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 outside the door. So what’s a CIO to do?
Now that they’re finding that they need competing for budget, many CIOs are coming to the realization that IT needs to transform and become a true IT-as-a-Service provider (or ITaaS, for yet another addition to the XaaS lexicon). 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. Business users are free to pick and choose cloud services that corporate IT has vetted, or provide themselves.
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 and Rackspace some enterprises are rolling out private cloud environments that meet self-serve provisioning requirements, and include reusable components and common services. The goal is to provide environments that are “good enough” to keep developers in house, though not necessarily provide best in class IaaS capabilities.
There’s a set of obvious technology issues that corporate IT needs to address to support this model including integration, identify management, security etc. In addition to technology issues, to effectively compete as a service provider many internal IT organizations are finding they also need new business skills and capabilities that are a bit unfamiliar to them. These include:
- Offer design – it’s not enough to just build a private cloud and let it loose. Just as Amazon or Rackspace does, enterprise IT needs to identify the starting points, bundles, configurations to be offered internally that include CPU, memory, storage, network and other services and components. Post launch internal 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.
- Pricing – with cloud service catalogs, many CIOs are also implementing 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 private cloud services need to evolve beyond just “cost-plus” models. Pricing of internal services need to reflect competitive market dynamics, and provide incentives to keep volumes in house. Needless to say, optimizing service pricing 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 market and evangelize 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 your value prop.
- 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 private cloud 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 demand in a competitive environment is a capability that few marketing organizations even possess.
If this all sounds suspiciously close to product marketing and management, at the end of the day that’s effectively what most of this is. 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.
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