Showing posts with label IT Financial Management. Show all posts
Showing posts with label IT Financial Management. Show all posts

Thursday, February 6, 2014

Managed Services Providers Agree: Build a Vertical Market DaaS Focus

A few weeks ago I had the privilege of speaking with a number of our Citrix Service Providers at Citrix Summit in Orlando.

There is no doubt in my mind that the Managed Services industry is shifting… away from commodity services (dedicated servers, websites, Exchange mailboxes) and toward more holistic, higher-value hosting and outsourcing services.

The evidence I cite is both from a Service Provider panel I facilitated, as well as from assessing the winners of the recent Citrix CSP Awards.

Heard at the Panel

My first set of data points came from a panel I ran covering the importance of choosing a vertical industry focus. On it I had the honor to sit with Frank Butler, CEO of Proxios, John Alston, CEO of ClubDrive Systems, Byron Patrick of Simplified Innovations, and Ted Eisley of Microsoft.

Whether the founder's intent was to focus on a vertical from the start, or whether they organically developed their vertical foci, the panel agreed that choosing one or more vertical markets was good for business.  It made marketing and prospecting easier. It allowed for a more replicatable set of offers. It enabled them to re-use line-of-business applications more frequently. And it enabled them to charge healthy premiums on their services because they were delivering such specific value.  Indeed, my Differentiate or Die theory was alive and well!

Some data points I took away from our discussion:
  • Living your business helps business come to you: One benefit of tenacious focus on a market is that "the business comes to you" Byron Patrick is so focused on the CPA market that he attends all of the professional networking and development meetings in his geography. Both he and his company are know quantities in the industry. He's the de-factor "go-to-guy" And that makes business developing (dare we call it marketing) all that much easier.

  • A low price is not (necessarily) the goal: All panelists agreed that competing on price was not their goal. Doing so is a race to the bottom. Rather, they competed on service and overall value. And surprisingly, when asked about prices for the DaaS offerings, many said they can easily charge in excess of $100/seat/month, sometimes more than twice that -- assuming that the value they provided (i.e. line-of-business applications, bundled services, etc.) was commensurate.
  • Knowing the market means knowing customer assessments:  Another great question from the audience had to do with how much customer assessment was needed to "size-up" an opportunity and arrive at price for migration and on-going DaaS service. And a nearly unanimous response from the panel was that, once you've done a few similar vertical engagements, understanding the gotchas and pit-falls gets a lot easier.
  • Speaking the vernacular simplifies marketing: Each CEO focused on a different market. But each knew that market and could speak the language of the buyer, as well as the language of the user. They knew the compliance and regulatory factors. They knew the top vertical apps. They knew how to speak to the issues and concerns of the customer in each market. Now that's not something you can fake. It only comes with focus and experience.
Seen at the Awards

The other set of data points I reference is from the Citrix Service Provider Awards ceremony.

The winning Service provider for Marketing Excellence, MindShift, won on the basis of their comprehensive approach to accurately messaging their services to the specific business goals of their audience.  But all entrants and semi-finalists outlined focus. Focus on specific markets, use types, applications, and sometimes even technology.  

As I'd heard in the panel, the Awards finalists all started with an intentional DaaS service definition, that evolved over time to meet the needs of one or more specific markets.

And by doing so, the successful Service Providers have consistently seen double-digit seat growth annually.



Got a question? Comment? I'd love to hear your input.

Wednesday, August 1, 2012

Enablers for Transformed IT - Placing My Bets

It's an odd time of the year to be making predictions. But recent conversations with start-ups, CEOs, CIOs and others have suggested areas in Enterprise IT that I  bet will be "hot" over the near/medium term.

Some of the areas are "Sexy" (high on the Hype Cycle) - and others are not. But in my opinion all are worth betting on. They are all interrelated and all are critical enablers to the goal of a transformed IT ecosystem.

Already Sexy: Integrated Cloud Infrastructure Management
Of course you expected this one... But the betting opportunity isn't exactly what you think.

There are currently hoards of point-products professing "cloud management" - including the OpenStack/Cloudstack alternatives - but surprisingly, these still lack in providing a comprehensive solution that a reasonably sophisticated SP or CIO needs to buy.

In other words, I don't just mean a product that offers an automated virtualization (server, storage, networking) layer.... No: The real opportunity I expect to see here is an integrated comprehensive solution, that includes security, compliance, monitoring, financial metering, end-user provisioning portals, etc.  The winners in the space will either integrate these features too, or offer a pre-integrated bundle of best-of-breed point-products. And it's going to happen soon.

