Tag Archives: VMworld

Strategizing and Modernizing your Cloud Delivery Practice

Part 1 – Establishing your Cloud Business Management Practice 

By Khalid Hakim, Charlie McVeigh

History, particularly IT history, sure does have a way of repeating itself.

Think back to the 80’s and the advent of mini computers.   Mini computers were widely adopted by business units because of the perceived difficulty and cost of having the IT organization implement business solutions on the corporate mainframe.   In the 1990’s it was the PC.  Again, Corporate IT was seen as too slow and too expensive for the business solutions that were needed.  In the  2000’s  it is the advent of 2nd and 3rd generation Internet applications followed quickly by  the mobile computing revolution.  Like a broken record, corporate IT organizations were perceived as being slow and expensive to react to these new business demands.   Now that we are  in 2015, IT organizations are fighting the proliferation of public cloud offerings that business units cannot seem to drink up quickly enough.

What is common to each of the historical phases that are described above?  Business units that consume IT services perceived that they could procure IT services and applications more quickly and at a lower cost than corporate IT organizations could provide them.

What does this mean for the CIO in the modern era of IT?  It means that CIO’s must adapt or run the risk of being rendered irrelevant in relation to the way IT is consumed today and into the future.  It means that  CIO’s must now get on board with the concept of “running IT like a business.”  It means that CIOS’s must evolve such they are arbiters of technology and understand economically where is the best place for IT workloads to run.  Is it private cloud?  Public cloud?  Hybrid?  Outsourced?  Insourced? SaaS?  Iaas?  PaaS?  The choices are nearly endless – and you get it – todays CIO must be versed in all of these capabilities.

Todays effective CIO is asking and seeking answers most of the following questions:  Can you tell me on the spot what your total cloud spend is, and, what that spend is comprised of?  What’s the cost for you to deliver a unit of cloud service (IaaS for instance)? And what about your consumers: Who consumes what service and at what cost?

Can you identify the services used and the cost allocation for each service? How is your cost efficiency compared to that of other public cloud infrastructures? How can you use that type of information to optimize the cost of your existing and future operations? How can you create a showback report to each of your stakeholders?

Let’s say that you’re the VP of Cloud — think through how you would justify your data center investments. Have you proactively analyzed demand vs. capacity and how this is impacting your forecasting/budgeting exercises?  How can you scale dynamically to fulfill your consumer needs? Have you thought about your goal to optimize the cost of delivering cloud services? “What if” scenarios, benchmarking, and the reduction and optimization cost and price of your cloud services should be considered as well. Don’t you need closer monitoring to the quality of your delivery, such as continuous analysis and improvement? Have you thought of aligning your efforts with the corporate marketing and promoting your cloud services value?

(I can hear you thinking, enough with the questions already…)

What I would like to share with you today is a 6-month program (shown in the diagram below) to transform your cloud initiative into a successful robust cloud business management practice. The goal of the Cloud Business Management (CBM) service is to set up a cloud business management practice to enable effective, efficient, and agile business management of your cloud services.

Cloud Business Management

The following components are addressed in the full cloud business lifecycle service.

  • Cloud Business Manager Workshop – Educate the cloud service delivery teams on the foundations of cloud business and financial management aspects including costing, pricing, showback/chargeback, budgeting, forecasting, and cost optimization.
  • Cloud Business Strategy Assessment – Evaluate the IT business operational maturity of an organization and compare with VMware recommended practices. VMware will recommend possible strategies and propose a plan that best fits the organization IT and business models.
  • Cloud Services Definition – A comprehensive methodology to define cloud services and their constituent components end-to-end.
  • Cloud Services Costing – Understand Customer’s cloud services cost end-to-end and create a service-based cost allocation and classification strategy for Customer’s cloud services.
  • Cloud Services Pricing – Help Customer set a cloud pricing strategy and propose rates for the various components and offerings. This includes showback, cost recovery, investment funds, and driving particular behavior.
  • Cloud Services Marketing – Set up the cloud services marketing strategy including branding, marketing objectives, cloud service positioning, communications plan, value measurement, cultural considerations, and catalyst of change. Also, identify types of promotions and drivers of cloud services consumption and behavior impact.
  • Consumption and Showback / Chargeback – Help Customer develop a process for reporting on cloud service consumption and billing for cost recovery using VMware vRealize™ Business Advanced. In addition, determine the required people roles and dashboards.
  • Cloud SLM and Contracts Management – A comprehensive Cloud Service Level Management process including SLA and OLA templates between Cloud Infrastructure and Tenant Operations teams and the consumer. Additionally, basic vendor contract management process is provided.
  • Cost Optimization – Develop and execute a cloud cost optimization repeatable process that includes competitive analysis, benchmarking, public cloud comparison, and cost savings realization.
  • Cloud Services Budgeting and Forecasting – Develop a cloud-service-based budgeting and forecasting process to enable a more efficient demand and supply chain supported by the vRealize Business Advance cost model.

