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Business IT is Coming Out of the Shadows

Harris_SeanShadow ITBy Sean Harris

For a number of years the perception among businesses that internal IT is unable or incapable of delivering to their needs (particularly for new and emerging requirements) has led them to bypass internal IT and source their solutions directly from external vendors. This is commonly referred to as Shadow IT.

According to most analysts (see references below), the shadow is now bigger than original object that cast the shadow, which only happens during the final hours of sunset (an interesting analogy) and has brought about the joke that the title CIO stands for “Career is Over”. Synonymous with this is the rise of the Chief Digital Officer (CDO), Chief Technology Officer (CTO) and application development teams, who are becoming more embedded in the lines of business.

How and why has this happened and what can Enterprise IT and the CIO do to reverse this trend?  Or is it too late?

Why is Shadow IT So Prevalent?

Ten to fifteen years ago, for the vast majority of businesses, IT and technology ran the business. By this I mean they ran the business systems, such as HR, CRM, inventory management, financial systems and logistics. There were a few notable exceptions such as mobile operators, media companies, investment banking and the likes of Thomson Reuters, for whom IT and technology was/is the business. In those cases, the revenue generating services that they provided were dependent on IT and technology.

This is even more true today. There are few, if any, businesses that do not rely on technology and IT of some sort to deliver business services to their customers, partners and channels or use IT to provide technology or IT services to enhance the customer experience. This is part of what is often referred to as the Digital Revolution. So why haven’t internal IT departments benefited from the increasing dependence of the business on IT and technology

There are a number of reasons for this. In no particular order these include:

  • A focus on the stability and reliability of IT systems, and the processes and procedures that support them, at the expense of agility has led to a perception that in-house IT is unable to react at the speed of business. This is despite the fact that technology has moved considerably in the direction of delivering agility combined with reliability and availability.
  • Organisational silos in IT make the organisation rigid and unable to react to the changing needs of the business.
  • A one size fits all approach to IT operations. The push for standardisation and shared services to improve IT operational efficiency has led to a one size fits all approach to IT operations, governance, security and application development/delivery.
  • A focus on IT operational efficiency rather than focusing on end to end business benefits and linking IT investment to business gain (market share, margin and revenue). This is often at the expense of user experience and business outcomes.
  • A lack of clear understanding of the IT and technology needs of the business and the clear articulation of this to all in IT. Without this, it’s impossible to articulate to the business of the value that internal IT delivers.

This has led to the lines of business looking elsewhere to fulfill their technology and IT needs. Most CIO’s and IT departments that I speak to complain of ever increasing pressure to reduce spending on IT and cut costs.  However, many analysts point to an increasing spend on technology and IT (see references below). So where is the money going?

The answer is what we call Shadow IT, but so we can hardly call it “Shadow” any more.  Most analysts point out that Shadow IT spend is now greater than the CIO’s IT spend. It is well and truly mainstream.

5 Steps To Reverse This Trend

Step 1

It may sound blindingly obvious, but the first step is to get a clear understanding of the needs and KPIs of the business and how IT maps into that. From this it is possible to start mapping IT spend into business benefits and making the case for IT investments.

Step 2

The next step is to understand that not all applications are equal. Simon Wardley does an excellent job of explaining what I mean in his blog.  Organisations need to take a good look at their application portfolio, what categories they drop into, what their natural lifecycle is and where they are in that lifecycle. This will help to build a multi-modal IT strategy based on the needs of the business and the applications that support the business services.

Step 3

Next we need to switch to a user experience and business outcomes approach to defining and developing IT services rather than features and functions and a sole focus on IT operational efficiency.

Step 4

Next recognise that in-house is not always the best answer. Sometimes the best solution is a third party service and so you need to build an architecture to support a service broker function. In this way IT can ensure that the business gets the best solution for its needs while ensuring that corporate governance, security, audit and compliance requirements are all meet, something that is often compromised by Shadow IT.

Step 5

The final step is to build an organisation and multiple sets of operational procedures and processes (reflecting multi modal operational requirements) to support all of the above. A key part of this transformation is a clear focus on a service-driven organisation designed around the need to support business services and needs of the business.

To be clear this is not a case of tweaking minor parts of the IT organisation of a typical enterprise.  This is a major transformation, but this is your only hope to stop the increasing marginalisation of internal IT and the role of the CIO.

If the IT organisation is able to make this transformation it will lead to a massive increase in investment in the IT organization, redirecting the business IT spend away from third party vendors and back to the IT organisation.  This leads to a massive change in perception of the contribution of the IT organisation to the business.

If you need help applying these principles to your orgnaisation, VMware’s Advisory Services can help you build a strategy and roadmap to undertake the transformation needed to move to a business focused IT delivery organization, maximising the value (and perceived value) of the internal IT organisation within the business.

