for example building a new data center). Depending on your model, this expense may be captured as either a project expense or an operational expense. In keeping our model simple, amortization should be used sparingly. When absolutely necessary, it should be used consistently by establishing a concise policy like “All expenses over $500,000 will be amortized (spread) over 36 months.” In our example, no expenses exceeded half-a-million-dollars and so amortization does not apply. However, if we had an Expense E of $1,750,000 for our new data build-out it would be recognized as $1,750,000 / 36 = $46,611.11.

CEO5

STEP 3: Calculate Total Cost of Ownership

Projects may require capital expenditures (CAPEX) beyond labor like: material procurements, suppliers of personnel, etc. plus travel. Project costs are often direct and simply added with project labor for total project cost. We can distribute these costs as well if needed. Total Cost of Ownership for Service B rises to $18,323.64 by adding capital expenses of $3,000.00 to our previous operational expenses and labor. Assuming our other services and projects require only labor, our service organization must recover $44,252.00 this month to remain solvent. Dividing Service B’s total cost by 250 subscribers gives us a cost of $73.29 per subscriber per month.

CEO6

STEP 4: Establish Charge-back

Our previously mentioned 250 subscribers of Service B is spread over four service customers (departments in this example) as 100 + 100 + 25 + 25 = 250. A fee of 7% which is the difference between our cost and our price. Recovery from each customer of their fair share of services. Department A has 100 subscribers of Service B; which equates to 100 * ($73.29 *107%) = $7,842.03. 107% is a representation of 100% of the cost plus 7% fee. Our previous Total Cost of Ownership of $44,252.00 is now a price of $47,349.64, allowing our service organization to not just be solvent but also profitable to enable research, development, improvement, etc. of services.

IT Cost Model

If the culture of your organization does not allow for your IT department to charge customers for service the same principles can still be applied. Remove the fee (7% in our example) and communicate the same information as Service Consumption Report rather than an invoice to provide show-back to your customers. Though they may not be paying for services you can still influence their behavior by giving them comparative analysis against their peers.

The following table summarizes charge-back using an IT Cost and Price Model.

IT Cost Model

In my next blog post we will explore tips for how to ensure, as the new “CEO” or your IT department, that your transition to an agile, innovative, and profitable service provider is a successful one.

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Jason Stevenson is a Transformation Consultant with VMware.

Establish Your IT Business Management Office (ITBMO) To Run IT Like a Business

Khalid HakimBy Khalid Hakim

We hear a lot about (and maybe have interacted with) Project Management Offices (PMOs), and possibly about Service Management Offices (SMOs), but IT Business Management Office (ITBMO) sounds like a new buzz word in today’s modern IT business taxonomy. PMOs typically focus on the management and governance of IT projects, while SMOs are responsible for the governance and management of IT services and the processes to ensure effective service delivery. ITBMOs, however, go beyond this to the next IT business maturity level to address business and finance partnership with IT to help IT organizations transform into services-based, business-oriented, and value-focused organizations.

ITBMOHave you ever asked yourself of how you can make your CFO happy? How you can support your corporate financial goals and aspects of a balanced scorecard? How you respond to “IT is always expensive” perception? Have you thought of challenges related to quantifying value your consumers get of IT services? Are you challenged to view IT costs by services you deliver? Or even budgeting and forecasting by IT services? Can you tell on the spot what your unit cost of a service is? What about demand driven IT? Do you feel that you are always over capacity with low utilization of services? What about leveraging marketing power to promote your IT services? How you can commoditize and brand your IT services? And many other questions and thoughts that keep CIOs awake at night.

(I can hear you thinking)

We have been hearing about “transformation” and “running IT like a business” quite frequently nowadays. As a matter of fact, these are becoming overused terms without real meaning of what they actually imply. Imagine that you are the CEO of a new wood furniture manufacturing business. Obviously, the main functions that you could initially think about are Product Management (who turns logs into useful products), Sales and Marketing (who promotes and sells to consumers), and Finance (who manages the financial aspect of the organization). The question is: why can’t we apply the same discipline to IT organizations? Similar to Product Management, IT organizations deliver services, and therefore we have Service Management and Service Owners/Managers. We are only missing two things here to run IT like a Business: a strong service-based financial operating model and the Services Sales/Marketing sense to help promote and consume IT services in the best valuable manner to consumers.

This is what the ITBMO brings to the table: a stronger partnership between IT, Business, and Finance to accelerate transforming your organization into a business-oriented, service-based, and value-focused one. Initially, you can think of the ITBMO as a virtual group or committee that has champions from various IT/Business functions. This virtual team paints the IT business vision and defines its mission on how to run IT like a business to deliver more value to business in the most economical way.