So, how is this valuable to your organization?

  1. Help your business consumers be accountable for better management of their cloud spend  rate cards, showback, chargeback, service tier options, and fair recovery of IT costs
  2. Help you make informed decisions for hybrid cloud, cost takeout, application rationalization, intelligent workload placement and bill of cloud
  3. Empower your IT to deliver on cloud promises for the desired quality, at the right cost by creating tighter alignment and accountability between IT, Business, and Finance
  4. Present you a comprehensive cloud business management practice within your IT organization leveraging your investment on vRealize Business and enabling you to run your cloud like a business
  5. Accelerate your transformation journey to an IT organization that is more consumption and cloud-service based

In our next blogs, we’ll cover the cloud business management components in greater details to help you plan for your Cloud Business Management (CBM) practice within your organization.

And if you’re heading to VMworld, don’t miss this session!

VMworld 2015

Using vRealize Business for Cloud Business Management

IT services and applications gradually rely on cloud services that provide more flexibility and agility for IT providers to supply the value to the business on demand. However this change also introduce new challenges to manage a dynamic environment that needs to scale economically per consumer’s demand. The cloud model can facilitate the shift to a business focus for the entire IT hierarchy—from the top to the technical teams managing and delivering the cloud. But to achieve the full business value of the cloud, companies need to put in place a more specialized and robust Cloud Business Management (CBM) practice. The CBM practice addresses the key business aspects of cloud operations.  Khalid Hakim, global operations financial and business management architect, and Kobi Katzir – Senior Product Line Manager at VMware will shed light on this new business practice using VMware vRealize Business to move your cloud management 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.

Charlie McVeigh is an IT business management strategic advisor, and you can follow him on Twitter @cbmcveigh

Operations Transformation at VMworld: What’s in it for you?

VMworldVerticalGIF_07.14.14 (1)

Your CIO expects great things, and you deliver by understanding and implementing great technology. But now it’s time to take it up a notch – show that you understand how technology change affects the entire organization. Bring forward ideas for people, process and technology evolution. This year at VMworld, the Operations Transformation track gives you the tools and examples you need to take a holistic view of change and drive it forward for success.

You’ll be able to explain how virtual computing can be extended to increase agility, transform storage to lower costs and raise performance, virtualize the network to improve speed and efficiency, and automate IT operations so your team can redeploy resources to focus on innovation. Learn from VMware experts as well as IT leaders who have made IT transformation happen inside large enterprises, and take their successes and lessons learned back to your role.

Combining technology with a new way of operating to become more service-oriented and bring more business value is every IT organization’s ultimate goal. Sessions are filling fast, so make sure you fill up your VMworld 2014 schedule with items from the SDDC > Operations Transformation track to bring essential big-picture thinking back to your department.

The Missing Link of IT: An Effective Service Costing Process

By Khalid Hakim

For years now, there has been much discussion about the urgent need for tighter alignment between business and IT. Why are we still talking about the “need for” alignment and not the “results of” better alignment? Because all too often, IT cannot answer one of the key questions business leaders ask: “What exactly does this service cost?”

In many cases IT does not have an adequate service costing process, which means it does not have a fast, accurate, consistent, fair way to provide cost information about IT services to constituents. And the lack of an effective service costing process is costing both IT and the business—big time.

Cost transparency is important not only because IT service users want to know what they’re paying for, but also because it provides an opportunity for IT to quantify its value to the business.

If IT can provide accurate cost information, both business and IT leaders can make better decisions about IT investments, outsourcing, cost cutting, business strategy, and competitive differentiation.

We’ve all heard the mantra “Minimize IT costs while maximizing business value,” or its short form: “Do more with less.” It’s a core principle of IT business management (ITBM). But without an accurate, transparent service costing process, how can IT leaders truly deliver IT as a service (ITaaS) and run IT like a business?

Take a closer look at your existing service costing process and ask yourself a few tough questions:

  • Is it accurate? Does it take into account all of the CapEx and OpEx elements of delivering an IT service?
  • Is it equitable? Does it charge the right constituents the right amounts for IT services, based on their actual consumption—or does it simply charge a lump sum based on voodoo economics?
  • Is it transparent? Can constituents get an accurate breakdown of what’s included in the final price tag and what isn’t?
  • Is it improving IT investment planning? Your service costing process should enable business and IT leaders to create more finely honed investment strategies that cut costs while creating new competitive advantages. Is it?

If you can look in the mirror and answer “yes” to all those questions, congratulations—you’re a member of a small minority of enterprise IT departments with an effective service costing process. If not, ask yourself the next logical question: How can you develop a better service costing process?

I’ll address that question in my next blog post. So stay tuned.
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Khalid Hakim is an operations architect with the VMware Operations Transformation global practice. You can follow him on Twitter @KhalidHakim47.

VMworld-graphicAnd if you’re heading to VMworld, don’t miss Khalid’s session!

