Call it the cloud. Call it converged infrastructure. Call it hybrid delivery, or whatever the marketers come up with next. The fact is, the world of IT has changed. It’s the “new IT.” But let’s be honest: it’s not altogether new, and it’s not altogether IT. So what is it, and how is it going to impact the industry we work in?
The definitions of the cloud are as numerous as, well, the clouds in the sky. Each new definition is ostensibly the correct definition, better than the others for a number of reasons (usually because it supports the features of a specific product line or proposed solution). But all of them point to some common areas, and the ability to deal with these areas is critical.
The Business of Business
The new IT is focused on business, but not like before. We used to talk about IT–business alignment and how we would provide services to the business. We would pride ourselves on being able to meet our service level agreements (if we had them). But just providing good service to the business is not enough anymore. IT is integrated into the services and products our businesses sell.
In the new IT, IT will do more than manage a set of outputs. We will be asked to understand what the business does and how we enable it to achieve its objectives. We will be expected to prove that our services enabled the business to actually perform the activity that made it invest in IT in the first place, and that it was able to do so successfully.
When it comes to the new IT, we need to understand and be able to explain how the services we provide enable the business to achieve its outcomes.
In the new IT, it won’t matter to our customers how we provide our services. Finally, the technologists have caught up with the idea of IT services. We’ve always talked about end-to-end, seamless service, so this concept, which has made the cloud a hot topic, is nothing new.
But it’s going to take a little more than cloud architecture to make this a reality. Value is defined by the consumer. No matter how well we define and sell a service, the customer will have the final say about whether they will or will not use a service (or whether they source it from us or someone else).
So what makes the difference? Again, value. If a customer believes that a certain service helps them achieve their outcomes and does so at a reasonable cost, then it is valuable. The new IT is making it easier for customers to find exactly what they need, at the price they are willing to pay.
The message is clear. If we want to succeed in the new IT, we have to learn what our customers value and we have to deliver it at a fair price.
It had to come to this eventually. If customers want to calculate the value of an IT service, they need to know two things:
- Does the service enable them to meet their outcomes?
- Does it do so profitably?
Most of us still use allocation to recover the cost of IT. In other words, each business unit pays a percentage of the cost of IT, no matter what services they use. In the past, we went to great lengths to avoid calculating and communicating the actual cost of individual services (e.g., charts of account incompatibility, corporate policies, no budget, etc). The end result was that customers got as much as they could and then demanded that we cut our costs, undermining our ability to provide quality services. It was a vicious cycle.
The reality is that, in the new IT, there are many companies that can and do calculate these costs. Many of them sell their services on a pay-per-use basis. If we can’t demonstrate the cost of a service and link it to business outcomes, then the only thing we can do to show value is cut costs. And realistically, in these days of “do more with less,” how much more can we cut?
The bottom line? Being able to calculate and communicate the costs and returns on individual services will be key in the new IT.
Interestingly, the most important thing to know about the new IT is that it is not really about the technology. Sure, technology makes it possible to virtualize processing, hybridize data centers, and deliver services anywhere and everywhere, on demand.
But did you see what happened when technology made it possible for people to work remotely and be more independent? They used it to meet, share, network, and socialize. The new IT is people-driven and people-delivered.
Corporations that care only about the bottom line are finding things more and more difficult these days, while the companies that have placed their future in the hands of their end users seem to be finding it much easier to succeed. That’s because, no matter what business we’re in, the services and products we deliver are ultimately all delivered to people.
The new IT has made it possible to interface more directly with those people, to find out exactly what they need, and to get it to them wherever they are. Even more important, the new IT
enables them to define their needs and communicate them to us directly, so that we can develop and deliver new services within days, sometimes even hours.
The moral of the story: Setting up and using these communication channels will be crucial in the new IT.
As it is in the current environment, technology will continue to be central to the new IT, and so, too, will be our ability to manage it.
The good news is that we have become very good at managing the technological aspects of our IT environments. We have more technical skill than ever before, and as technical training has become cheaper and more readily available, so has the technology itself. The new IT will accelerate this commoditization.
