ITaaS – Page 3 – IS Survivor Publishing

The ITaaS metaphor – picking and choosing the parallels

ITaaS is a new name for an old idea — that CIOs should run their organizations as if they were independent businesses, selling information technology to its “customers” in the rest of the business.

The KJR Manifesto advises a different course of action: Don’t run IT as a business — run it in a businesslike way. But as with everything else in the manifesto, this is a guideline, not a law of the universe. Sometimes this is what you have to do. So continuing on the path of helping you make it work instead of just writing it off as a bad idea …

Start with a tedious but necessary conversation with the CEO. See, running IT as a business had better be a metaphor, not something to be taken literally. And all metaphors are dangerous because of the temptation to treat them as identities rather than as parallels.

The conversation, then, is where to draw the line — where to use the metaphor and where it stops. Among the topics:

Growth: Profitable revenue growth is a central goal of just about every business. So if a CIO is supposed to run IT like an independent enterprise that sells products and services to internal customers, it’s important to know whether growth should be one of IT’s business goals.

My guess: At least half of all CEOs would be horrified at the very idea. They distrust IT, think everyone in it wants the company to buy them technology for technology’s sake, spending every last bit of profit on toys if the company didn’t have a carefully constructed governance process to ensure all IT projects will deliver enough business value to warrant the investment.

The last thing this group of CEOs wants is for IT spending to grow.

But if pressed, many of even the most recalcitrant CEOs would acknowledge that if IT is to be run as a business, it has to be in a position to satisfy demand, and if the demand for IT services increases … if, for example, the CMO wants a more sophisticated big data analytics capability … then IT’s size will just have to expand to accommodate.

Sales and Marketing: True independent businesses don’t just satisfy demand. They generate it. That’s the whole point of sales and marketing. Does the CEO want IT to engage in sales and marketing?

Don’t be ridiculous. That’s pushing the metaphor way past its useful boundaries.

Or is it? Because a common complaint among CEOs is that the CIO doesn’t provide technology leadership, and doesn’t act as a strategic partner. What does that take? Identifying new technologies that can improve the company’s competitive posture and painting a picture of what they could do.

The difference between that and sales and marketing? Mostly, the difference is what you call it, not what it is.

Competition: Does IT continue to have a captive market? ITaaS’s proponents list competition as one of its most desirable attributes — that IT loses its monopoly and has to compete for business in the business. This supposedly will drive down costs as competition always does.

It might. Competition, especially for commodities, does drive efficiency (when you’re on the receiving end of this statement what it does is put pressure on margins).

But when competition is based on price, the result can also be a race to the bottom. And as IT’s “customers” often lack IT’s sophistication in evaluating an application’s engineering, and sometimes lack IT’s perspective regarding the importance of an IT provider’s marketplace viability, the result of competition can also be an accumulation of attractive but poorly built and unsupported junk.

Competition #2 — technical architecture: “Technical architecture” sounds like something IT tosses out to intimidate its less-knowledgeable business counterparts. Let’s simplify things.

The immediate question is whether IT does or doesn’t establish technology standards for the company. If it does, competition is fair, because everyone — IT and outside vendors — have to conform to the company standards. If it doesn’t, what the heck — throw out the standards, and let every project team build what it needs to build using whatever tools and techniques will let it build its product as cheaply as possible.

That’s the short-term issue. The bigger and longer-term issue is whether the company has nothing more than a technology portfolio … a pile of stuff … or a coherent, integrated computing environment.

If every business department goes shopping every time it needs something, there’s really only one possible outcome, and that’s the pile of stuff.

Read about ITaaS and you might think it’s nothing more than service catalogs and chargebacks. It’s more complicated than that.

And we aren’t done yet, but we are out of space, so stay tuned.

Yet more ITaaS business models

We’ve been talking about ITaaS — IT as a Service, which doesn’t mean an IT organization that lives in the Cloud, and does mean an IT organization that runs itself as a separate business that views the rest of the enterprise as its internal customers.

Which means with ITaaS you have broader responsibilities than the head of a business division or department. Starting with the past two weeks’ topic – deciding on your business model, of which we covered about half the ones on my list. To continue … and let me emphasize, I’m not saying these are all good ideas. I’m not going to even try to connect these to anything IT might want to pursue — I’ll leave that to your imagination. But they are common business models, so what the heck:

Size/growth. Whatever it takes to get bigger. The usual end-game is to dominate a market or distribution channel to the point that doing business with you is either unavoidable (de facto monopoly like Microsoft with desktop Windows and Office) or just a lot easier than the alternatives (Amazon).
Do the deal. Live to sign big, interesting contracts. This is an entrepreneur’’ business model. Think Donald Trump and Ross Perot. It’s a business model for people with chutzpah. Not for the faint of heart.
Amoeba. Try a bunch of stuff. Do more of whatever sells and less of whatever doesn’t. This is just the ticket for entrepreneurs who are too prudent to base their futures on doing big deals. Big-deal entrepreneurs will say “risk-averse” or something stronger rather than “prudent,” but they’re pretty much the same thing.
Landlord/Tenant. Also known as the Hollywood Studio Model. You provide facilities for entrepreneurs, internal or external. They take most of the risks; your risk is that they might not succeed well enough to pay the rent.
Return/profit. Whatever it takes to improve the bottom line. Not a good idea, because it encourages business leaders to take their eyes off the ball. Profit should be a consequence of the business model, not the model itself.
Shareholder value. Whatever it takes to drive up the stock price. You know that eyes-off-the-ball thing? Focusing on shareholder value makes focusing on profit look like a good idea.
Wait ’em out. Sure, your marketplace has changed. But if you batten down the hatches and hoist up the landlubbers, maybe big competitors will die first and you can inherit their customers, thereby putting off the inevitable. Think Best Buy, inheriting Circuit City’s customers, thereby looking like it was succeeding even as it was becoming little more than “Amazon’s showroom.”
Charybdis. The business spiral of death, aka “eating the seed corn.” Revenues are declining. Rather than fix the problem, cut costs enough to maintain profit margins. The business will fail, but you’ll pocket enough bonuses to retire in comfort before the inevitable happens.
Find a buyer. Give up. Suck in your gut, put on lipstick and makeup, and find someone with a lot of cash to take you in and give you a nice home.

There you go. If you want to head down the ITaaS path, ask yourself: Just how seriously are you going to take the idea that you’re running a separate business? If you mean it, start with the business model. If it’s just a metaphor, you’ll have to decide how far you’re going to take it.

Which gets to Mike Riddle beating me to the punch on a couple of points he made in last week’s Comments, namely: “If it is really going to be ITaaS, then it must be subject to market forces:

1) It must compete with outside vendors to keep its business, and

2) It must be free to sell to outside business. If it cannot, then the separate run as a profit making unit fails because it is not allowed to develop a full market.”

Yup. If you’re serious about running IT as an independent business, the rest of the business is going to want you to compete with outside vendors for their trade. Then there’s the other side of the coin, namely, that you’ll be dividing IT’s time between the rest of the business and other corporate customers.

Oh, and one more thing — you and your staff will have to get into the habit of responding to the various informal requests for favors you all get from your non-IT colleagues every day, “I’ll be happy to do this. Here’s what it will cost.”

They’ll love that.