IT Business Management Office (ITBMO)

Figure : IT Business Management Office (ITBMO)

As shown in figure 1, the ITBMO supports 6 functions/towers to ensure stronger partnership throughout the IT service and project management lifecycle. These are:

  • Service Management Office (SMO): the entity (or any similar) within an organization responsible for the delivery and management of IT services. This includes the pure ITSM process management and ownership and delivery along with the ongoing management of IT services.
  • Project Management Office (PMO): the entity responsible for project management and governance
  • IT Finance: the function that takes care of the financial aspect of IT, which could be part of IT or Finance. This typically includes IT budgeting, accounting, pricing and cost optimization.
  • Services Sales & Marketing: a new (or maybe existing) function that will be improved and strengthened as part of the ITBMO establishment.
  • Business/IT Alignment: any existing functionality (such as Customer Relationship Managers or Account Managers) that ensures ongoing alignment between IT and Business.
  • Governance, Risk, and Compliance (GRC): the function (or multiple functions) responsible for organizational change, developing IT policy and governance strategy, IT risk evaluation and mitigation and compliance.

A champion from each function (could be multiple champions based on the organization scale and size) contributes to the core operations of the ITBMO to achieve the value-focused vision. The ITBMO runs in consultative and supporting mode, but depending on the IT organization’s authority, decision making process and power, and delegation factors, the ITBMO could be an authoritative entity within the organization.

Standing Up an ITBMO

Figure 2: Standing Up an ITBMO

Figure 2 shows the six steps required to standup a successful ITBMO within your organization:

  1. Develop Vision/Mission: thinking of why you need an ITBMO in the first place is your first step. What is the challenge you are trying to overcome or opportunity you want to introduce? Thinking collectively in a short/long term vision and drafting a mission statement of what this ITBMO actually does are your foundational steps towards a value-focused organization.
  2. Build and Position the Organizational Structure: figure out what roles are needed and who needs to be onboard and whether this is a virtual team of representatives or dedicated and how it fits the organizational structure and reporting lines
  3. Develop Process Interactions: fully understand your existing processes interactions within the functions that will be supported by the ITBMO, and figure out where you want the ITBMO to help, support, and interject to accelerate value realization
  4. Develop RACI Chart: translate your discovered process interactions and help areas expected into a roles and responsibilities chart (i.e. RACI). This will expose the areas of improvement and will help build a short and long term improvement roadmap across all supported functions to achieve the desired vision.
  5. Establish Value Measures and KPIs: quantifying IT value is one of the challenging tasks IT management confronts. This step defines a very high level value measurement framework or methodology along with the success factors and measures that a CIO or CFO can judge the success of ITBMO thru. VMware vRealize Business is the technology that will be used as a platform to define those value measures and KPIs and help making informed decisions.
  6. Build ITBMO Ongoing Operations: build your ITBMO ongoing operations guide by identifying which RACI responsibilities will be performed

So, you might now be thinking about the value an ITBMO can bring into your organization and how you could best leverage such a powerful business unity:

  • Establish business horizon within your IT and implement a model to help run IT like a business
  • Ensure tighter partnership between IT, business, and finance. This partnership is key to IT success like any other business.
  • Enable your organization explore more improvement opportunities and build a maturity improvement roadmap to run IT like a business
  • Help accelerate your transformation journey not just to a trusted service provider, but to a strategic business partner
  • Create new virtual business roles within your organization and help accelerate this transformation journey
  • Help your IT organization make better and strategic use of VMware vRealize Business to drive the cost optimization and value realization strategy and goals
  • Empower your IT to deliver on the desired quality, at the right cost by creating tighter alignment and accountability between IT, Business, and Finance
  • Elevate and strategize your IT conversations with service consumers, stakeholders, and executives to support IT and business transformation journeys

And if you’re heading to VMworld, don’t miss this session (OPT 5075) on Tuesday 9/1 at 5:30pm!

6 Steps to Establish Your IT Business Management Office (ITBMO) with VMware vRealize Business

VMworld 2015While many smart IT organizations have started their transformation journey to service-oriented and consumer-centric providers, there are still some key gaps that need to be addressed to ensure the effectiveness and efficiency of this transformation and therefore to yield the expected value. These gaps are related to the IT financial operating model and how modernized it is to cope with technology & cloud evolution along with the business speed. The IT Business Management Office (ITBMO) is revolutionizing the way IT leaders demonstrate business value to the enterprise. The ITBMO could be a virtual committee to ensure stronger partnership between IT, Business and Finance together to drive an organization towards faster value realization and maturation. Khalid Hakim, global IT operations, financial and business management architect, and Jason Nienaber, IT Business Management Director at VMware will shed light on this new business practice using VMware vRealize Business to move your IT organization to the next level in maturity and position it as a strategic partner to your business consumers and line of businesses.

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Khalid Hakim is an operations architect with the VMware Operations Transformation global practice. You can follow him on Twitter @KhalidHakim47.

From CIO to CEO: 5 Steps to Organize an IT as a Service Provider

Jason StevensonBy Jason Stevenson

In my last CIO to CEO blog, we discussed How to Run an IT as a Service (ITaaS) Provider by providing services to meet customer needs using a commodity as an example. In this blog, we will discuss how to organize governance and personnel within an ITaaS Provider.