Not Yet Sexy: The Integration Bus
If you believe that most of IT's infrastructure is "going cloud" and that many 3rd-party services will be SaaS, then the role of the CIO will begin to shift from being a technologist (who builds things from ground-up) to being a Supply-Chain manager (who integrates multiple services from multiple sources).

To execute on its new role in the enterprise, IT will therefore become an integration point for internally- and externally-generated services. It will need to provide core identity, compliance, data exchange, security, and access infrastructure to properly "broker" all of these diverse services, providers and APIs.

It seems to me that the notion of an integration bus will become crucial. Such a bus will provide the "glue logic" between all services, and avoids tedious hand-coded integration points. In many ways this bus is a core intersection point between the internal and external cloud - the hybrid nexus, if you will.

Remember, it's not enough to have a service in a cloud. There will be a huge need for coordinating the interactions into/out-of (and between) cloud-sourced services. The need for such a service bus will quickly elevate to that of a critical IT enabler. A good bet to take.

Getting Sexy: IT Business Management
Building on the concept of IT as a "supply chain manager" is the concept of IT as a Service Provider to the business. This is sometimes termed IT-as-a-Service, where IT begins to run itself as a "business". While it may not literally have a profit motive, it will be forced to become functionally competitive with external services, to market itself, and to price itself competitively.

As I've written before, in order to think like a business, one critical enabler is to know fixed and variable costs, as well as cost allocations and cost sensitivities.

Thus, the segments known as IT Financial Management (ITFM), IT Business Management (ITBM) and/or Technology Business Management (TBM) will necessarily have to expand in importance.  This segment looks at the granular cost basis of infrastructure (including cloud service costs) and assembles a composite cost structure at the application and even service level. This permits IT to understand cost sources, provide decision support and forecasting for infrastructure changes, and provide a "bill of IT" showback/chargeback to internal service customers.  All critical in the new Transformed view of IT.

Too Sexy: Big Data Business Models

Careful here... I'm not speaking about Big Data infrastructure or analytics products per se. I'm referring to the business models that will soon be based on mashing-up and analyzing large quantities of structured/unstructured data to uncover new revenue opportunities.

As I recently mentioned, data-based business models will begin to complement existing product/service based businesses.  While adoption of Big Data technology is already penetrating the infrastructure market, the real opportunity is when it penetrates the lines-of-business people such as marketers, sales, and business development.

Companies that employ marketing professionals paired with "data scientists" are the ones to watch. The new business opportunities presented by the promise of cracking big data will be the driving force behind the infrastructure and technology purchases.

When will this transition happen?  I predict when companies begin to hire "Big Data product managers" and team them with BizDev and data scientists. Now that's disruptive and sexy.


Friday, May 18, 2012

Follow IT's Money: A Survey of IT Financial Management Vendors

With all the talk of Cloud Computing and the transformation of IT, conversations mostly center on technology. But core to real IT transformation is the financial transformation of IT as well.

I've recently written about IT's need for financial metrics and financial transparency (a recent blog of mine has a great set of resource pointers on this very topic) but haven't done a deep dive into the companies - and products - that enable this change. In the course of researching I've found that the market is getting increasingly crowded with players... and indicator to me that this segment is beginning to become more important to IT leaders.

At its core, IT finances are based on capturing and monitoring fixed vs. variable costs, use and utilization of assets, and then blending-in operational costs. Other more sophisticated IT finance tools then allocate those costs to projects and/or organizations across the enterprise, and some even integrate that data into other finance applications (See this Blog by Paulo Prazeres on the topic). Still other tools extend out into the public cloud, monitoring usage and cost - even making recommendations regarding other pricing options and even other cloud providers.

Overall, in my opinion, these tools should be used with one goal in mind: Running IT more like a business. To do so, you need to know your sources of fixed and variable costs, costs of alternative sourcing, per-unit service costs, and who costs are allocated to. (Note: knowing costs is a requirement, actually charging-back is not).  So, when choosing tools, consider what you might need for your basic here-and-now requirements, also consider where you want to be in a few years, and what vendors are likely to offer those features as well.

