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IT as a Service transforming traditional IT departments

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Jon Peirce jokes that IT in most businesses resembles a busy Department of Motor Vehicles office: People wait, demanding service, while employees work their way through the lines with as much patience and efficiency as they can muster.

Jon PeirceJon Peirce
Senior VP of IT
EMC Corp.

"That's the way our IT organization was structured," said Peirce, senior vice president of IT at technology vendor and computing services provider EMC Corp. in Hopkinton, Mass. "Until we realized that if we continued to operate IT with that business model, we would quickly become irrelevant given the options people have."

Those options are the business services available in the cloud. Unlike the DMV, the IT department is not the only game in town -- anymore, that is. Today, it's easy for someone to download a mobile application onto a company smartphone, or for a department to subscribe to cloud services like Microsoft's Windows Azure to access a virtual computing environment. Known as "shadow IT" -- the bypassing of traditional corporate channels to acquire applications and infrastructure -- it's shaping up as a formidable rival to the IT department. And at EMC, Peirce realized his team couldn't compete. 

"People were trying to source around us because IT was getting in the way of their business value," Peirce said. "We had to transform the IT model in order to be relevant in the future."

Winging IT

EMC faced a problem familiar to many large companies -- the IT group never had enough capacity to meet demand, and there was a big disconnect between a fixed IT budget and the need for ever more services. On top of that, the company's revenue more than doubled between 2005 and 2012, and IT couldn't keep up with the data and storage needs of the growing business. Like many IT managers grappling with data surges, Peirce ported essential applications to a virtualized environment, eliminating legacy infrastructure stacks and reducing equipment costs. By 2010 EMC had virtualized 70% of its servers and added storage virtualization in an integrated private cloud -- all fairly standard technology trends in today's modern data center. But it's what happened next that has analysts pointing to EMC as a trailblazer.

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In 2011, EMC's IT department embraced the managed service mind-set and began offering IT as a Service (ITaaS). Operating much like its own business, the group no longer needs to spend time provisioning servers; rather, it is a broker for sourcing both on-premises and off-premises cloud services to other departments. IT seeks out the best cloud provider for the business need, negotiating price and service-level agreements.

All services are billed back to the appropriate department, which means technology expenses fall under the operating budget rather than being considered a capital expense, that would come out of the IT budget.

This is a pivotal point in the evolution of IT, industry pundits say, as the focus is shifting from a communal customer service model gated by a centralized budget to a usage-based, on-demand setup.

In this new world of self-service IT, chief information officers are instructing their teams to go beyond virtualization and cloud computing to become service architects who design enterprise stores for downloading company-approved applications, build service catalogues with a menu of choices and drive shareholder value by supporting company innovation.

To that end, IT becomes a strategic partner to the line of business, said Dick Csaplar, an analyst at Aberdeen Group Inc. And that means developing new expertise. "The skills traditional to IT, like coding and project management, will still be needed for some mission-critical applications, but negotiating contracts and managing SLAs are the skills that will be required by IT in the future."  

Getting personal

Not surprisingly, such a seismic shift in operations requires modifications in the organization as a whole -- and those don't happen overnight.

"The biggest challenge for business is not the technology, but the organizational and governance transformation," said Wayne Pauley, an analyst at the Enterprise Strategy Group. Before joining the consultancy in January, Pauley taught the EMC team how to be ITaaS architects. He said it's a process that requires IT to become "cloud-capable," he said, and understand new technology, including object-oriented programming languages like Ruby and Python.

The switch to ITaaS is a lot of hard work, but it's been well worth the effort for EMC. An Enterprise Strategy Group audit of the ITaaS transformation there revealed that from 2004 -- when EMC began its move to virtualization -- through 2012, maintenance spending dropped from 80% of total IT outlays to 58%; while "innovation spending" increased from 20% to 42%; the company also logged $157 million in capital expense avoidance, and $66 million in operational expense savings. Furthermore, infrastructure consolidation resulted in a 34% increase in energy efficiency.

"Many organizations are not allowed to talk about what they are doing [with ITaaS] because they consider it a competitive advantage," Pauley said. 

At Cubist Pharmaceuticals Inc., a fast-growing biopharmaceutical business in Lexington, Mass., a partnership withTriCore Solutions and other Infrastructure as a Service (IaaS) providers enables the IT group to hone in-house IT processes as they lean on their partners for infrastructure management.

"My customer has choices," said Rajesh Padmanabhan, Cubist's senior director of business application services. "My group is competing with every vendor outside of Cubist, which keeps us sharp and focused and helps us grow."

The ability to focus on services rather than get bogged down by daily system management tasks puts the IT department in a strategic position, especially as Cubist embarks on a five-year mission to expand its footprint globally and double its revenue to $2 billion. "Just having the scalability that we do becomes a big part of where IT adds value in the new business strategy," Padmanabhan said.

Paying up for better business

Similarly, San Jose, Calif., networking vendor Cisco Systems Inc. began its own internal transformation in 2009 with an IaaS platform designed to provide users with capacity on demand. That evolved into Cisco IT Elastic Infrastructure Services (CITEIS), a cloud-based system that automates the delivery of IT services through built-in workflows. In this "pay for play" setup, users log in to a portal to gain access to self-service infrastructure and software provisioning. Using its own technology, including the Intelligent Automation for Cloud software suite and the Unified Computing System server line, Cisco whittled down server provisioning from eight weeks to just 15 minutes.

"It was hard to maintain at first," admitted Michael Myers, Cisco's director of technical services for CITEIS. "We had subject matter experts writing scripts to create the framework. And we were putting together the stack that runs our automation and gives us the ability to be agile with how we turn up the services." 

Now that the developers have automated the self-service provisioning, they are freed up to work on projects that bring more value to the business, Myers said. And the IT department itself is driving value. Cisco employees buy a service, such as Web servers, middleware or database capabilities, from IT -- just as they would with a third-party cloud provider. But unlike a service provider that pads the cost to increase profit, Cisco users are only being charged enough to cover IT costs.

Similarly, EMC charges for ITaaS by the month versus in the past when the capital expense was an up-front cost and a long-term commitment. As a result, IT has more financial transparency. "It opened a lot of eyes in our business," Peirce said. "We had never looked at what an end-to-end service costs. It caused us to implement a profit and loss view of our services to understand the unit cost of the service and what happens to that unit cost over time as we make investments and scale the volume of service." 

Today, 92% of EMC's infrastructure is virtualized, but the company's IT transformation is ongoing. "It's something that will never be complete because it must constantly be tuned to adapt to the needs of business," Peirce said. The good news: EMC's internal IT team can now compete more readily with external cloud providers.

"Our initial motivator was fear," he said. "But now we are better business partners. We, as an IT organization, are viewed strategically and in a more positive light."

About the author:
Stephanie Neil is a freelance writer and a correspondent for Business Information. Email her at stephanieneil@comcast.net.


This was first published in June 2013

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