IT as a Service ProviderTo provide business/mission-value and remain relevant, many IT organizations are positioning themselves as a Hybrid Cloud Broker; providing both public and private cloud services to their customers and users. To be successful, these organizations must adopt ITaaS; a model in which IT is a commodity, providing services on demand to meet business needs through a scalable and measurable pool of resources using integrated and automated processes. This is accomplished through a blend of:

  • Cloud computing standards
  • Service management best practices
  • Leading cloud and virtualization technologies

The following provides five steps to reorganizing IT to become and ITaaS Provider.

Step #1: Service Owners and Managers

Misconception #1:
Service owners and managers are lower-level resources that: a) do not have financial responsibility, b) are not fully accountable for their service, and c) report into functional/project directors.

Organize an IT as a Service ProviderAs part of service portfolio and catalog management, IT assigns owners for each service.

  • Service Owners (SO) are accountable for service strategy including fiscal responsibility and understanding customer demand for their services. Service Owners solid-line report to the CIO.
  • Service Managers (SM) may also need to be identified for each organizational sub-unit such as lines of business, cost centers, geographies, etc. If used, service managers are accountable for service operation and potentially service transition. Service Managers dotted-line report to service owners.
    • In larger organizations, service owners and managers may use a one or more Business Relationship Managers (BRM) as a conduit to customers paying for the service. BRMs solid-line report to the CIO but are embedded with their customers. The CIO may also have an IT Financial Manager (ITFM) to coordinate ITaaS provider budget allocations to service owners and consolidated service chargeback to customers.

Step #2: Service Life Cycle

Misconception #2:
Service strategy, service design, service transition, service operation, and continual service improvement are just names of service management books.

Organize an IT as a Service ProviderThough many organizations claim to be service oriented, their organizational structures remain functionally and/or project oriented. The following diagram illustrates an organizational pyramid providing service orientation through a service-life-cycle-based organization.

  • Directors are assigned for each service life cycle step including service design, service transition, service operation, and continual service improvement. The CIO also acts as the service strategy director and also performs demand management. Directors solid-line report to the CIO but dotted-line report to the service owners/managers. These directors’ budgets are an aggregate allocated by the service owner.

Step #3: Process Owners and Managers

Misconception #3
Process managers can be an afterthought and “peppered” throughout the organization.

Organize an IT as a Service ProviderTo be successful, an ITaaS Provider must have mature processes under the control of process managers and owners.

  • Process Managers maintain unit procedure documentation. Monitor process reporting. Reviews process records for compliance. Provide ongoing process and system training to unit. Contribute to continual process improvement. Ensure compliance with policies, processes, and procedures. Facilitate regular process meetings and communication channels. Coordinate interface with other service management processes. Take corrective action if needed.

For organizations with intensely “siloed” or “stovepiped” cultures, process owners many need to be introduced. This is not preferred but a common reality.

  • Process Owners champion policies, process, roles and responsibilities. Provides ongoing process and system orientation. Facilitates quarterly reviews. Facilitates annual audits. Enables continuous improvement.

The Service Portfolio Manager (SPM) also fulfills the role leading a service/project management office. The office may including control, technical writing, quality assurance, etc.

Step #4. Technical-Facing Service and Configuration Item Owners and Managers

Misconception #4:
Technical resources for service design and operation do not need to work together in abstracted technical-facing services.

Organize an IT as a Service ProviderThe business-facing services discussed above are supported by functions each with its own owner.

  • Infrastructure Function Owner (IFO)
  • Application Function Owner (AFO)
  • Data Function Owners (DFO)
  • Service Desk Function Owners often fulfilled by the Incident Manager (IM)
  • Operation Center Function Owners often fulfilled by the Event Manager (EM)

These functions may be further decomposed into technical-facing services. Common technical-facing services for ITaaS include network, compute, and storage and each must have an owner.

  • Network Service Owner (NSO)
  • Compute Service Owner (CSO)
  • Storage Service Owner (SSO)

To be a successful ITaaS Provider, technical services are not “siloed” or “stovepiped” and therefore do not require managers in addition to owners as they are shared services. However, the components supporting technical-facing services often have:

  • Configuration Item Owners fiscally responsible for the component
  • Configuration Item Managers operationally responsible for the component.

Life Cycle Gravitation

Configuration Item Managers are often referred to as DevOps in an ITaaS environment; especially for configuration items supporting the application function. Depending on an organization’s culture, DevOps may dotted-line or solid-line report to the Service Design Director or the Service Operation Director. As the organization matures, resources naturally gravitate from operations to earlier phases within the life cycle.

Step #5. Users and Assignment Groups

Misconception #5:
ITaaS is just jargon. IT departments are about IT personnel delivery IT.

Organize an IT as a Service ProviderIn a mature organization, classification of events, incidents, requests, etc. are aligned to the business-facing and technical-facing services within the catalog rather than legacy Category/Type/Item classifications. In this respect, the Technical-Facing Service Owners and Configuration Item Managers discussed above may also be referred to as Assignment Group Managers. The remaining technical employees within the ITaaS provider report to these Assignment Group Managers.

