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Getting Started on Your Journey: On-Demand Services

Author: Michael Francis

IT organizations are experiencing the change from monopoly holder of IT service delivery to being a supplier of many IT services to the business. And as a supplier of services, IT needs to engage with the business with competitive differentiation.

As CIO, you know that your business customers will migrate to paths of least resistance to achieve their desired business outcomes—many times this means engaging public cloud services. The risk to your IT organization and the enterprise is a lack of governance and the risk of increased cost. Inevitably this approach, which initially may result in agility for the business customer, can quickly become detrimental to achieving broader business initiatives for the enterprise.

I see a second bump on the hype curve of public cloud in my region—Australia. Many of my customers are planning the relocation of assets to the public cloud, with the assumption that it must be more cost-effective. But as the CIO, it’s critical to understand what you’re gaining from relocation and why. Analyzing what drives costs in your private cloud and why these will be reduced in the public cloud is a critical element for success.

Public cloud does play a role in extending enterprise IT capabilities—everything from SaaS-based applications to IaaS-platforms—and today’s CIO needs a strong financial and capability-centric business case to act as a service broker. Transforming your IT organization to deliver more value to the business requires a focus on enabling new business capabilities in a more agile way—a focus on the business needs rather than on a commodity that may or may not be more cost effectively delivered by a third-party supplier.

To successfully transition to an IT broker, the transformation of people, process, and technology must begin with the CIO. Without the support of the CIO, any change will likely be incomplete and focus on only one axis of the people, process, and technology composition.

The next step in architecting an IT broker environment is to envision what the environment may look like in the future and why it will look this way. The image below depicts a progressive, mature enterprise IT architecture. IT services are delivered to the presentation layer and consumed through the brokerage layer implemented in the corporate services cloud. This enables the consumer to access a service with an SLA-based agreement between the consumer and IT. The brokerage layer located in the corporate services cloud is responsible for vendor management and SLA reporting.

Once the CIO and enterprise architects share a common vision for the future, the next step is to identify the existing business services offered by the IT organization and their common SLA requirements. This commonality forms the basis to define the initial IT service offerings. Initially this process would only consider infrastructure-level SLA requirements such as availability, recovery, performance, and security. Start with the infrastructure layer, as it tends to have a high degree of commonality and minimal differentiation. It is also the foundation for more advanced IT service offerings like PaaS and SaaS.

To recap, as CIO you will maximize the probability of success at the onset of your journey to becoming an IT service broker by having a shared vision with your enterprise architects—I can’t overemphasize the importance of a clear and shared understanding of the desired future state. The next step is to implement a brokerage capability—the combination of people, process, and technology operations. Lastly, identify the common SLAs defined for existing business services—these will form the first IT service offerings.

On-demand services can provide the efficiency and agility needed to transform your IT organization from reactive provider to engaged service broker, and finally, to a strategic partner driving the goals of the business.

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

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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.

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

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

 

On-Demand Services –Thoughts from Down Under

AUTHOR: Michael Francis

I’m a principal systems engineer with VMware and have been involved in the development of our cloud operations services. I’m sharing my experiences through a series of blogs pertaining to on-demand services. In this first blog, I reflect on what got us to this point and will follow this up with a discussion on how on-demand services transform both business models as well as the engagement model between enterprise IT and the associated business. In the final entry I’ll recommend how on-demand services can be delivered effectively—where the rubber hits the road!—and I’ll get into some specifics.

On-Demand Services, Part 1 – Remind me of how we get here again…

I have been with VMware for nearly seven years and in the IT industry for 20+ years—and over that time, like others, I have seen many changes. I think the biggest game changers in the past two decades are the smartphone and tablet form factor computers. Both devices have brought a mobility and price point revolution to computing that has enabled access to information to a very broad population from anywhere, at any time. This combination of form factor and ease of access to information through self-service mechanisms almost overnight changed the relationship between enterprise IT and the end user.

Let’s look back—I had a O2 Windows-based mobile that I used for business in the early 2000s, and it was great. I had access to email in a rich interface and integration with my contacts and global address lists anytime I needed them. And, I could communicate with corporate messaging in a small form factor. However, what it didn’t give me was the flexibility to access information like I could with my home PC—I couldn’t easily extend it to run other applications. And unlike my home PC with its mouse-driven interface, this phone forced me to use the keyboard—which was like trying to navigate in Windows for workgroups using only a keyboard.

Then came the next generation of smartphone and the advent of the touchscreen, which was analogous to the introduction of a mouse to our personal computer. The interface was easier to use and navigate and could be so much richer from a features standpoint. But the real power was that I could access a new universe of applications through a single self-service portal. And, the applications were cost-relevant, which meant they were easy to consume and demo in order to select an appropriate set of applications that worked best for my specific needs. It changed the phone from being a fixed-purpose device with keyboard control to a touchscreen-driven, openly flexible device ready to provide me with access to the world at my fingertips, from wherever I was.

For the consumer, it was the simplicity to access a marketplace of application services and then self provision a service that was the point where so many rapidly engaged in this transformation. This ability to self service combined with the size of the marketplace fueled the prolific use of the successful smartphone and tablet platforms. Consumers had a single storefront with access to thousands of application service suppliers.

The on-demand services built into these consumer devices created a broad ecosystem of suppliers eager to be able to showcase their wares. The single application store provided a single location for consumers to shop for services. Do you see the similarities? In the past, the enterprise IT organization was “everything IT” to everyone in the organization—from manufacturer, to distributor to reseller—and the consumer had little choice. Stepping up to meet demand, software as a service (SaaS) providers are the smartphone application builders for enterprise services, and like smartphone applications, more and more consumers seek their services.

So what’s missing from this equation? What’s missing is an equivalent enterprise-class, consumer-relevant application store with access to all IT services. An on-demand services capability within the enterprise to be the storefront to a varied selection of IT services—some sourced internally, some externally.

There’s another aspect to this transformation—and that’s the ease of creation, delivery and price point of these smartphone applications. All of which created a need for an agile application platform offering a low-cost of entry to feed the demand of so many new suppliers entering the market. Further, the swings in consumption of suppliers’ offerings has perpetuated the need from application suppliers to pay for flexible-scaling, consumption-based models for underlying compute capacity.

To sum things up, the on-demand services in our smartphone and tablet devices opened up access to services and information beyond what was previously available, using a single application store interface that made things simple to consume. It moved the power base of information access from enterprise IT into the hands of the consumer. The velocity of uptake of these consumer devices spawned cloud computing, cloud computing service providers and the concept of service consumption-based computing. On-demand services have transformed consumer information access.

I’ll follow up soon on how the introduction of on-demand services into the enterprise can transform business models and the engagement model between enterprise IT and the business.

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

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