ITaaS – Page 4 – IS Survivor Publishing

More business models for ITaaS

A couple of years ago I “reported,” in InfoWorld that “… the Silicon Valley Rabbinical Society is reportedly experimenting with services as a service, and the Conjunction Society of America will soon offer “as” as a service.”

While we haven’t sunk quite that low … not yet, at least … we do have IT as a Service (ITaaS). This isn’t, fortunately, an attempt to package everything IT does into software you can access through your browser. It is, somewhat unfortunately, the resurrection of the old idea that you should run IT as if it is an independent business, selling to its internal customers.

Last week’s column pointed out a logical consequence — that if you’re going to run IT like an independent business you’ll have to actually run IT like an independent business. Among the ramifications: You’ll have to run IT according to a clearly enunciated business model — a well-defined account of the levers and buttons you pull and push to gain profitable revenue.

In real businesses the “big three” business models are product innovation, customer intimacy, and operational excellence. Likewise ITaaS.

But while these are the most common models, they’re hardly the only ones, and so, in response to popular demand, here’s the first half of the rest of my list of business models employed by real corporations, along with a suggestion of how they might apply to ITaaS.

Business models

Product/service innovation variants

We covered the basic version of product innovation last week, but there are three variants that deserve special mention:

Razor/blades — give away the core product to create a captive market for renewables. ITaaS might, I suppose, “give away” PCs, smartphones and tablets in order to create demand for applications, charging enough for access and use to make a profit on the spread.
Financing — break even on the core product; make money on financing the purchase. Back in the day, GM made more money financing car purchases than it did on vehicle sales. Many health clubs finance memberships and make more on the financing than on the dues. It’s a dangerous play, though. As GM demonstrated, once you head down this path it’s easy to stop caring whether you sell competitive products. ITaaS should blow this one off.
Media — use content as bait; sell content consumers to advertisers. I don’t even want to think how ITaaS might make use of this business model.

The rest

Production capacity/capability. Most hotels and airlines follow this model — they do everything they can to fill rooms and seats.On the apps side of the IT house I’ve heard this called the “leverage” model and it’s a seriously bad idea. It means assigning everyone to enough projects that they’re always busy. The theory: doing so minimizes unit costs by eliminating wasted down time. The reality: According to Tom Demarco, along with just about every developer I know, every interruption and task switch from one project to another costs 15 unproductive minutes. Do the math.On the ops side of the IT house this strategy can make more sense — keeping networks and servers near but not beyond capacity minimizes unit cost. If you’re interested in pursuing this model, two words: hybrid cloud.

Technology/competency. This means finding new uses for something you’re good at. In the world of ITaaS this might have some tactical value, for example, renting out business analysts to help business managers figure out more effective ways of doing things, or renting out project managers to lead non-software-related projects.
Sales/marketing method. Think Amway and Mary Kay — it doesn’t matter what you’re selling, so long as you can use your established selling techniques to sell it. If there’s application to ITaaS I’m not ingenious enough to spot it.
Distribution method. This usually means dominating a distribution channel, and at a minimum means mastering one. For example, you know those nasty companies that trick you into installing adware? That’s an unsavory example. Convenience stores are a non-unsavory example (I nearly said “savory,” but the food they sell isn’t that tasty. Except, of course, for Nut Goodies.)The ITaaS version might be interesting: As IT already has relationships with literally everyone else in the company, figuring out more services that might have business value and could be provided through those relationships has potential.

Natural resources. The extraction industries — forest products, mining, coal, oil … We could push the boundaries, I suppose, and think of everything in the company’s databases as natural resources, making data mining directly analogous to actual mining. But if we did, the Metaphor Police would hunt us down like dogs.Had enough? Too bad — we’re only about halfway done. But it is enough for this week.Stay tuned.

IT as a service isn’t a technology

In the absence of a new idea, a new name for an old one will have to do.

Which is about the only justification I can imagine for ITaaS — IT as a service.

No, ITaaS isn’t a new technology that serves up everything a traditional IT department does, only over the Internet and into your browser. It’s the twentieth-century model of IT service delivery, where the IT department envisions itself as a supplier to the rest of the business, selling various forms of information technology to its internal customers, who pay for it through a system of chargeback.

As regular readers have surely figured out by now, this isn’t a model I usually endorse — in most circumstances, integrating IT into the business leads to superior results.

But instead of piling on more criticism (or even drearier, repeating the same old ones) let’s figure out how to make it work, because there are situations — centralized IT supporting more-or-less autonomous business units, for example — where ITaaS is the only practical alternative.

Where to start? The same place real businesses start: by choosing their basic business model, “business model” meaning the buttons and levers the business can push and pull to turn its actions into profitable revenue.

Somewhere in my IT Catalysts detritus I have a list of twenty or so business models, which successfully describe every business I’ve ever run across (not all of them are good models, just as not all businesses know how to sustainable make a profit). And while there are a lot of them, three are dominant:

Product innovation, filling known or newly discovered needs, wants and desires with ever-increasingly wonderful goods and services (services being, in this context, just another type of product — you charge for services, different from providing good service).
Customer intimacy, where you know your customers so well, and take care of them so well, that taking their business elsewhere is almost unimaginable.
Operational excellence, where you’re so efficient that you can offer your admittedly less interesting products to whoever happens to show up, at such a low price that the savings outweigh all other concerns.

By the way: while every well-run business has one business model that’s its lead story, that doesn’t mean business leaders get to ignore the others. Product innovators still have to operate efficiently, just not with relentless efficiency; likewise they shouldn’t treat their customers like dirt, even though they can’t offer them custom-tailored solutions the way a customer-intimacy company does.

And so on.

Ready for the punch line?

IT that’s integrated into the business is close kin to the customer-intimacy business model — so much so that the rest of the business doesn’t think like a customer at all and IT stops thinking like a supplier. In this model they and we become peers and partners.

ITaaS? IT’s CEO (the CIO, but we’re modeling IT as a separate and independent business) has a choice to make. IT can be a product/service innovator or it can be what, in pre-cloud days, was called an information utility — a purveyor of inexpensive commodity solutions.

It can be finer-grained than this. For example, IT infrastructure services can have a different model from application services, with the former focusing on hyper-standardization in support of operational excellence while the latter provides technology leadership to the rest of the enterprise in the guise of product innovation.

Don’t like these business models as a framework? Come up with a different one. That’s fine — these simply illustrate the more fundamental point: With ITaaS the whole nature of IT strategy and governance undergo profound changes.

With IT as an integral part of the business, its strategy is a consequence of the overall business strategy. As an independent business its strategy is derived independently … although, like any good business, it has to guide its strategy with its understanding of marketplace (or, as it’s all metaphorical, “marketplace”) trends.

This, by the say, is one place many ITaaS proponents miss the mark. They start by defining an IT services catalog. It isn’t that having an IT services catalog is a mistake. It’s that without a business strategy behind it, an IT services catalog is just a list of stuff we do.

Strategy precedes product.

Governance? With integrated IT, governance is how the business makes sure IT’s project portfolio optimally supports business priorities. With ITaaS, revenue is revenue — IT governance is mostly a matter of which business units have the budget to do what.

Which might explain the appeal of the ITaaS relationship model: It results in a lot less arguing.