Every individual employee of an ITaaS Provider must move from technology to process, to service, to customer, to mission, and then ultimately to a value focus. Because these individual employees are the first, second, and third line of support for the users receiving the service it is critical for these IT employees’ tools and training to encourage user value focus.

Though impractical from a presentation standpoint, the entire ITaaS Provider must conceptualize their role as an inverted organization chart with the users at the top of the organization, then IT employees supporting the users, and then IT management supporting IT employees.

Organize an IT as a Service Provider

Move from CIO to CEO by leveraging a Strategist from VMware to address the people, process, and technology elements necessary to transform your organization to an ITaaS Provider.

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Jason Stevenson is a Transformation Consultant based in Michigan.

The Benefits of Linking IT Spend to Business Returns

Harris_SeanBy Sean Harris

For just a moment, consider the following fictitious organization, Widget Warehouse.

Widget Warehouse is making a gross margin of 15 percent and is able to spend five percent of its revenues on IT (you can replace these numbers with your own). The company would like to improve the financial performance of its business and is considering three IT programs to do that, as well as the likely impact on the CIO, CFO and CEO/shareholders.

 

  1. Leveraging IT agility to raise revenue by five percent without cutting IT spend – Assuming business costs rise—but that IT costs do not—this will generate an additional 0.23 percent of revenue, boosting gross margin to 15.23 percent. If both business and IT costs do not rise, it will boost gross margin to 20 percent. Most importantly, this would show a dynamic growing business rather than a static one, as seen in the following two scenarios.
  2. Leveraging improvements in IT agility, reliability and security to cut business costs by five percent (and not cutting IT spend) – This will deliver a four percent improvement in gross margin.
  3. Cutting IT spending by 20 percent – This will improve gross margin by one percent.

Now, consider the reactions of the Widget Warehouse CIO, CFO and CEO/shareholders to the three scenarios.

  • Scenario 1 – The CEO and shareholders will be most interested in this one, seeing not only improved margin, but also a growing business. This will generate the most interest from the CFO as well, and the CIO is now recognized as a contributor to the growth.
  • Scenario 2 – This will still be of strong interest to the CFO, but of lesser interest to the CEO and shareholders. The CIO will still be seen in a very positive light, but not necessarily a contributor to growing the business.
  • Scenario 3 It is still likely to be of some interest to the CFO, but of limited interest to the CEO and shareholders. It will more than likely generate a whole heap of pain for the CIO, since a chunk of the cost cutting will involve people and inevitably damage morale (and productivity) in the IT department.

The most appealing scenario to all parties is a combination of scenarios one and two, which can be achieved in parallel.

So, having agreed that Widget Warehouse wants to focus on the first two scenarios, they now face a critical question: “How do we approach it?”

Shifting the Focus of IT Projects

It is widely accepted that the use of cloud computing—public, private and/or hybrid—and the delivery of IT-as-a-Service (ITaaS) should provide benefits on three axes:

  • Efficiency Cost containment and reduction
  • Reliability – Reduced outage and improved availability
  • Agility – The ability to respond quicker to the needs of the business, customers and market

Using the software-defined datacenter to deliver the enterprise cloud adds a fourth axis, which is security.

Most IT organizations I speak to are always ready to discuss business cases or return on investment (ROI) based on the efficiency axis, and indeed ITaaS has much to offer in that space, but for the purpose of this discussion I will focus on the impact of agility, reliability and security, and how these can be linked to business benefits.

  • Reliability – Most organizations can easily measure the loss of business during an unplanned outage. The key here is to ensure you measure your availability in terms of business availability, and not IT services availability. For example, an IT group that is supporting five IT services—one of which is experiencing outages—might consider themselves to be 80 percent available. However, if that one service happens to be authentication and authorization, then it is likely all business services are not available, so IT services are actually 100 percent unavailable. It is therefore vital as a first step to comprehensively map business services to IT services and systems.

The most major impact of service outages on the business is reputation and brand equity. Much has been published on the cost to the Royal Bank of Scotland from their 2012 outage. They’ve admitted that due to decades of IT neglect their systems crashed, leaving millions of customers unable to withdraw cash or pay for goods. What is the risk to your business if during an outage your customers try an alternative…and never return?

Another consideration is not unplanned downtime, but rather overall availability. Most IT departments do not consider planned downtime as having an impact on the business or on IT service reliability, but is it possible that by reducing planned downtime you could increase revenues? For example, you could extend trading hours or re-use infrastructure for new services.

  • Security –In addition to the loss of business during a security breach, consider the permanent reputation damage resulting from public disclosure. The 2014 security breaches at SONY will cost the company $35 million in IT repairs in addition to the more intangible, but arguably more serious, harm to their brand’s reputation.
  • Agility – While examining reliability and security as the crucial axis, it can seem as though you are focusing on the negative impacts IT can have on the business, whereas the agility axis looks squarely at delivering positive impact and business value. To generate the metrics in this space requires a new form of communication between IT and the business: the conversation must shift away from pure cost pressures on IT.
    • By delivering agility, what is the impact IT can have on improving business efficiency (scenario 2)?
    • By delivering agile IT, what is the impact on revenues that can result from shorter time-to-market? What is the long-term impact on market share by being first to market? The first player in a market will often maintain a market leadership position, and be an established premier brand long after others enter the market.

