For the first time, corporate IT is facing real competition. Business users are deploying increasingly sophisticated SaaS applications on their own. Developers continue to look first to public cloud IaaS and PaaS platforms for new application development, reducing the need for internal infrastructure. With every new 3rd party cloud service, more IT budget dollars go out the door. So what’s a CIO to do?
Now that they’re finding that they need to compete for budget, many CIOs are coming to the realization that IT needs to transform and become a true IT-as-a-Service (ITaaS) provider. Instead of organizing around traditional technology silos, the vision is to become a modern service provider that offers and orchestrates both internal and external IT services. In this model, corporate IT offers a menu of SaaS, PaaS and IaaS options for business users via a centralized service catalog. A well-run hybrid cloud will enable business users to pick and choose cloud services that from a service catalog that has been co-developed with IT.
One example of the new service provider mindset is the internal private cloud IaaS and PaaS environments that are being deployed to capture the “hearts and minds” of developers. To compete against Amazon AWS many enterprises are rolling out private or hybrid cloud environments that provide self-service provisioning, elastic scalability, reusable components, and common services.
There’s a set of technology issues that corporate IT needs to address to support this model including service orchestration integration, identify management, security, and so forth. In addition to new technology and tools, internal IT organizations are finding they also need new business skills and capabilities that are a bit unfamiliar to them in order to effectively compete as a service provider. These include:
- Service design – it’s not enough to just build a private or hybrid cloud and let it loose. Just as an external cloud provider would do, enterprise IT needs to identify the starting points, bundles, and configurations to be offered internally that include CPU, memory, storage, network and other services and components. After launch, IT needs to iterate and respond to user needs and usage behavior and modify offers accordingly just as a 3rd party service provider would do. This is easier said than done.
- Product management – IT needs to continuously align business requirements and the services portfolio to ensure it provides services that are attractive and relevant. This requires developing and managing roadmaps that include the right set of internal and external services that enable the business to experiment, innovate, and grow. If this all sounds suspiciously close to product management, at the end of the day, that’s effectively what it is.
- Pricing – with cloud service catalogs, many CIOs are also implementing consumption-based chargeback models. Business users receive a bill at the end of the month for all IT services, whether they be internal or external. To effectively compete with external vendors, internal pricing of cloud services need to evolve beyond just “cost-plus” allocation models. Pricing of internal services need to reflect competitive market dynamics and provide incentives to keep volumes in house. Needless to say, pricing strategy isn’t a traditional IT core competence.
- PR and marketing – while at first this may seem to be a stretch, it’s really not. While CIOs don’t need to retain PR firms for internal communications, they do need to effectively evangelize, market, and sell their services internally. This is more than just promotion. It’s about understanding your customer’s needs and pains, whether it be business executives or developers, and effectively communicating the unique value proposition of IT’s services.
- Demand management – if business users and developers are offered a true choice, demand for internal services may initially be difficult to predict. This is particularly true of IaaS and PaaS services. Usage will be driven by a variety of factors including features, capabilities, and chargeback pricing. Demand forecasting and management will be critical to avoid bad capacity decisions. While capacity planning has always been a core IT skill, effectively forecasting business demand in a competitive environment is a new twist on this capability.
IT departments need to effectively become cloud service providers themselves and understand they’re competing as such. While many have considered the technology implications of this choice, few have yet fully considered the business skills required to make this model successful.