References:

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

Solving the Shadow IT Problem: 4 Questions to Ask Yourself Now

Harris_SeanBy Sean Harris

Most IT organizations I speak to today admit they are concerned about the ever-increasing growth in the consumption of shadow IT services within the business; the ones that are not concerned I suspect are in denial. A common question is, “How do I compete with these services?” The answer I prefer is: “Build your own!”

What Would It Mean for My IT Organization to Truly Replace Shadow IT?

Totally displacing Shadow IT requires building an organization, infrastructure and services portfolio that fulfills the needs of the business as well as—or better than—external organizations can, at a similar or lower cost. In short, build your own in-house private cloud and IT-as-a-Service (ITaaS) organization to run alongside your traditional IT organization and infrastructure.

Surely your own in-house IT organization should be able to provide services that are a better fit for your own business than an external vendor.

IT service providers often provide a one-size-fits-all service for a variety of businesses in different verticals: commercial, non-commercial and consumer. And in many cases, your business has to make compromises on security and governance that may not be in its best interests. By definition, in-house solutions will comply with security and governance regulations. Additionally, the business will have visibility into the solution, so the benefits are clear.

How Do I Build My Own Services to Compete With Shadow IT?

Answering the technical part of this question is easy. There are plenty of vendors out there offering their own technical solutions to help you build a private cloud. The challenge is creating the organizational structure, developing in-house skills, and implementing the processes required to run a true ITaaS organization. Most traditional IT organizations lack key skills and organizational components to do this, and IT organizations are not typically structured for this. For example:

  • To capture current and future common service requirements and convert these into service definitions, product management-type skills and organizational infrastructure are needed.
  • To promote the adoption of these services by the business, product marketing and sales-type functions are required.

These are not typically present in traditional IT organizations. Building this alongside an existing IT organization has three main benefits:

  • It is less disruptive to the traditional organization.
  • It removes the pain of trying to drive long-term incremental change.
  • It will deliver measurable results to the business quicker.

What If External IT Services Really Are Better?

It may be discovered after analyzing the true needs of the business that an external provider really can deliver a service that is a better fit for the business needs – and maybe even at a lower cost than the internal IT organization can offer. In this case, a “service broker” function within the IT organization can integrate this service into the ITaaS suite offered by IT to the business far more seamlessly than a traditional IT organization can. The decision should be based on business facts rather than assumptions or feelings.

How Do We Get Started?

As part of VMware’s Advisory Services and Operation Transformation Services team, I work with customers every day to map out the “Why, What and How” of building your own ITaaS organization to compete with Shadow IT services:

  • Why
    • Measurable business benefits of change
    • Business case for change
  • What
    • Technology change
    • Organizational change
    • People, skills and process change
  • How
    • Building a strategy and roadmap for the future
    • Implementing the organization, skills, people and process
    • Measuring success

In the end, customers will always choose the services that best meet their needs and cause them the least amount of pain, be it financial or operational. Working to become your business’ preferred service provider will likely take time and resources, but in the long run, it can mean the difference between a role as a strategic partner to the business or the eventual extinction of the IT department as an antiquated cost center.


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

5 Tips to Successfully Adopt End-to-End IT Services

By Barton Kaplan

IT organizations are at a crossroads. More technology savvy business partners, combined with compelling third-party cloud service offerings, are leading to an explosion of “shadow” IT. Gartner estimates that 35 percent of all technology spending will occur outside of IT by 2015.[1] As a result, traditional IT organizations face a stark choice: 1) fundamentally transform their operating models to win back the confidence of the business or 2) maintain the status quo and become full-time caretakers of the legacy environment.

In response, IT organizations have initiated efforts to roll out various XaaS offerings — infrastructure, platform, software, database, disaster recovery, and so forth. This is a necessary step, but ultimately insufficient. It will be extremely difficult for internal IT organizations to compete effectively in commodity-oriented services with external providers given the scale, low costs, ease of use, and rapid innovation they can bring.

IT organizations shouldn’t view these services as the end point, but rather as a stepping stone to end-to-end IT services. CEB defines end-to-end IT services as the “packaging of all the technologies, processes, and resources across IT needed to deliver a specific business outcome.”[2] Rather than offering separate services, applications and infrastructure organizations come together to offer integrated services (e.g., collaboration).

End-to-end IT services bring inherent advantages, including:

  • More closely aligned to the business
  • Focused on business and not IT outcomes
  • More cost efficient
  • More differentiated than XaaS offerings

When implemented successfully, the results can be dramatic. CEB estimates annual IT budget savings at 17 percent. One high tech company that adopted end-to-end IT services was on target to reduce “lights-on” spending as percentage of the total budget by nearly 50 percent over five years. An insurance company I worked with saw a 250 percent increase in spend on innovation.