Hopefully with this brief discussion I have whet your appetite for refocusing some of your IT transformation effort on not just driving greater efficiency in IT, but in using IT to be able to drive greater efficiency in the business, or even drive the business. This in turn will change the role of IT from being seen as a cost to the business (as it is in most organizations) to being an enabler and vital part of a successful business.

VMware Accelerate Advisory Services can help IT organizations like yours build a roadmap to transform IT into a business enabler and assist in building the business case for change – based not just on the cost of IT, but on the true value IT can contribute to the business.


Sean Harris is a Business Solutions Strategist in EMEA based out of the United Kingdom

How Does Change Management Change with ITaaS?

LinkGregBy Gregory M. Link

As Dorothy said, “…I don’t think we’re in Kansas anymore.” The same can be said of the changing landscape in IT departments within enterprises. IT-as-a-Service, or ITaaS, is where IT focuses on the outcomes the business needs, and functions much like a business itself, following the service provider model. IT Service Management (ITSM) tools and processes are put into place to deliver IT services with an emphasis on customer benefits. This is a prime example of the evolution taking place in corporate IT organizations around the world.

As organizations move toward an ITSM model to deliver ITaaS, they are transforming the way they work by extensively leveraging technologies such as infrastructure virtualization and the cloud, and working to break down many of the traditional IT silos of the past. Along the way, IT service management processes—such as change management—evolve as well.

Traditional models of change management called for a Request for Change (RFC) to initiate change in a given environment, each one being reviewed, evaluated, authorized and coordinated individually— typically with significant employee involvement. If an organization needed a new server for application development, they submitted an RFC and plodded through the one-size-fits-all process.

But the ITSM tactics and tools used in an ITaaS approach allow many of these types of needs to become software-defined and treated safely as service requests fulfilled via self-provisioning. Some rigor will need to take place via a standard RFC to ensure the desired controls are embedded, but this happens on the front end where policies and standards are built, to ensure safety with the new level of efficiency ITaaS brings. Once properly vetted, this type of service request becomes an orderable item in the service catalog, and fulfillment is delegated to the Request Fulfillment process.

Not only can authorized customers order servers, but they can specify the running parameters of the server for the virtual environment. Once the options are specified in the service request, it only takes the click of a mouse and the server is soon provisioned and ready for use. The era of waiting days or weeks for equipment to be ordered, configured and tested before going into service is over. Governance surrounding this new capability needs to be well thought through in consideration of security and costs.

Essentially, tactics traditionally used for business end-user requests only can be replicated inside IT, allowing IT teams like Application Development to leverage self-provisioning, thereby increasing the speed of delivering overall outcomes to the business.

Of course, new technology solutions won’t allow all changes to be delegated to self-provisioning, even when we end up in the Land of OZ. For example, if a physical server needs to be added to the environment, an RFC will still need to be generated and run through the traditional change management process.

The capabilities that enable an ITaaS approach will continue to evolve as organizations embrace this relatively new way of doing business. Using the key ITaaS-relevant technologies will allow IT to move their processes, like change management, into the future, as well as automating everything that can responsibly be automated and freeing our human resources to add the real value the business needs and expects—innovating and helping to improve the bottom line.


Gregory Link brings over 18 years of experience in IT Service Management. He has worked in both the Service Desk  and ITIL implementation areas for large IT organizations. Gregory is currently a Transformation Consultant at VMware, Inc. and is a Certified Private Pilot with an Instrument rating.

Collaboration Between AppDev & Infrastructure for ITaaS

Mark SternerBy Mark Sterner

Traditionally, IT organizations operated in a siloed environment. AppDev teams were tasked with meeting the needs of the business and Infrastructure teams provided the environment to support AppDev. These two organizations had little interaction and even less collaboration. Even worse, the infrastructure provisioning process was viewed as a roadblock to getting the business with what they needed when they needed it.

In today’s IT world two factors have turned this scenario upside down. The first is the trend toward virtualization and automation, which enable the infrastructure team to provide the supporting environments at the speed of business. The second is the desire of companies to adopt an ITaaS (IT as a Service) approach in which IT focuses on the outcomes the business needs and functions much like a business itself.  Evolving to an ITaaS approach requires a great deal of collaboration between all levels of the IT organization, including effective and structured collaboration between AppDev and Infrastructure.

