One of the main lessons from the April 23rd Peer Incite with Jason Mendenhall, Executive VP of Cloud at Switch Communications, builder of the huge SuperNap colocation center in Las Vegas, is that cloud services are here to stay and are growing because they offer business advantages. One area where that is true is in Big Data analysis, where much of the data often comes from cloud services and resides on the cloud, and which usually requires major a compute resource to run the analysis in a reasonable amount of time.
However, cloud services also are a long-term threat to ITOs. Every time a cloud service, like Salesforce.com, displaces an internal application like CRM, the ITO shrinks. Given that the cloud is here to stay, ITOs have to adapt or die.
The concept of running IT as a service organization is not new – Gartner was talking about it as early as 1990. Back then the argument was that business executives see IT as a set of business services, not a collection of infrastructure, software, etc. CFOs and CEOs have always wanted IT to manage itself as a service provider, but the constant war to keep the lights on, waged in large part in terms of a constant series of minor tweaks, scripts, and other highly technical adjustments, punctuated by major system crashes and application migrations to new hardware, forced a tech mindset that quickly devolved into silos – server, network, storage. That made it nearly impossible for IT professionals to see across the entire system, much less manage how something as complex as ERP ran, and what it cost, end-to-end.
Virtualization, which moves management up to the software layer and out to the edge of the system and promises a near future in which entire data centers will be managed from a “single pane of glass”, along with IaaS and network-based colocation services like Switch that allow ITOs to turn much of the hardware layer over to someone else to run, are changing that. They are replacing the traditional detailed technical challenges with a new set of higher level, business-oriented issues including managing a growing stable of cloud service providers (SaaS & IaaS), decisions about where different data sets need to reside and how much control the enterprise really needs over those data sets, and how to leverage new kinds of applications coming in from the cloud that never were in the data center.
At the same time, SaaS and the new mobile cloud services are changing user expectations. If Salesforce can provide CRM as a set of services on a utility pricing model, CFOs are asking, why can't my ITO do the same? It is not a long step from that to a decision that either the ITO does take a services approach or the CFO and CEO will replace it with providers that do.
However, reorganizing around services is not just a technology transition, it is a complete organizational change. It must be driven from the top – the CIO or above, rather than created from the bottom. And it will mean the retraining or replacement of many IT employees, not all of whom will make the cut. That includes CIOs, themselves.
Action Item: The bad news is that the process will be wrenching at times. The good news is that this is not going to happen tomorrow. ITOs have time to make this huge transition. But CIOs need to kick the process into gear now. The longer they wait, the shorter the time they will have and the more ground they will lose.