Accelerate Your IT Transformation — How to Build Service-based Cost Models with VMware IT Business Management (ITBM)
A recent VMware survey showed 75% of IT decision makers list the number one challenge in IT financial management as lack of understanding of the true cost of IT services. ITBM experts and VMware Operations Transformation Architects Khalid Hakim and Gary Roos shed light on this alarming figure, and give practical advice for obtaining in-depth knowledge of the cost of IT services so you can provide cost transparency back to the business.

When you visit the VMworld 2014 Schedule Builder, be sure to check out the SDDC > Operations Transformation track for these and other sessions to help you focus on all the aspects of IT transformation.

A VMware Perspective on IT as a Service, Part 2: An In-house Example of IT Transformation

By: Paul Chapman, VMware Vice President Global Infrastructure and Cloud Operations

In this series of posts, I’m offering a VMware Corporate IT perspective on the journey to IT as a Service (ITaaS), looking at how we adopted the movement ourselves, sharing some of the many benefits that ITaaS is bringing us, and offering some insights on how – if you’re considering taking the plunge – you might successfully make the transition yourself.

Last time, I outlined the context for the movement to IT as a Service – one that suggests we’re now at a point where IT can no longer hide behind the complexity of IT environments, and where IT organizations need to deliver on new consumer expectations of service delivery if they are to have the agility and efficiency to deliver at the speed of business.

Today, I’m going to share the story of one of the functional IT groups at VMware – our Applications Operations group – that has transformed by shifting to a focus on agility and automation, with game changing results. If you’re curious to learn more, check out the full case study, or a short summary video here.

A Problem with Process

Here’s what happened: The Cloud Operations group within VMware corporate IT oversees the support of a portfolio of ~200+ business applications. The application operations team (AppOps) provisions and manages very complex SDLC development and test environments for a team of ~600+ global developers and quality assurance engineers who work on the VMware program portfolio.

By the middle of 2012, the AppOps team realized that it faced a serious issue with provisioning these environments.

As things stood, their processes were:

  • Slow – Manually provisioning a dev/test SDLC instance for a full enterprise applications ecosystem was taking in the range of 4-6 weeks per instance,
  • Disruptive – Hundreds of developers had to wait for a reliable new instance for extended periods of time, multiple times during the lifecycle,
  • Risk – Cascading delays created risk, keeping other portfolio projects from being able to start and/or complete on time, potentially costing millions of dollars in delays,
  • Inconsistent – Quality and lead times were unpredictable, varying with schedule complexity, different outcomes from manually repeated processes, and the capacity and availability of team members distributed around the globe.

The knock-on impact of a delay was very costly. Every time a new environment experienced delays, developers were idle and millions of dollars were at stake. This made portfolio planning inordinately difficult. We could have shrunk the portfolio and slowed the delivery of business critical programs in response, but that was unacceptable given our overall corporate growth objectives.

Then, not surprisingly, IT was therefore under considerable pressure to increase its agility, speed, and throughput.

Not the Easy Fix

Clearly, AppOps needed to reduce provisioning times and increase schedule predictability and service quality.

One way to do that would have been to try and improve the efficiency of the large “human middleware” they already had in place, applying lean methodologies and trying to be as “efficient” as possible when executing standard repeatable tasks.

However, a thorough process review made it clear that more than a continuous efficiency program was required. The primary issue was that they were scheduling and managing a large number of people who were performing, in the most part, skilled but repeatable tasks. Even with an improved provisioning process, the human-middleware problem would never fully go away, as speed and predictably could never reach the desired goals.

Instead, the AppOps group chose to completely replace and automate its provisioning process using a VMware on-premises private cloud, based on the software-defined data center. This would completely automate SDLC instance provisioning, using blueprints, policies, and automation and management capabilities using the VMware vCloud® Suite and other adjacent tools.

If they were to succeed, two factors would be critical:

  • Ambitious, long term objectives. To be successful, any solution needed to be game changing – instead of making incremental improvements to the existing process, AppOps was looking to turn a process that traditionally took 4-6 weeks to into one taking just a matter of hours. Solving this problem required a radically different approach that was built from the ground up.
  • An available private cloud. VMware had already deployed, at scale, its private cloud (called ‘Project OneCloud’), delivering infrastructure-as-a-service (IaaS) capabilities for internal use. With vCloud Suite’s automation and management capabilities, the private cloud could host all non-production SDLC instances – eliminating the need for lengthy hardware provisioning cycles.

By late 2012, the AppOps team was ready to start building the new, automated and streamlined provisioning platform, setting itself the goal of deploying all Dev/Test SDLC instances within 24 hours of a request.