One of the most powerful results of an ITaaS approach is the provision of cost effective, nimble solutions at the speed of business. To achieve this it is important for all IT teams to clearly define and understand the services they provide, particularly the end-to-end services delivered to the business itself.  Historically, defining end-to-end services has often fallen to the AppDev team who took an application-centric approach to the process. This led to a disconnect between AppDev and Infrastructure.  Ideally, this process is a collaborative effort between the two teams to clearly define the services, taking all aspects into consideration, including not only the applications, but also the infrastructure, the service level agreements for elements such as availability and performance and the relative importance of each service to the business operations.

While the process of defining IT services provides the basics of ITaaS, it is only the first step in truly transforming an IT organization. In order to deliver IT as a service, IT must provide the business with metrics that illustrate the benefits provided, particularly the financial value through increased productivity at a lower cost. To meet that goal the AppDev and Infrastructure teams need to collaborate on many different levels to realize these efficiencies.  Streamlining and effectively managing the allocation and deployment process is the first step to lowering the cost of IT.

Typically, AppDev teams of the past chose their solution to the business need with little thought to maximizing the efficiencies of the supporting infrastructure. Additionally, the Infrastructure team provided the environment with little understanding of the application architecture.  Leveraging the efficiencies of a virtualized environment can certainly provide a more agile environment, but only through a collaborative effort can IT truly provide the most effective solution.  AppDev and Infrastructure need to consider all aspects of delivering the solution. This includes availability, security, performance and scalability and reporting requirements. They must also understand and agree upon the application’s importance to the business. This will determine the disaster recovery strategy and define the support levels provided by both teams. Once all these factors are determined and defined, only then can the IT teams develop the most effective solution by aligning the application architecture with the most efficient infrastructure.  This effort will help to lay the groundwork for standardizing the integrated AppDev and Infrastructure processes and delivering measurable metrics that illustrate the success of the transformation to ITaaS.  Additionally, the standardization work can be leveraged to help implement Platform as a Service (PaaS), bringing even greater efficiencies to a virtualized environment.

Collaboration across the entire IT organization is not a new and trendy concept. Several models have emerged as best practice pathways to building and maintaining agile IT teams.  DevOps, for example, addresses the need for IT to provide rapid deployment of systems by breaking down the traditional barriers between IT teams. The “Dev” in DevOps does not simply refer to the AppDev teams, but includes all IT resources such as network engineers, sys admins, security teams and DBA’s. They are all part of the development lifecycle and have a role in the development of the most effective solutions to meet the needs of the business.  Through DevOps, IT organizations become a valued service provider and not a bottleneck to providing business solutions.

ITaaS requires organizations to rethink how they provide solutions to the business. Collaboration between AppDev and Infrastructure is central to successfully transforming to ITaaS. Traditional silos need to be broken down, blurring the lines between internal IT teams.  This may require an internal reorganizational effort to facilitate a more collaborative environment, but even without changes to organizational structure, working together towards a common, outcome-focused objective, is the key.  While managing this entire endeavor may seem a bit overwhelming, changes in the market, competition and technology are requiring most IT organizations to re-evaluate how they can keep up with the demands of today’s business environment.


Mark Sterner brings over 14 years of experience in IT Service Management. He has worked in both the process development and ITIL implementation areas for large IT organizations. Mark is currently a Transformation Consultant at VMware, Inc.

Two Steps to Put IT at the Heart of the Business: How Senior IT Professionals Can Get the Business to Fall in Love with IT

Ed HoppittBy Ed Hoppitt

As Valentine’s Day approaches, I thought it appropriate to pose the question: “How do you move IT from being seen as a mere service provider, to being at the heart of key business decisions and initiatives in 2015?” Put in the parlance of romance, “How do you get the business to fall in love with IT?”

In the last few years, technology innovations and emerging business models have enabled competition in surprising new ways—and from surprising new sources. Now supermarkets are becoming retail banks, and Uber has a higher market value than Hertz and Avis combined. When technology enables a competitor to rise from nowhere in no time at all, it’s up to you, as a senior IT professional, to take charge of shaping the business transformation to empower your colleagues—and earn a place in the heart of the business.

But how do you make that happen? The road to IT romance starts with the following steps.

Step 1: Work on Your Image and Approach

If you’re going to woo the business, you’ll want to put your best foot forward. It’s not enough to transform your organisation; you need to be sure the business notices your new positive changes, and experiences the benefits of your efforts.

First, realise that perception of your organisation is everything, and being seen as a roadblock to innovation and agility will not get you that first date. Winning hearts and minds requires focussing on strategy over technology to contribute a fresh approach to achieving goals rather than the “same old same old.”

A large part of this entails transforming how you source and procure IT services. Most IT organisations are still focussed around complex hierarchical structures that simply aren’t agile enough to support a rapidly changing business environment. Hanging on to old delivery models—like old love letters—will only hold you in the past.

Here, the CIO’s leadership is critical in changing the organisation’s image from “gatekeeper” to “orchestrator.” You will need to champion a collaborative, hybrid sourcing model that allows you to draw on internal innovation—or leverage the dynamic new commercial ecosystem—based on the best solution to the challenge at hand.

Step 2: Contribute Something Meaningful to the Relationship

Having worked so hard to get a seat at the table, you’ll want to be sure you have something to offer once you get there. The following are three areas where you can add value to the business in 2015.

