As cloud computing matures and success models emerge, enterprises are now getting serious about using cloud to drive IT transformation. JP Morgan Chase, Toyota, GE and other leading organizations are moving beyond incremental costs savings and are using cloud and next generation platforms to drive innovation, growth and competitive advantage. Unfortunately many CIOs and their advisors are attempting to take a traditional, legacy approach to cloud-enabled IT transformation that fails to account for new realities.
IT transformation is certainly not a new concept, having been around for at least the last decade or so. Though transformation efforts traditionally have been launched to improve IT / business alignment, they typically have served more as window dressing for IT cost cutting. Traditional approaches to IT transformation are characterized by multi-year programs generally based on a four-step approach:
- Strategy – a core team would develop a 3-5 year target end-state design for the IT organization that would include applications, infrastructure, and a new operating model including policies, processes, roles and skills.
- Plan – a phased, multi-year implementation plan would be created to coordinate all activities required to reach the defined end-state model. This would include application rationalization, modernization and replatforming, infrastructure upgrades, as well as organizational change components.
- Migrate – a project management office (PMO) office would centrally manage the integrated transformation program across internal and external stakeholders and vendors.
- Improve – finally, processes, tools and methodologies would be implemented to ensure continuous performance improvement across key performance indicators (KPIs).
This approach was well suited for a time when defining target end-state models 3-5 years out was a relatively safe business. Innovation in enterprise technology was fairly predictable and basically driven by the underlying roadmaps of Intel, Sun and other major chipmakers, which also then drove hardware and enterprise application roadmaps. Given the relatively predictable evolution of technology platforms, application and infrastructure complexity and cost of customization these programs were:
- Centralized – IT transformation programs were typically driven by a top-down, command and control approach all the way from strategy development through rollout and implementation.
- Rigid – the classic transformation process was sequential with strategic, organizational and operational requirements largely “frozen” in the initial phase.
- Costly – given their size, scope and complexity, traditional IT transformation programs typically required multi-million dollar commitments by CIOs.
Consultants and vendors thrived on broad scopes, timeframes and budgets, while CIO’s were provided a modicum of job security assuming the program maintained reasonable progress against objectives.
The paradigm shift driven by cloud computing and next generation IT models has characteristics that make it difficult, if not possible to take this traditional approach to IT transformation. What’s changed?
- Control – whether CIOs like it or not, IT transformation is already underway in their organizations. Instead of being centrally driven by IT, transformation is being driven by business executives, frontline users and developers deploying Amazon, Salesforce.com, Dropbox and other services. Self-serve, consumption-based service models have enabled business users and developers to essentially begin driving IT transformation initiatives on their own. As the train has already left the station, driving a clean sheet IT transformation effort is now nearly impossible.
- Uncertainty – cloud services are continuing to evolve at a rate and pace not seen before in enterprise IT. This rapid evolution is being driven by vendor innovation, open source platforms like OpenStack, CloudStack and Eucalyptus, and growth in mobile, big data and other synergistic technologies. This pace of change doesn’t apply just to cloud technology, it applies to economics as well with pricing of public cloud services dropping rapidly driven largely by Amazon. This uncertainty makes development of a static end-state models on a multi-year time horizon risky at best.
- Ease of deployment – cloud has reduced the costs of customization associated with traditional IT environments, as well as the cost of experimentation and failure. Rather than plan for any and all contingencies in a detailed requirements exercise, cloud services makes it more effective to test, deploy, learn and iterate.
Unfortunately many CIOs and their advisors are taking a traditional, legacy approach to cloud-enabled IT transformation. These approaches fail to take advantage of the inherent benefits of cloud platforms, and are creating unnecessary cost and risk.
CIOs need to recognize that they are now service providers that need to compete with 3rd party vendors like Amazon, Salesforce.com, Microsoft and others and that they now need to transition to an IT-as-a-Service (ITaaS) operating model. This model needs to provide users will self-serve access to external and internal services via an integrated service catalog that also supports chargeback and billing. This operating model needs to reflect not just new cloud services, but also include virtualized and dedicated environments that will be still part of the enterprise IT landscape for the foreseeable future.
IT-as-a-Service (ITaaS) Operational Model
To drive transformation to this new IT “business model” and become a true service provider, a new approach to transformation is required that is:
- Collaborative – now that its “customers” have freedom and choice, corporate IT needs to ensure that the needs of users, developers and other key stakeholders are truly being served by internal and external services. This requires an intimate understanding of customer needs, and a set of capabilities similar to product marketing and management provides in 3rd party service providers.
- Flexible – rather than a forced march down a linear, rigid methodology a new approach needs to provide CIOs the flexibility to start where it makes sense for their organizations. CIOs need to have multiple “on-ramps” to ITaaS transformation that integrates existing cloud service usage without disrupting the value they already may be delivering to business users.
- Iterative– Traditional IT transformation programs took a monolithic approach that comprehensively defined the governance models, processes, policies, tools and people required for a target end-state model. Rather than architect the full house up front, CIOs need to take an iterative approach that incrementally adds ‘thin slices’ of definition in each of these areas, and provides the ability to react to technology and market developments.
Stay tuned for future posts on this topic where we’ll be discussing new approaches to IT transformation that are emerging based on these principles.