Doing this meant driving transformation in three areas:

  • Architecture – Shifting from a traditional virtualized data center environment to a SDDC private cloud and deploying cloud management with automation capabilities to provision complex SDLC environments. Each instance contains over 30 applications, including the company’s full ERP, custom applications, portals, middleware, IDM, BI, webservers, app servers, integrations, databases, and more.
  • Operations – Converting manual, time consuming processes to an end-to-end, automated scripted process with blueprint-based provisioning. Key employee transitions would include investments in change-management and supporting employees through training and education, moving them to more value-added and meaningful roles in the new cloud operating model.
  • Financial – Moving from a project-capex based infrastructure funding model to a service-opex consumption and chargeback model. Instead of incurring costs for building and maintaining infrastructure to support the virtual machines, IT could pass the cost of workloads to individual project requestors. In turn, because of the ability to provision quickly and provide transparent opex service costs, there has been a higher increase in de-provisioning instances which has in turn increased infrastructure utilization and reduced spend on net-new infrastructure.

The Payoff and Business Benefit

Phase one of the project – deploying basic automated provisioning and management capabilities – has now been completed. 2,800 virtual machines that support dev/test instances have been transitioned to the new OneCloud environment, resulting in game-changing benefits:

  • Reduced provisioning time from 4-6 weeks to 36 hours: on track to achieve goal of <24 hours,
  • Increased productivity of 600 developers by as much as 20 percent,
  • Improved service quality so that AppOpps can now consistently say “Yes” to all project requests in the time required,
  • Saved the business $6M per year in infrastructure and operating costs,
  • Moved people to higher-order, more meaningful IT roles, e.g. blueprinting and automation design.

Phase two will focus on further enhancing automation and management capabilities and transitioning more pre-production environments to the private cloud.

Lessons Learned

  • Agility investments are self-sustaining. Investing in increased agility yields significant additional benefits, such as substantially reduced operating and infrastructure costs, and increasing service quality.
  • vCloud Suite is a full solution. The AppOps team implemented vCloud Suite to automate provisioning and management of SDLC instances. Out-of-box functionality let them automate and manage a wide range of core tasks. The availability of SDKs and APIs let them deliver additional automation and management functionality through adjacent tools.
  • On-demand capabilities change IT service consumption. SDLC instances are no longer viewed with the same risk outlook as before. Where developers and applications owners formerly felt the need to keep an instance open for multiple and/or on-going projects, AppOps can now release those instances back into the provisioning pool in a “disposable infrastructure” service consumption model.
  • APIs replace ticketing and late-night meetings. A service catalog and API calls help IT clarify and simplify communication about the services AppOps delivers and what its customers can expect in return. Efficiency has replaced the time-consuming, difficult, and highly-variable task of scheduling and coordinating work between multiple, globally distributed teams.

Key Takeaway:

The VMware corporate IT organization decided to invest in improving agility, and, as a byproduct, not only increased service speed and quality, but also dramatically lowered IT infrastructure and operating costs.

Next time, I’ll look at agility: how we measure it and how we keep continuously improving. In Part 4, I’ll explain what it took to stand up and run our own internal private cloud that so far include  ~50k VMs.

For more information in the meantime, please see:

Follow @VMwareCloudOps & @PaulChapmanVM on Twitter for future updates, and join the conversation by using the #CloudOps and #SDDC hashtags on Twitter.

VMworld Recap: Hear From the CloudOps Experts, Part 2

As we discussed in Part 1 of our VMworld 2013 recap, cloud technology is empowering organizations to re-think IT – an opportunity underlined in our September #CloudOpsChat, which explored how automation lets IT operations service clients efficiently while focusing on meeting business objectives.

In the second and concluding post in this series, we further explore those possibilities – Hear from CloudOps experts Ed Newman, Kevin Lees with Khalid Hakim, Valentin Hamburger with Bjoern Brundert, Jeff Ton, and Paul Chapman as they discuss their VMworld operations transformation sessions and share their thoughts on the future of CloudOps:

Ed Newman:

Kevin Lees and Khalid Hakim:

Valentin Hamburger and Bjoern Brundert:

Jeff Ton:

Paul Chapman:

Follow @VMwareCloudOps on Twitter for future updates, and join the conversation by using the #CloudOps and #SDDC hashtags on Twitter.

VMworld Recap: Hear From the CloudOps Experts, Part 1

As cloud technology advances, IT organizations are working hard to keep up: We covered the changing role of the IT Admin during our May #CloudOpsChat, and Kevin Lees previously discussed the culture shift required for IT Transformation.

At VMworld, the Operations Transformation track offered some great opportunities to hear more about how IT can successfully make the change – transitioning from practices rooted in the client-server era, to those optimized for virtualized resource pools, more automation, and new application architectures common in the cloud era.

We caught up with many of our CloudOps experts on-site at VMworld to ask them about their sessions and what they think the future holds for IT operations in the cloud era.