  • Hybrid: 2015 is going to be the year hybrid really takes off, becoming wholly integrated with enterprise IT. It will become key to be able to run a true Bi-Modal IT function, where “and” rather than “or” becomes the norm. No longer will a one-size-fits-all approach work, and the ability to be both a trailblazer of innovation for your business, as well as a safe pair of hands is critical going forward.
  • Internet Of Things (IoT): Internet Of Things (IoT): 2015 looks like the year IoT will become all pervasive. For example, British Gas has announced an IoT project called Hive, which allows customers to control their heating from a smartphone. When a commodity utility business unleashes software (a move driven by IT) as a differentiator, other markets (and competitors in the same market) will quickly follow. It is through taking the initiative and spotting that opportunity to use emerging technologies and then drive that change in your business and market that will bring success in this space. If, as CIO, you see an opportunity and seize it, the rest of the business can’t help but recognize IT as an orchestrator – not a gatekeeper.
  • Security: No company is going to accept a ‘Sony’ moment in 2015, and no IT executive is going to survive one. For too long, security management has lagged behind developments elsewhere in IT. Security needs to be at the heart of business, and that means it needs to be associated with workloads and data, not with the expensive proprietary hardware running complex software that doesn’t understand the constructs of the business.

This Valentine’s Day, do your best to help the business fall in love with you. They may not realise it yet, but you’re about to become the key to their future happiness—and survival. It’s time to get their attention and make some magic happen. Good luck!


Ed Hoppitt is a VMware EMEA Advisory Services & CTO Ambassador

3 New Year’s Resolutions to Make “IT Relevance” a Reality

Sue Holly-RodwayBy Sue Holly-Rodway

It’s that time again―the dawn of a new year, and its accompanying surge of post-holiday, re-energised intention and commitment to improvement.

My team and I work in the shape-shifting world of technology, helping customers drive business transformation through IT transformation. And that can be challenging simply because today, technology is the business. As Jeff Immelt, CEO of GE Corporation, said, “If you went to bed last night as an industrial company, you’re going to wake up today as a software and analytics company.”

That makes the CIO and IT team central to shaping business strategy, including planning and execution. And of course, you still need to optimise the operation of core systems while reducing operational budgets as well. Based on our experiences over the past year, I wanted to suggest three resolutions to help you meet these goals.

Resolution 1: Put IT in the Driver’s seat

In order to shape successful business transformation, the CIO must be in the driver’s seat. By the end of 2015, act as the “Chief Innovation Officer,” and play a central, creative role in shaping business strategy where technology is the accelerator for growth.

We believe that many businesses still have a long way to go in recognising the central, critical roles of the CIO and IT team in guiding business strategy through expert understanding of how technology can drive growth. So what gets in the way? Often IT is seen by the rest of the organisation as old-fashioned and a roadblock to innovation and agility. All too frequently IT itself is stuck in the mindset that their job is just to keep the systems up and running—and let “the business” worry about the rest. For real transformation to happen, both of those mindsets have to change.

To be in the driver’s seat, the CIO must first be heard in the boardroom, proactively advocating IT-driven business transformation. In addition, the IT organisation needs to change focus from traditional, operational, project-based thinking to innovative, cross-organisational business growth initiatives where technology is central.

In 2015, the transformational CIO will be working to put more focus on innovation. That means sponsoring initiatives that assess the gaps between the current and desired state, and plotting incremental steps toward improvements that don’t disrupt the whole IT organisation. External advisory partners are really helpful in this area, where the challenge isn’t purely the capabilities of the technology, but people and processes as well.

Resolution 2: Drive the journey to the cloud

Nearly every organisation is at some stage of exploring cloud services, especially in terms of enabling innovative new business initiatives to fly―or fail―quickly. Cloud-enabled IT-as-a-Service (ITaaS) should be the natural domain of the CIO and IT, based on their years of experience putting technologies such as security, integration and connectivity at the centre of their strategies. Cloud strategies should be no different.

But this past year, our team has seen multiple examples of organisations lurching toward using so-called “open” or “free” cloud-based services, rather than having a well-thought-out strategy with an execution plan for robust, secure, cloud-based services to support the business as part of a wider technology capability, delivered or brokered through the IT organisation.

As the CIO, make a resolution to create and own the “travel plan” for your organisation’s journey to ITaaS through the cloud. This is a journey that can involve a number of potential potholes along the way – and like all successful journeys, it requires a well-thought-out plan, informed by experience, expertise and appropriate risk management.

An important part of preparing for the journey involves encouraging closer working relationships between the operations and development teams. In a recent VMware Europe CIO event in Barcelona, Spain, IT leaders agreed upon the importance of bringing these teams closer together to build more collaborative ways of working to deliver better outcomes for the business.

Resolution 3: Protect the business with proactive security investments

Today, almost every user in your organisation has one or more mobile devices, which they use—or would like to use—to access business-critical information and applications. The process of closing the gap between IT’s capabilities and end-users’ expectations creates serious cyber security implications that warrant the full attention of the business.