So how do IT organizations get there? Achieving end-to-end IT services is a multi-year journey, not a flip of the switch. To reduce the risk of increasing irrelevance, however, IT needs to start now. Here are five proven tactics that leading practitioners have followed to successfully implement end-to-end IT services:

1)     Pursue an evolutionary approach, not a big bang. Successful organizations focus first on a single service that they can roll out enterprise-wide, or a willing business unit around which they can develop an initial set of services.

2)     Define your services based on business capabilities. Don’t define your services in terms of technology, but rather the business outcome they can impact. The most effective means to do so is through business capabilities.

3)     Adopt the goldilocks principle when it comes to the service portfolio. Not too many, not too few. A handful of services is likely too few; more than a couple dozen services is likely too many.

4)     Govern and prioritize based on services, not projects. End-to-end IT services require a fundamental change to the IT operating model. Projects don’t go away, but they are subservient to the needs of the service, and no longer the primary means through which business needs are met.

5)     Manage end-to-end services like a product in the marketplace. Service owners ought to act like product managers, not operations support. Key measures of business value should be based on adoption rates and service use.

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Bart Kaplan is a business solution strategist with VMware Accelerate Advisory Services and is based in Maryland.



[1] Gartner, Inc. “Predicts 2014: Application Development.” Brian Prentice, David Mitchell Smith, Andy Kyte, Nathan Wilson, Gordon Van Huizen, and Van L. Baker, November 19, 2013.

[2] CEB CIO Leadership Council, “The New Model for IT Service Delivery”, 2012

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.

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

Taking IT Out of the Shadows

by Barton Kaplan

Wikipedia defines shadow IT as “systems and solutions built and used in organizations without explicit organizational approval…by departments other than the IT department.” It’s been a sore point for central IT organizations for a long time, and judging from the most recent data, it’s only getting worse.

Gartner predicts that by 2015, 35 percent of technology spending will occur outside the central IT organization[1]. In a US$2.7 trillion industry[2], that’s a big number. What’s worse, CIOs consistently underestimate how much the business spends on technology. According to best practices firm CEB, business partners spend almost twice as much on technology as IT estimates[3].

Why is this happening? Recent technology trends compound the prevalence of shadow IT, and putting increased pressure on central IT to keep pace.

  • Business partners have become more tech savvy and are much more willing to take on technology-related activities. From technology evaluation to vendor management, some two-thirds of business executives express a willingness to lead.[4]
  • With the maturation of cloud and XaaS offerings, it’s easier than ever for the business to go around IT to meet its technology needs. And vendors are targeting these business buyers because they typically purchase more and procure faster than IT departments.
  • Across industries, technology is viewed as more critical to enterprise success and competitive differentiation than ever before.
  • As business speeds up and third party providers improve their ease of use, central IT is  perceived as getting even more slow and bureaucratic.

What’s worse, traditional approaches to managing shadow IT simply don’t work anymore. Historically, central IT has reacted to shadow IT in one of three ways:

  1. Police – Attempt to root out and shut down shadow IT. The reality in today’s enterprises, however, is that the vast majority of central IT groups simply don’t have the stature to adopt this approach, or the authority to enforce it. Further, much of this spend is business-sanctioned and viewed as essential.
  2. Ignore – Turning a blind eye to shadow IT isn’t an option either, given the size of the spend and the potential risks to the enterprise of it going completely ungoverned.
  3. Incorporate – Bringing shadow IT into the central IT organization is actively opposed by the business out of fear that it will result in lost agility and innovation. Fifty percent of business technology spending is on innovation, which is three times the size of IT’s innovation budget.[5]

So what should IT do? First and foremost, central IT organizations need to adjust their mindset. The days when shadow IT meant hiding a server under your desk are long gone. Today’s shadow IT has become much more sophisticated and central to the business.

IT organizations need to accept and advise business partners’ experimentation with technology, not resist it. Progressive practitioners who have had success changing their technology relationships with the business are adopting the following three tactics:

  1. Distinguish between healthy and unhealthy shadow IT. At one consumer products company, the IT organization differentiated between “shallow” vs. “deep” IT when determining whether a project should be business or IT-led. This more cooperative approach resulted in a 52 percent increase in IT investments directed at new opportunities.[6]
  2. Change IT’s perspectives on risk. IT’s typical approach to risk is one of mitigation. Less risk is always better. By contrast, business partners look at risk vs. reward tradeoffs. If the reward is great enough, it may be worth the risk. Leading IT organizations are adopting risk management frameworks that capture this more nuanced view of risk.
  3. Improve business perceptions of IT. IT needs to operate at the speed of business and devote more of its budget to innovation. According to VMware data[7], customers who are running IT as a service spend 50 percent of their budgets on innovation vs. an industry average of just 30 percent .