However, what we do with those systems still depends on the needs of individual organizations. We need the skills and business knowledge to be able to identify exactly how our systems are used and to predict new opportunities. This will require business and communications skills on an unprecedented scale.
The old technocentric IT has become a true business unit and, ironically, it is the advances in technology itself that have made this shift possible. At the very least, technical professionals will need to understand the business impact of what they do, but the demand for more advanced skills will undoubtedly increase.
One thing is certain: Survival in the new IT will require staff at all levels to develop their business and communication capabilities.
IT organizations have traditionally focused on the technology side of IT. In the new IT, they will increasingly be asked to focus on the information side. Customers will look to IT to help them
solve complex business problems, not just by providing them with applications and infrastructure, but by making information and knowledge available to them from a variety of sources.
In the new IT, IT will become more involved in the decision-making processes of other business units. For this reason, it is critical that IT departments do not fall into the trap of thinking they can just hand over infrastructure or SaaS and assume that their customers will be able to use them effectively. That road is paved with costly infrastructure costs and business failures.
Information—and the ability to use it—is a key asset to any organization, and a valuable source of competitive advantage. IT has been tasked as its steward, and the new IT will require us to fulfill that task more diligently than ever before.
The key takeaway: The ability to understand the business’s need for information—how to access it and how to use it—will be at the core of IT’s mission in the new IT (just as it should always have been).
IT is a single service provider, no matter how many disciplines it has, so application development, enterprise architecture, project management, operations management must make peace with one another. We can no longer afford to maintain individual links with the customer. The new IT focuses on one thing and one thing only: delivering services that meet the customers’ needs.
And it doesn’t matter what’s in those services. We can’t continue to think that we each offer something unique to the customer. We don’t. We only offer what we can collectively build and deliver as a single service provider.
CIOs will need to take up the challenge of forging a single service-providing organization that delivers value at a reasonable cost. This will never happen as long as different units in IT believe they’re independent.
In the new IT, governance will go far beyond “Who is responsible for what?” That’s a question of management, not of governance, and it can be answered using a simple RACI chart, provided we know what actions and processes we’re doing in the first place.
The failure of IT governance has two causes. First, we still haven’t figured out what we have to govern. CIOs assume that their direct reports are handling things without realizing that’s actually their job. Governance is not the responsibility of any single process manager or service owner. It is the job of the highest-ranking executives in the organization, and it is being lost in the jumble of technology decisions knocking at their doors.
Second, we haven’t yet figured out that governance is, like organizational integration, about one thing and one thing only: ensuring that the organization is able to fulfill its strategic directive, according to mandated policies. Governance is about how we deliver value to the business and how we meet the business’s objectives. How do we decide whether to move to the cloud, or outsource, or keep our legacy structure?
In the new IT, the CIO will own governance, and all direct reports will be held accountable for executing the organization’s strategies under the direct supervision of the CIO.
The new IT will be even more dependent on third-party service provisioning, and IT will be asked to manage and coordinate these relationships on behalf of the business. The alternative is a mass of conflicting and overlapping contracts that reduce individual costs to the business unit, but result in huge costs for the enterprise.
IT will broker these services and manage the quality of the services provided, to keep the organization’s value chain functional. This will take all the skills and capabilities outlined in this article. Third-party sourcing will not simplify IT’s task; it will merely complicate it and magnify any existing shortcomings.
We will need guidance if we are to become value enablers, shifting our focus from outputs to outcomes. We will also need to have a clear portfolio of services, detailing the costs and investments associated with each service. Finally, we will need to invest in our relationship with the business through a formal process of business relationship management.
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Fortunately, all of these areas, trends, and processes are fully documented in the ITIL 2011 edition of Service Strategy, which includes practical and achievable guidelines for establishing
and managing these disciplines and navigating the uncharted landscape of the new IT. To order your copy of Service Strategy, visit www.best-management-practice.com.
David Cannon is the coauthor of ITIL Service Operation (TSO, 2007) and Service Strategy (TSO, 2011). He is the chairman of the itSMF International Executive Board and a strategist for Hewlett-Packard. His work has put him in touch with customers and suppliers around the world, where he hears their triumphs, frustrations, and wishes.