This has typically been regarded as the domain of risk managers, and has not been seen as central to business success. However, the speed of change in technology and the blurring of lines between external and internal IT requires the insight and leadership of the CIO and their technology experts and security teams to address it.

As CIO, resolve to convince the business that cyber security is a business-critical topic and one that merits proactive investment. My team and I have had many conversations on this topic with CIOs and IT leaders in EMEA this year. Elan Yanovsky, ex-CIO of Israel Post, and now part of the EMEA Accelerate Advisory Team, shares this view:

“Though much has been said and written regarding cyber security, this is still the largest threat for the CIO. Many organisations still believe this will only happen to others. Mobile, Cloud and Social push us―IT―toward interesting times but also closer to the hands of evil players. What happened to Sony recently can―and actually does on a daily basis―happen to others.   See this infographic from Business Insider on the world’s biggest data breaches.  The CIO needs to be allowed to invest more on understanding the threats, exposing the vulnerabilities, and preventing the usage of them. The technology capabilities, such a micro-segmentation in the network, which VMware offers through NSX technology, or managing mobile email through Airwatch mobile management technology, are now available. Now it’s not just an option, it is all about survival.”

In Europe, specifically, IDC predicts the passage of recent EU Data Protection Legislation will also require incremental investment in IT governance and security. The CIO has a critical role to play in guiding the business in the best ways to apply the time and money required to complete a full assessment of the organisation’s security vulnerabilities and take action to eradicate them.

These are just three ideas around goals which might help to reinforce your focus for 2015 – and whatever they are, all the best for a successful and exciting year!


Sue Holly-Rodway is VMware’s Senior Director for Advisory and Professional Services Business Development in EMEA. Sue has held this role since January 2014 and is responsible for driving the deployment of the skills and capabilities in VMware’s Advisory and Professional Services teams.

3 Key Trends for 2015: How to Keep Pace with the Rapidly Changing IT Landscape

craig dobsonBy Craig Dobson

So much happened in 2014, and as the New Year begins, I’m looking forward to finding out what 2015 holds—both from a market and an industry perspective. One thing is for certain: the rapid changes we have seen in our industry will continue into the New Year. In fact, the pace of change is likely to accelerate.

I believe the following key trends will be shaping the IT landscape of 2015:

  • Increased application focus
  • Continued movement from CapEx to OpEx models (embracing “x-as-a-Service”)
  • Heightened focus on accurate measurement of the cost-of-IT

Let’s explore these trends in a little more detail.

Application Focus

All throughout 2014 I have been hearing clients say: “it’s all about the application.” In the face of global competition and with the rise of disruptive startups testing the old school business models, the lines of business are seeking innovation, market differentiation, and quick response to changing market dynamics. They are driving IT—and all too frequently looking outside, to cloud-based solutions— to enable quick response to these dynamic changes, often at a lower entry cost.

In 2015, lines of business will prioritize and focus on the business applications that will support the goal of serving, winning, and retaining customers. Application portfolios will change to hybrid architectures that increasingly leverage x-as-a-service models. Supporting platform decisions (such as infrastructure and cloud) will be made based on application decisions. IT professionals will need to stay on top of evolving business applications in order to more effectively support the demands of the lines of business.

Moving from CapEx to OpEx

The appetite to consume anything-as-a-service from external providers has grown throughout 2014, and is now significantly shifting the IT funding model from three- to five-year CapEx investments to OpEx-based consumption models. This shift will accelerate in 2015, and will often be tied to shorter contract periods, with an increased focus on cost and an expectation of a continued improvement on cost-to-serve.

What is driving this change is a general acceptance by mainstream enterprise businesses and different levels of government (through policy changes) that cloud-based services make economic sense, combined with the fact that the business risk of consuming these services has decreased.

Accurate Measurement of the Cost-of-IT

With the shift from CapEx to OpEx models and the focus on the business value of the application lifecycle, the CIO will be under even more pressure to show value back to the lines of business. In 2015, with these new dynamics, and with IT moving to become a full broker of services or portfolio manager (for both internal and external services) delivering x-as-a-service capabilities, this change will demand a greater level of granular and real-time financial reporting at a service level for the consuming lines of business.

This increased financial awareness will provide the ability for IT to show value, offer apples-to-apples comparison between internal IT and external services, as well as comparison between suppliers.

In addition to the cost transparency measures, I believe we will also see an aggressive focus on driving down operational costs to allow the savings to be targeted at next-generation business applications.

Ready for 2015

Let’s face it — change is a given, and 2015 will be no exception for IT. Forward-thinking IT leaders will get ready to deliver applications that meet the dynamic demands of the business; x-as-a-service offerings that meet or exceed end-user requirements; and financial reporting capabilities that not only show end users what they’re paying for but also enable IT to quantify its value.


Craig Dobson is Senior Director of VMware Technical Services for the Asia Pacific region and is based in Sydney.