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IT as a service: Cornerstone of the digital enterprise
Think about the last time you went to your favorite restaurant. Did you choose from a rich selection of menu items? Did you weigh cost versus value? Did a delicious meal arrive within a reasonable period of time? We’re betting the answer is yes, or you would have gone elsewhere.
Now think of your most recent experience with your company’s IT department. Were you able to choose from a varied catalog of IT services to get the outcome you wanted? Did you pay only for the IT firepower you needed? And was the entire process, from request to completion, speedy?
If you answered yes to all those questions, you’re working in a company where the IT department is running like a well-oiled machine. The organization is engaging in what we call IT as a service. When a company moves to such a service model, IT becomes standardized, consolidated, and virtualized. It offers a catalog of software services and hardware configurations designed specifically to meet each business units’ needs. Instead of working in bureaucratic silos and reacting—often slowly—to various projects on an ad hoc basis, the IT staff is flexible, fast, and focused on the needs of their internal customers.
Just as consumers have a multitude of choices for where they shop for goods and services, businesses now have numerous options for sourcing IT to help them get their work done. With that one simple change, the IT landscape has changed dramatically. Put plainly: IT departments now have competition. If they attempt to remain in their old role—as technical guru—they will eventually become obsolete.
The premise behind the concept of IT as a service is simple: Offer your internal clients the power of choice, allow them to pay only for what they use, and deliver it speedily. In this model, IT functions less as a tightly controlled department and more as a business. It becomes a broker for its internal clients, finding the best technology at the best price and negotiating service-level agreements (SLAs) and orchestrating IT from the initial request to support of the final outcome. With the advent of cloud computing, most companies now function under the hybrid IT model. They use a combination of legacy systems, cloud computing, and internal and external IT. The new role of IT is to act as a broker for all these different choices. For an example of how the IT-as-a-service model works, see "Otto Group’s IT team makes service job one" below.
Moving to an as-a-service model is no small task, however. It involves more external partners and moving parts and therefore a very different mind-set. As your organization moves to a service-oriented model, you will need a roadmap. Having helped hundreds of such companies, we offer a few suggestions as you begin your journey.
Things to consider as you move to ITaaS
Having worked on hundreds of IT transformation projects, we are able to identify seven major areas companies should address in their overall strategic plan for transformation. While leadership teams that miss any one may exact positive change, they will fall short of true transformation.
To become a true digital enterprise, offering IT as a service with full benefits, the following areas need to be addressed:
- Technical infrastructure and architecture: Moving to an IT-as-a-service model means looking at enterprise infrastructure architecture differently. Rather than organizing your architecture around projects, you need to organize it around relevant business services. It requires a shift from thinking in terms of hard assets to thinking instead of the business needs of customers.
- IT management framework: Here again, IT leadership should move the focus away from assets and projects to service architectures. Along with that shift, leaders need to rethink security, network, and risk management policies, because of the increased number of interactions with third parties.
- Finance: The as-a-service model completely flips IT’s finance model on its head. How do you price on a pay-as-you-go consumption basis, which comes with far more variables than traditional pricing models? For instance, price too low and IT has a budget deficit; price too high and business units will find external providers that are more cost-effective.
- Culture/people: Moving to IT as a service can ruffle the feathers of IT specialists. Deeply technical, hands-on types may not have the skills or temperament to move to a cross-functional, service-oriented culture focused on managing IT rather than delivering it. Training helps, but in some cases, even the right training will not equip some employees with the skills needed for a service-oriented culture. Be open to hiring people with different skills or outsourcing some functions.
- Process: Business users see IT as an enabler, not as an end goal. To better serve business clients, IT leaders will need to make internal processes more consistent and agile. Determining how they will handle, say, unforeseen incidents such as outages or how they measure success will play a role in customer satisfaction.
- Service management: Most IT departments are good at managing systems, figuring out, for example, how many servers are required at what run rate. Because IT professionals will now be acting on behalf of their business clients when negotiating SLAs, they will need to become well versed in the language and logic of business. The technical knowledge is still necessary, but IT professionals now need to add business savvy to their wheelhouse.
- Application management: Business units own the applications, but IT tends to have control over them. Getting business units to buy into pricing models and support agreements is key—otherwise, SLAs, no matter how well negotiated, will become a point of contention. IT employees need to clearly understand the business user’s end goal and day-to-day requirements in order to successfully manage the company’s application landscape.
The new model
IT as a service takes companies from the old model—siloed and slow—to a much more customer-centric one. Otto Group is just one example of what companies around the globe are doing to transform IT as they become digital enterprises. With internal clients now able to access a multitude of external options and service providers, IT departments need to continue to up their game.
IT is on a journey we expect will keep morphing as the business landscape does. We expect companies with the most flexible, service-oriented IT will emerge the winners.
Otto Group’s IT team makes service job one
Alexander Hauser, vice president of IT at the Otto Group, was worried. The global retailing giant’s subsidiaries were under no obligation to use his IT department. “This put us in direct competition with external service providers,” recalls Hauser. When he measured how his IT team was doing compared with external providers, he found that it came up short. For one thing, his IT team was simply taking too long to provide hardware and services for databases, networks, and other areas. “Our businesses needed to provide their customers with new services such as online stores—and quickly,” says Hauser. “In our modern world, it’s simply unacceptable to take two months to do something such as provide new servers for tasks like these.”
Franck Borchard, head of IT at Otto Group, also saw the need for change. “It was clear to us that we had to completely modernize our traditional IT delivery model.” The company used Hewlett Packard Enterprise’s transformation framework to address not just architecture and technology, but also its service portfolio, organization and culture, operating and software development processes, and governance. The group wanted true IT transformation.
After working with HPE, Otto Group IT is now 90 percent faster at providing new infrastructure services. “Shorter IT delivery times mean that businesses within the Otto Group can implement their own projects—and therefore innovation—significantly faster than before," explains Borchard. "This includes a number of projects which are driving digital transformation within the group, something that is a top priority for us.”
But shorter delivery times were not the only win. Otto Group IT’s running costs went down by roughly 40 percent, a benefit that can be passed on to customers. The improvements are having a profound impact. Otto Group IT now has signed contracts with some of the internal businesses that previously did not work with the organization.
And these days, Hauser isn’t worrying so much.
IT as a service: Lessons for leaders
- IT as a service is about offering internal clients the power of choice. They pay only for what they use and get it quickly.
- Implementing a service-oriented model is no small task, requiring a roadmap and a new mind-set to deal with more external partners and moving parts.
- A successful strategy will address seven major areas starting with technical infrastructure and ending with application management.
This article/content was written by the individual writer identified and does not necessarily reflect the view of Hewlett Packard Enterprise Company.