 "How IT Can Be The Next Major Utility Provider")
In today’s fast moving IT environment, IT can no longer work in a silo. Organisations are embracing Agile development methodologies requiring all members of the team—both business and IT–to collaborate and tackle problems together. Organisations that don’t adapt to these technology shifts quickly are falling behind and those that embrace these new technology models find themselves with a seat at the table when discussing new strategic capabilities and business growth.
CIOs have been the face of this change for some time, but their role is changing. They are becoming brokers of services that are closely tied to the business. They are now focusing on applications and services delivered internally and externally that have a direct business impact–rather than on just managing the “factory” of datacentre infrastructure. For example, by letting the cloud handle common, often commoditised, IT processes including backup, storage and security, CIOs can focus on more strategic business decisions and other new services.
The Evolving CFO, CIO Relationship
The rapid adoption of SaaS and cloud computing is changing the way that organisations do business. Cloud and SaaS applications are no longer confined to IT. Multiple departments and divisions in the business are increasingly embracing these applications and are relying on IT to ensure they run smoothly. For example, a marketing application will need to cleanly interface with a finance application, which then interfaces with a manufacturing or other application. This integration between different applications is taking IT out of the silo and forcing it to collaborate with different groups across the enterprise.
This is also impacting the relationship between the CIO and CFO, specifically around the new challenges the CFO faces as part of this model. The traditional IT model involves annually setting a CAPEX spend with a smaller amount in OPEX. As organisations shift towards a consumption model, they are faced with maintaining OPEX costs, which are not based on consumption-based figures. As a result, estimating anticipated expenditures becomes more complex since IT is now being charged for things like data, or the amount of email storage space they need. Those numbers can dramatically fluctuate based on the actual consumption, removing just about any level of predictability.
The CIO must work closely with the line of business to communicate the departmental spend and the CFO will increasingly be involved in setting appropriate guidance—not just in the total spend, but in budget allocation, CAPEX or OPEX. The CFO will need to maintain a watching brief over the contracts, especially since SaaS and IaaS agreements can fluctuate over time. This makes it more critical than ever for the CIO and CFO to maintain a constructive relationship— one that will not only ensure the IT practice is successful, but also ease the transition to IT becoming the broker of services for the organisation.
Measurement As Part Of A Utility/Brokerage Based Model
One of the biggest questions involved in moving to a utility/brokerage based model is deciding ‘what’ should the IT organisation cost back to the business? The industry needs to come up with a standardised approach to measuring this for the utility/brokerage based model to succeed. This will require looking at what the business actually uses in terms of consumption and documenting the consumption in a manner that the business can comprehend. This is similar to IT moving to a utility model, in which it would operate more like an electric company than an IT company.
IT vendors are beginning to transition to a model where they get paid based on a company’s consumption instead of a single cost upfront. This move requires CIOs to change the way they think about consumption and to adopt a utility based mindset and model.
Transitioning IT into a brokered service model is the next step in its evolution. IT will fundamentally change how business views the consumption of technology and how the industry pays for services. It will also change the working dynamic between finance and IT to one where the proactive CIO is able to own the charge around a consumption style “bill” rather than be at the mercy of the finance department when making decisions.
For the model to work, IT will need to be responsible for ensuring that technology is performing effectively and efficiently and at a cost that is reflective of the value the business is willing to fund.
The author is Vice President Strategy & Innovation, CA Technologies.