For Part 1 of this blog series, we’ll hear from experts Venkat Gopalakrishnan, Kurt Milne, Ed Hoppitt with Phil Richards, David Crane, and Rich Bourdeau with Rich Pleasants:

Venkat Gopalakrishnan:

Kurt Milne:

Ed Hoppitt and Phil Richards:

David Crane:

Rich Bourdeau and Rich Pleasants:


Stay tuned for Part 2 and more insights on cloud operations from the CloudOps experts at VMworld.

Follow @VMwareCloudOps on Twitter for future updates, and join the conversation by using the #CloudOps and #SDDC hashtags on Twitter.

The CloudOps VMUG Special Interest Group

We’re back from VMworld in San Francisco! We had a great week on-site, filled to the brim with live-tweeting key CloudOps sessions, meeting up with CloudOps executives, and picking winners for our #OpsTrivia and #OpsCaption Twitter contests.

One of the conference highlights was the VMware User Group (VMUG) Special Interest Group Luncheon, held at the W Hotel. Organized by Toronto VMUG Leader Angelo Luciani, the event provided the perfect opportunity for members of the four VMUG special interest groups (CloudOps, Healthcare, Public Sector, and Higher Education) to network over lunch.

The CloudOps group was the very first VMUG special interest group established and has already hosted several events, including a Google+ Hangout. In addition, it holds a monthly discussion of a trending CloudOps topic on the last Thursday of every month.

To learn about the benefits of joining a VMUG special interest group, we caught up with Angelo Luciani during the luncheon:

Don’t miss out on any future CloudOps VMUG events:

  • Register for our VMUG special interest group
  • Subscribe to our news announcements
  • Join the conversation with your CloudOps peers on the forums and on Twitter with the #CloudOps and #cloudopssig hashtags

For more photos from the luncheon and VMworld, head to our CloudOps Flickr page.

Follow @VMwareCloudOps on Twitter for future updates, and join the conversation by using the #CloudOps, #SDDC and #cloudopssig hashtags on Twitter.

A VMware Perspective on IT as a Service, Part 1: The Journey

By: Paul Chapman, VMware Vice President Global Infrastructure and Cloud Operations

At VMware, we now live and breathe IT as a Service (ITaaS). It’s a relatively new phenomenon, but many companies are beginning to make the shift.

In this short series of posts, I’m going to offer a VMware Corporate IT perspective on the journey to IT as a Service, looking at how we ourselves made the change, sharing some of the many benefits that ITaaS is bringing us, and offering some insights on how – if you’re considering taking the plunge – you might successfully make the transition yourself.

A Long Time Coming

First up, it’s worth remembering that the concept of IT as a Service is not that new. As a community of IT professionals, we’ve been talking about it for at least a decade. But for a long time, the obvious and daunting challenge of managing very complex IT infrastructures gave us an excuse not to act.

Fast forward to today: We now have Software as a Service, Infrastructure as a Service, Platform as a Service and so on – which creates a whole new consumption model for IT. These innovations make it very hard for IT organizations to keep hiding behind complexity as an excuse not to act.

Meanwhile, though, the pace of technological change has all but outstripped and outpaced internal IT’s ability to keep up with consumer-like demand, and that’s spurred the rise of successful innovation silos such as the Workdays, the Salesforce.coms, and the Amazons of the world – that have been happy to do the work instead.

You could say this is revenge of the business, with lines of business and developers now happy to bypass the IT infrastructure organization entirely, turning to external providers offering on-demand services and innovative business models.

In the face of this, most IT organizations struggle to keep up with demand for new services. Quite frankly, I think that even if they were funded to fully support the demand, most IT organizations still wouldn’t be able to keep up using traditional service delivery models. I think the inefficiencies and the lack of agility rooted in a heavy-human and “process-bound” way of doing things would just get in the way.  Even simply maintaining the status quo these days is enough to overwhelm and exhaust personnel.

Not Whether, But How Fast

That’s certainly how we saw things here at VMware. It wasn’t so much a question of whether to go on the journey to IT as a Service, but a question of how fast we could get there. In 2010, 99% of our servers were virtualized, and 20% of business applications were delivered by SaaS vendors. We saw the power of the shift to more agile service delivery. We established an executive mandate to further transform our IT services as soon as possible, and we also started to take an outside-in look vs. an inside-out look.

Our plan included four basic principles:

  • To get IT up to business speed;
  • To become much more efficient and agile in our operations;
  • To delight our users every day;
  • And to turn IT into an innovation center, not a roadblock.

These four principles still encapsulate what we expect ITaaS to deliver.

We knew that traditional service delivery models imposed numerous friction points between the business and IT. We also knew we had to significantly increase our levels of automation and self-service. We knew that our consumers were looking for us to act like an internal SaaS provider, and we knew that the solution was to move to a zero-touch, customer-centric model. With that, we committed to further increasing our SaaS portfolio, and we started our 1st private cloud initiative.

In 2012, 30% of our applications were delivered via SaaS providers, and we launched our 2nd private cloud effort. “OneCloud” is our internal IaaS private cloud based on a software-defined datacenter architecture. Within a year of launch, we now have 9 different large SDLC tenants groups internally and have approximately ~40,000 virtual machines in our private cloud.

