Doug Bourgeois is the vice president and chief cloud executive for VMware Public Sector. He also is the former CIO at the U.S. Patent & Trademark Office and executive director of the Interior Department's National Business Center, one of the Federal Shared Services Centers. ()
I mentioned in a previous blog, The Value of the Cloud, that cloud computing has become the catalyst for the transformation of the information technology industry to IT as a Service (ITaaS). The transition to ITaaS involves both the evolution of technology architecture and the establishment of a business model for IT.
The transition to ITaaS is a journey from a traditional IT organization that provides IT resources and support, to a service-provider organization that delivers competitive services. In addition, the ITaaS organization has the capability to assist the enterprise by brokering a portfolio of service options to meet varied mission needs. In this context, there are five critical components of the business model for IT that need to be established: a portfolio of services, a transparent and consumption-based pricing model, an evolution of organizational and governance structures, performance management, and cloud vendor management capabilities.
Successfully establishing these business model components presents substantial challenges for many traditional IT organizations. For example, many IT leaders struggle with creating a services portfolio. I learned this first-hand when I was leading a federal agency to implement cloud services. Fundamental tasks to defining each service, such as availability levels, capacity options, service levels, security, and so on, can be very problematic. In addition, a lack of ongoing collaboration with the intended business users during the definition of services can severely hinder adoption.
Since the cloud is an economy of scale business, this lack of adoption can lead to uncompetitive pricing and put the transition to ITaaS at serious risk. To overcome these challenges, the IT organization needs to evolve to ensure key staff are equipped with the right business skills to maintain ongoing collaboration with business stakeholders throughout development, deployment, and production adoption.
Achieving full transparency is another common obstacle in successfully transforming to ITaaS. Ultimately, users across the enterprise will not utilize IT services if the pricing model is not completely transparent, competitive, aligned with the budget, and accurately updated regularly. Unfortunately, most traditional IT organizations do not have access to the necessary expertise in IT cost management nor the tools to efficiently provide such transparency. To make matters even more challenging, mission users need to have objective access to both internally and externally provided service options. For the ITaaS organization to be relevant, it must be able to determine true cost and performance characteristics across the services portfolio. In addition, ITaaS leaders must position themselves to become unbiased internal “consultants” as mission decision makers evaluate and choose from both internally and externally provided ITaaS options. Effectively positioning the IT organization to become a trusted advisor to the mission requires access to best-in-class tools that provide transparency of cost and performance data for the portfolio of service options.
The final, and perhaps most important, component of an effective business model for IT is a collaborative governance process that spans multiple levels. Make no mistake, the governance model is the glue that ties the entire business model together and makes it work. Unfortunately, the concept of governance is as widely used as the term “cloud” and as widely misunderstood. In the context of an ITaaS organization, an effective governance model has three layers that work together. The most strategic layer is about how the top executive in the ITaaS organization interacts with the top executives across the entire scope of user organizations to make decisions pertaining to strategy, priorities, and funding levels. This layer, in turn, is integrated with the overall strategic planning and budgeting layer to ensure ongoing collaboration regarding planned service rollout, adoption, pricing, and budgets. The final layer involves the ongoing interaction between the service delivery managers in the ITaaS organization and management across the user base with budget authority. These folks need to collaborate to support the annual budget process but also need to work together regularly to ensure alignment of supply and demand as well as billing accuracy. Finally, these folks also collaborate to identify additional features and prioritize them for future cloud service enhancements.
As you can see, the business model for IT is not a simple matter. Yet, it is an absolute necessity to successfully transforming to an IT as a Service provider. Unfortunately, many IT organizations have not set out to establish such a business model, which is hampering their transition to the cloud and putting the future of the IT organization at risk for becoming irrelevant. Ultimately, those IT organizations that build a successful business model for IT will become a broker of the service portfolio for the enterprise. Those that don’t will simply become one of many options from which the enterprise can choose.