Builder to Broker

Aligning Business Supply Chain with Digital Supply Chain

Understanding the transition to “Cloud Computing”, “Adaptive Infrastructure”, “Fog Computing”, or whatever you want to call it has presented many challenges to organizations.  It has proven difficult to fumble through marketing and hype in order to understand exactly what “Cloud Computing” or whatever you want to call it…is or actually means.  However you define it, I’ve seen individuals and executives within IT organizations recognize that there is a shift occurring within their businesses.  Over the last few years we’ve seen massive consolidation, convergence, and modernization of IT, all in the name of Cap Ex savings.  As a result organizations, in most cases, have seen significant cost reductions.  Now we see business asking the all too common question to their It leadership…What have you done for me lately?  The way that we answer this question will define us as IT strategists over the next few years as well as ultimately our success within our respective industries.

True Cost of Business

Many organizations will continue to chase cost optimization as a primary driver.  We’ve seen the market adjust accordingly for this.  Public cloud offerings like Amazon provide cloud services at a low cost to entry.  These offerings are introducing low cost competition into the market, not only for PDS but for your IT organization.  I know what you’re saying…there’s no way that your business could transition core IT services to Amazon.  That’s definitely true…for now.  Bottom line is that in cost optimization model you will always be competing against the lowest cost provider.  Unless your IT organization has massive economies of scale you will not be able to compete and therefor will become irrelevant.  The core belief here is that the past was about cost savings.  The future will be represented by the strategic value that IT provides to the business as well as innovation.  So…what is the true cost of IT?  IT has traditionally been a black hole of cost consumption.  Most organizations would not be able to do a comprehensive “build vs. buy analysis.  Also understand that when organizations procure on a per project basis they create
“siloes” of locked capacity and inherent inefficiencies.  Comparing IT costs in a traditional model with cloud services is an unfair comparison.  Service providers thrive on the ability to leverage efficient process and capacity management.  A critical factor to cloud computing is the concept of “right sizing”.  Leverage the compute, network, and storage capacity that you actually and therefore only pay for the capacity that you are actually using.  The concept of private cloud is extremely important for providing the ability to get the business accurate cost comparisons.

IT as a Service

Cloud Computing presents a unique opportunity for IT organizations to provide a service oriented approach to consuming IT’s resources.  Every IT organization provides services today, there just not formalized and or packaged into a menu of services.  Start with two or three core services to the business and develop a formalized services offering.  When making this decision recognize that not all applications will go through modernization, it’s important to throw things out.  This is a transformation and a shift.  Focus on optimizing applications and services that can embrace the future.  Automating legacy process and procedures will not provide any optimization.  Think about creating new processes through eliminating steps.  These new processes then provide very efficient automation and optimization. 

Similar to any other services organization you will need to understand utilization, capacity used, capacity available, costs of resources, SLAs, etc.  This information will provide insight into how efficient your new services are.  Use this data to provide insight to the business on costing and consumption.  In addition SLAs now become more important than ever.  The performance and availability requirements of your services will be the leading contributor to their success and or failure.  When creating SLAs around services you must develop the requirements through the key business stakeholders of that service.  IT must not and cannot develop SLAs within a vacuum.  Intelligent automation is the key long term.  Enable the ability to make decisions based off of metrics i.e. business requirements, performance SLAs, availability SLAs, security, compliance, etc.  Most organizations don’t have a way to capture this information today and are delivering services ad hoc.  We usually see IT take taking a stance somewhere in the middle of two approaches.  They either provide “no guarantees” which usually results in new leadership being hired within a couple years or they lock down everything to the highest level which is extremely costly.  SLAs need to be developed and agreed upon by the business units with the help of IT.  These are all steps to take in order to help you understand what the true cost of IT is and how the business is consuming those resources.

From Builder to Broker

Throughout this transition we see IT organizations shifting from primary builder of resources to more of a broker.  Think about the concept of creating a digital supply chain for your business.  As IT develops services and continues to gather data on usage and utilization they will begin to see what services are core to the business.  As a result they will begin to see what services or not part of their core competencies or are not primary services that the business needs to consume.  IT can then make the decision to broker those out to providers that can help them optimize.  This allows IT to align their resources with the needs of the business.  You then optimize your digital supply chain by creating services and brokering services that map to business requirements.  Continue to focus on the core business services, value engineering, and innovation that are necessary for your business.

In order to accelerate this process it’s important to have a strategy and clear vision.  The first step is to create a definition of cloud computing that aligns with your organizations requirements.  Develop an early phase architecture around that definition that will allow your teams to map people, process, and technology to outcomes.  Align with your business units to help them with defining SLAs, provide them a construct and cost structure to begin making decisions.  Leveraging a gap analysis/maturity model to understand where you are today vs. where you want to go will greatly accelerating the ability to create and implement a project portfolio.  You should be able to design, build, and implement a cloud computing strategy within 180 days.  Don’t try to boil the ocean all at once.