Two Insights: Automation and Change Management

I’ll write another post about building a private cloud in the near future, but I want to share what I think is different today, that allows IT orgs to finally – and successfully – make the change to this new way of doing business. Here are two quick insights:

First: The move to third party cloud services offers IT a route back to relevance and value.

That may sound strange coming from a vendor that sells virtualization solutions, but the workloads we shifted to third party providers are the easily-siloed and more mature business processes – sending HR processes to Workday, say, or ITSM to ServiceNow, or SFA out to Salesforce. They are important, but they are not the mission-critical processes that differentiate us in the marketplace.

We found that by dismantling the “soviet era” systems that were running those paper-based processes and moving them to the cloud, we freed up a significant amount of internal resources from having to focus on the things that really did not differentiate us in the marketplace.

What remained, and what we’ve been aggressively moving to a private cloud SDDC environment, are the systems that are often more complex than what we moved to SaaS provider – systems like our license management system myvmware.com, or our online training hands-on labs (hol.com), or provisioning dev and test environments for hundreds of developers who use these applications every day. But the agility and efficiency we gain by maintaining them in house, in a private cloud, directly impacts our customers and supports our revenue growth objectives.

If you look at what many IT organizations spend on the services they don’t silo off elsewhere, 60-80% of it is spent in just keeping the lights on. And when you break it down even further, a lot of that goes to what I call “human middleware” – people doing standard repeatable work: install another database, install an operating system, maintain that database, maintain that operating system. We are actively and aggressively replacing our human middleware with end-to-end automation with impressive results that are a win-win for our customers, our business, and for IT.  Many of the traditional roles that are shrinking are shifting to more meaningful roles, and we are finding our IT professionals are learning new and more relevant skills.

The Promise of Change

That leads to my second insight: The shift to ITaaS is daunting to IT employees, but it offers them a great opportunity.

It’s not hard to make the case that an IT as a Service strategy unlocks levels of agility and efficiency we’ve never seen before. But we also need to consider how it impacts the people we’re asking to make it work. Fears, uncertainties, and doubts about the change are understandable, and it’s important to recognize that both personal and cultural challenges exist.

Change in our industry is inevitable and constant.  Who is still doing the IT job they did 10 years ago? But leading a transformation to ITaaS means that you need to paint a picture of a future state for your employees that highlights roles and opportunities that are much more meaningful than they’re used to under the traditional model. Who wouldn’t want to be relieved of rote and repetitive jobs and asked instead to be part of a forward-thinking and innovative sea change that can make a positive difference? This is important to keep in mind as you look to align employee incentives with the changes that you want to make.

In Summary:

  • ITaaS isn’t a new concept, but with new technologies, its time has come.
  • Even with better funding, most IT orgs wouldn’t be able to keep up with the demand they face today using traditional process-bound methods.
  • Shifting some applications to SaaS providers frees up IT resources and costs to automate and innovate where it really counts.
  • Shifting core differentiating business processes to a private cloud significantly improves agility, and creates new opportunities for innovation that weren’t possible in a traditional data center environment.
  • Finally, own the problem. Actively lead the cultural shift required to transform the architecture and operating model that enables IT as a Service.

In part 2 of this series, I’ll share specific details about just one of the IT groups that has transformed what it does based on a shift to private cloud. In part 3, I’ll look at agility: how we measure it and how we keep continuously improving. In Part 4, I’ll explain what it took to stand up and run our own internal private cloud with ~40k VMs.

Follow @VMwareCloudOps & @PaulChapmanVM on Twitter for future updates, and join the conversation by using the #CloudOps and #SDDC hashtags on Twitter.

Rethinking IT for the Cloud, Pt. 2 – The Cloud Services Financial Model

By: Khalid Hakim

Attending VMworld? Please join my group discussion on IT Financial Management (OPT1004-GD) on Monday, August 26th at 3:30pm PT in Moscone West, Alcove 3. Hope to see you there!

This series looks at what it takes to transform a traditional, passive-order IT operation into a cloud-based IT ‘shop’ selling services – turning what’s typically regarded as a revenue drain into a business enabler, revenue supporter, and value creator.

In part one, I suggested a few key points to help you identify how much each and every service in your cloud service catalog is costing your company.

Now, let’s place those services within a broader context: to deliver IT as a Service and run IT like a business requires a business mindset and a business model. So what should that model look like?

To start off, take the key business functions of manufacturing organization. These include (but aren’t limited to) product manufacturing and management, sales, marketing, HR, and finance. The product manufacturing department is responsible for using raw materials, machinery and labor to create a physical product (i.e. a mug). Its marketing and finance teams then establish a unit cost for the product and set a pricing strategy. Marketing helps with product promotion, sales does the actual selling, and finance is a horizontal layer across all these functions to ensure that the organization will stay in business.