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Bart Kaplan is a business solution strategist with VMware Accelerate Advisory Services and is based in Maryland.


[1] Gartner, Inc. “Predicts 2014: Application Development.” Brian Prentice, David Mitchell Smith, Andy Kyte, Nathan Wilson, Gordon Van Huizen, and Van L. Baker, November 19, 2013.
[2] The New York Times. “Hard Times Could Create a Tech Boom.” Quentin Hardy, November 17, 2012.
[3] Corporate Executive Board (CEB) webinar: “Getting to Healthier Shadow IT.” January 9, 2014
[4] Ibid.
[5] Ibid.
[6] Ibid.
[7] VMware “VMware IT Evolution: Today and Tomorrow – Insight from the VMware 2013 Journey to IT as a Service Study.” August 2013.

An SDDC Helps IT and Marketing Meet in the Middle

AUTHOR: Enrico Boverino

Companies need to deploy a modern workplace and innovative infrastructure in order to digitize business processes, and that often calls for organizational and financial shifts in both the IT and marketing departments. Can a software-defined data center (SDDC)—which at first glance may appear to be purely a technology strategy—help CIOs and CMOs work together to deliver competitive business innovation while reducing budgets? I believe so.

A standard definition of digital services is difficult to nail down, but I found this one helpful: A digital service is one that has been entirely automated and which is controlled by the customer of the service. This describes a wide swath of new applications, personalized services, social interaction, and data analysis that might also include digital marketing initiatives. In this context, CIOs are now expected to show the business results of technology investments, and CMOs are also increasingly open to spending budgets outside traditional marketing in order to reach new users.

Different goals, complementary skills
In general, CMOs know about product placement, go to market, and new customer demands; they also have to protect the business from surprises like new competitors and disruptive business models. Increasingly, time is a precious commodity, as emphasis shifts to short product lifecycles to test new markets and services.

CIOs typically have a great understanding of corporate business processes, information security, and available resources. They are skilled at scouting new technology and solutions with a focus on expenditures and new areas of savings. It seems obvious that enabling greater coordination between these two worlds will lead to a more competitive, robust, and agile organization. But how?

It’s interesting to see how both goals and approaches of the two departments diverge in my engagements with customers— it tends to look like this:

Despite the best intentions to collaborate for mutual advantage and company-wide success, challenges quickly surface when we lay out each department’s specific objectives in an organizational matrix, especially when it comes to personal MBOs.

How can a software-defined data center help?

Having the ability to exploit a unified data center platform that provides new standards for automation, flexibility, and efficiency can bridge the different perspectives. In an SDDC, the compute, storage, networking, security, and availability services are pooled, aggregated, and delivered as intelligent, policy-driven software. Other key components include self-service, financial visibility, and policy-based provisioning for infrastructure and application. This provides business users with faster deployment and more reliable access to differentiating technology tools.

When CIO and CMO strategies are joined, it’s important to highlight the impacts an SDDC will have on efficiency (cost control), agility (revenue contribution), and reliability (quality of service and risk mitigation). The impacts of an SDDC adoption,  together the priorities associated with the opportunities CMOs and CIOs are striving to take advantage of, will help to define and exploit personalized roadmaps.

When we consider impacts on agility, an SDDC implementation has three capabilities that can facilitate conversation between the CMO and CIO:

  1. Abstraction of applications from the underlying infrastructure enables true self- and automated provisioning of services, overcoming manual steps and the wait time that exists when multiple siloed IT groups need to communicate.
  2. The policy-based automation of pre-configured applications can simplify the processes related to the rework, which are often required to change configurations, or distribution of systems geographically.
  3. Governance and brokerage of public cloud services from IaaS to SaaS, which can also provide agility-related benefits such as lower costs and time to market, but must be evaluated and in many cases integrated within existing processes.

Over the past two years, I have helped many customers gain visibility and insights into their current level of maturity using a software-defined reference framework. Capturing meaningful KPIs helps to build an executable roadmap that aligns with user demand and provides the ability to measure improvement over time.

For example, the impact on agility described earlier can be measured through metrics that include:

  • Revenue generated by new services
  • Customer satisfaction
  • Percent of workload offloaded to hybrid clouds
  • Percent of requests fulfilled via self-service and standard catalog
  • Time to provision additional capacity

Using their results to determine action plans needed to improve these metrics, CMOs and CIOs can decide which capability to address first and which marketing/IT joint investments will lead to the most beneficial business outcomes within the shortest amount of time.

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Enrico Boverino is senior business solution strategist for VMware Accelerate Advisory Services based in Italy. You can follow him on Twitter at @eboverino.