Now look at the IT organization as a service broker. What does it need on top of the traditional IT planning, project and service management, architecture, development, and operations functions? Answer: a business practice within IT that penetrates every function across the stack.

If you want IT to be a business-trusted advisor, in other words, then functions similar to those of the manufacturing business need to be deployed to help run the IT service factory as a real business.

Product management (i.e. service management), sales, and marketing functions will facilitate and market service provisioning, and a finance function will account for service costs and encompass planning and budgeting for investments. It might sound like I’m just suggesting that IT requires an improved focus on investments that help the business generate more revenue. And sure, such an organization could be described as business within a business. But, in this case, IT is the business!

The Cloud Financial Services Model

I call this model the Cloud Financial Services Model. At its core is a focus on the Accounting, Budgeting, and Charging/Showback processes. These are the basic processes around which you can flesh out a full service broker business, as shown in the diagram below.

KhalidDiagram
The model’s three core areas encompass the following:

–       Service Accounting: A full accounting of the service costs and expenses incurred will include tracking actual services costs, allocating all IT costs to services being offered, and correctly categorizing costs in terms of Fixed and Variable expenses, Direct and Indirect costs, Period and Service costs, and CAPEX and OPEX. Failing to allocate or miss-categorize these costs will impact your overall cost accuracy and transparency.

–       Service Budgeting & Forecasting: This covers the process of predicting, anticipating, and controlling your organization’s services investment and any other planned expenditures on both an annual and ongoing basis.

–       Service Charging and Showback: The showback is a reporting of cloud service consumption and costs, but is a step prior to charging as there is no actual billing involved. Charging is the process of pricing and billing cloud service consumers for cost recovery and value creation.

With these three areas in place, you can now build a set of Cloud Service Management Activities. Each has its own role to play:

–       Service Definition: Your cornerstone, 360-degree process for reviewing a  service, covering business and consumer management, and service and operations management. This includes identifying all the components making up the service chain and all cost drivers and their associated cost classifications & categorization, along with allocation bases. It will also, in turn, drive overall service costing accuracy and improve cost transparency.

–       Service Catalog/Portfolio Management: Your service catalog is the one-stop shop from which your consumers pick and choose services, so it must contain the right level of information, including cost and/or price. A service portfolio management budgeting and planning-based approach can help realize investment value far better than component- or project-based budgeting. Also, aligning IT cloud portfolio investment categories with business categories is a key step to the path to turning IT into a generator of business value.

–       Service Demand and Investment Analysis: Understanding the demand and performance requirements of both the business and cloud services will help drive a planned demand pipeline that in turns boosts the overall cloud service workload’s efficiency.

–       Standardization and Configuration Management: Standardization and realistic configuration management drive simplicity in service automation and provisioning, and hence efficiency in overall operations. Creating standard cloud service offerings with a high degree of standardization and automation results in operational expenses (OPEX) savings.

–       Service Operations Cost Optimization: Continuously looking for operations improvement opportunities is necessary along the operations journey. New cost drivers may continue to pop up during cloud service operations (especially privately operated ones) and thus IT management may run into cost overruns when unmonitored.

–       Value Measurement: It is generally important to consider a combination of financial measures (such as reduction in costs, revenue increases, and productivity improvements) and non-financial measures (such as performance, satisfaction and compliance).

–       Consumer and SLA Management & Reporting: Running strategic service reviews with consumer stakeholders ensures the continuous alignment and meeting SLA expectations – and that they’re getting value for their money. Producing a bill of cloud services consumption and total cost incurred to consumers is one of your key reporting and billing activities. It can kick off service improvement initiatives, driving service quality while optimizing and lowering costs.

–       Contract and Vendor Management: One way to look at cloud computing is as a new delivery channel for IT services. As a service broker, an IT organization acts as an advisor trusted to provide the required services to its consumers at the right quality and cost, regardless of where those services actually reside. Contract & Vendor management becomes even more important with public cloud services to ensure that service levels are being met and that demand is being proactively managed.

While the core Accounting, Budgeting, and Charging IT financial management processes are required for the cloud business management, those in the model’s outer layer represent the cloud-specific activities that will actuate your cloud financial management practices on the ground.

For example, Service Definition is a cornerstone activity as you need to define the boundaries of what you want to offer for each service. You can’t manage what you can’t control, after all, and you can’t control what you can’t define. Indeed, everything starts with defining your cloud services – of which service accounting and pricing become key activities – followed by publishing the right information to a broader IT service catalog. Service demand and investment analysis is then required to plan for future demand and to deliver services more efficiently at the right quality level, and so on, down the list.

The bottom-line: The Cloud Financial Services Model reflects how cloud service management activities are strongly tied to financial management core processes. Adopting it will help position you for success as you seek to transform IT from a cost center to value creator.

In summary:

  • Delivering IT as a Service and running IT like a business requires a business mindset and business model.
  • The Cloud Financial Services Model is a useful business model in this regard – offering a core focus on Accounting, Budgeting, and Charging/Showback (ABC).
  • The model also includes the various Cloud Service Management Activities via which you will deliver your financial processes.

In my next post in the series, I’ll take you though a cloud service costing exercise to show how you can calculate a cost for a specific cloud service.

Follow @VMwareCloudOps on Twitter for future updates, and join the conversation by using the #CloudOps and #SDDC hashtags on Twitter.

Your Official Guide to CloudOps at VMworld 2013

VMworld
 

VMworld is fast approaching and, as usual, there will be no shortage of events and activities: We’ll be live-tweeting, taking photos and videos, holding Twitter contests, and writing recap blogs so you won’t miss a thing.

Sessions We’ll Be LiveTweeting

If you are unable to attend VMworld or don’t have room in your jam-packed schedule, we’ll be live-tweeting the following sessions from the Operations Transformations Track on the @VMwareCloudOps or @vCloud Twitter handle (keep an eye on our Twitter feed to see which sessions will be live-tweeted on either channel):

OPT5194

Moving Enterprise Application Dev/Test to VMware’s Internal Private Cloud – Operations Transformation with Kurt Milne and Venkat Gopalakrishnan

OPT4689

Operations Transformation – Expanding the Value of Cloud Computing with Phil Richards and Ed Hoppitt

OPT1000-GD

Automated Provisioning with David Crane

OPT5474

The Transformative Power and Business Case for Cloud Automation with Rich Bourdeau and Rich Pleasants

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IT Financial Management for the Cloud with Khalid Hakim

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Automating, Optimizing, and Measuring Service Provisioning in a Hybrid Cloud with David Crane

OPT5489

Pivot From Public Cloud to Private Cloud with vCloud and Puppet with Edward Newman

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Organizing for Cloud Operations – Challenges and Lessons Learned with Kevin Lees and Khalid Hakim

OPT5705

Balancing Agility with Service Standardization: Easy to Say But Hard To Do with Khalid Hakim, Dave Bartoletti, Ian Clayton, and Kurt Milne

OPT4963

SDDC IT Operations Transformation: Multi-Customer Lessons Learned with Valentin Hamburger and Bjoern Brundert

OPT1002-GD

vCloud/SDDC Deployment with Venkat Gopalakrishnan

OPT5315

Transform IT Into a Service Broker – Key Success Factors with Paul Chapman, Kevin Lees, Rich Pleasants, Jeffrey Ton, and Heman Smith

OPT5569

Leveraging Hybrid Cloud to Transform Enterprise IT from a Cost Center to a Revenue Driver with Jeffrey Ton and John Qualls

OPT1003-GD

Cloud Lifecycle Services with Rohan Kaira

CloudOps Contests

CloudOps Trivia

Show us that you’re a CloudOps expert for the opportunity to win some great prizes.

Here’s how to play:

  • Follow us on the @VMwareCloudOps Twitter handle, and look for tweets containing the hashtag #OpsTrivia.
  • #OpsTrivia questions will concern major VMworld announcements, as well as specific CloudOps-related activities.
  • Think you know the answer? @reply us at @VMwareCloudOps with your answer, and don’t forget the #OpsTrivia hashtag.

Winners will be chosen by accuracy and timeliness of response. By participating, you have the chance to win fun prizes such as laptops bags, flash drives, iTunes gift cards, and more.

Photo Caption Contest

The CloudOps Photo Caption Contest is our way of letting you have a bit of fun with the VMworld scene.

Here’s how to play:

  • Follow us on the @VMwareCloudOps Twitter handle and look for tweets containing the hashtag #OpsCaption.
  • #OpsCaption related tweets will contain a picture of a spontaneous VMworld moment.
  • What’s going on? What are they saying? If you have a clever or funny idea for a caption, @reply us at @VMwareCloudOps with your caption, and make sure to include the #OpsCaption hashtag.

Winning captions will be chosen based on pre-determined selection criteria.

VMUG Luncheon – Tuesday, August 27th 11:30am PT

Join us at our VMUG Luncheon for the opportunity to meet with other members of the CloudOps VMware User Group. Make sure to pay close attention to our Twitter feed during the luncheon – we’ll not only be live-tweeting, but #OpsTrivia or #OpsCaption could pop up on our feed during the luncheon as well. Don’t miss your chance to win!

Recap Blogs

We will be blogging throughout the week to keep you up to speed on all of the VMworld excitement: During the event, we will be summarizing the biggest highlights of VMworld, as well as going over upcoming activities that you won’t want to miss. For those of you who are unable to attend the festivities, we will also be posting blogs after the event to summarize key VMworld moments.

For even more Operations Transformations sessions, see our post highlighting some key sessions you won’t want to miss.

Follow @VMwareCloudOps on Twitter for future updates, and join the conversation by using the #CloudOps, #SDDC, and #VMworld hashtags on Twitter.