Disclaimer - I may have unintentionally omitted some vendors... if so, please let me know so I can add them in. ~ KO

Subscription Billing
This class of players provide approaches to manage online subscription services, be they recurring SaaS or perhaps even other cloud-based infrastructure services. Many have flexible policy engines to support a variety of recurring revenue models.  This group of vendors isn't necessarily core to providing IT financial transparency, but may provide important services for specific IT business models.
Aria Systems - (San Francisco, CA) SaaS based service providing subscription billing and recurring revenue management; flexible billing/metering on any metric within the data center. Multiple connectors into many types of accounting systems

Monexa -  (Vancouver, BC) A very comprehensive suite of tools for billing automation for the entire subscription lifecycle of the business from initial offer to revenue to renewals.

Zuora - (Redwood City, CA) With an impressive set of customers, they provide enterprise-class, cloud-based tools to launch and scale any subscription service, quickly and affordably.
IT Accounting, Charge-back, Show-back
This next set of companies is by far the broadest, with all vendors providing at least basic products for monitoring, allocating and (most of the time) charging-back variable IT costs. This is all a foundation for providing basic IT cost transparency.
Cloudability - (Portland, OR) The platform aggregates our customers’ cloud costs into accessible and comprehensive reports to help manage spending, reduce waste, and identify opportunities for cost savings.

CloudRows - (Israel) Provides cost control for Amazon Web Services (AWS) accounts; enables you to be sure you are operating within your IT budget, and notifies you before a budget exception is about to occur. Works by constantly monitoring AWS activity logs in the background, and producing cost analytic reports for budget tracking.

Cloudyn - (Israel) Yields a deep view of application use of cloud resources, and actionable solutions for cost optimization; continually collects utilization, consumption, availability, capacity, and cost metrics for monitored cloud resources i.e. Compute (e.g, AWS EC2), Database (e.g, AWS RDS) etc.
Costnomics - (Fremont, CA)  SaaS based tool providing IT Financial Management; Service Cost Management; IT Investment Management; IT Charge Management. The resulting value is to provide Cost Transparency, optimized IT Spend, and better business alignment.
Newvem - (Israel) Newvem tracks and analyzes cloud resources usage, especially as they sprawl, identifying sub-optimal and vulnerable use of cloud resources with regards to security, availability, utilization, cost effectiveness and more. Then, recommends what needs to be done. Newvem does this by combining powerful data analytics of cloud usage data and curating crowd-sourcing knowledge and expertise from active cloud users, the community and experts for each specific issue that arises.
Nicus Software - (Salem, VA) Provides enterprise-wide IT financial management application used for IT chargeback, cost visibility, budgeting and forecasting. Suite is a comprehensive set of chargeback functions to support many different chargeback methodologies including resource-based, subscription-based, fixed cost, distributions, allocations, pass-thru and adjustments.

Pace Applied Technology - (Warrenton, VA) Offers accounting for IT resources, user chargeback, financial analysis and reporting. Provides the means to identify resource use, determine the cost of utilization, and charge the appropriate system users and/or business activities.
uptimeCloud -  (Toronto, ON) a cloud cost monitoring service that will help you measure, monitor and manage the cost of all your cloud based infrastructure in AWS (Amazon Web Services). Provides Cloud cost monitoring, Cloud cost forecasting, and Cloud cost showback. From Uptime Software.
IT Finance and Technology Business Management
I've chosen to break this out from the section above due to the more comprehensive features that appear to be provided by the vendors. These products play a more strategic role to manage and forecast costs, evaluate overall value, and assist in IT/business decision-making.
Apptio - (Bellevue, WA) Enables IT leaders to manage the cost, quality and value of IT Services by providing deep visibility into the total cost of IT services, communicating the value of IT to the business through an interactive "Bill of IT"; strategically aligns the planning, budgeting and forecasting processes
BMC - (Houston, TX)  Business Service Management Delivers comprehensive transparency into resources and associated costs required to provide IT services to the business; process for capturing demand, as well as a means by which it can be prioritized and managed based on business goals and objectives;  Enables IT to budget and forecast expenses from the perspective of IT resources, activities, and their associated costs.
Claritia - (Fort Worth, TX) Provides solutions aimed at delivering complete transparency into the total cost of IT ownership and delivery so executives can easily optimize and forecast their budgets. Products for IT cost transparency, IT financial management and IT cost optimization.
CloudCruiser - (Roseville, CA) Provides cost visibility and optimization across heterogeneous internal/external cloud environments. Offers a comprehensive suite of applications to map and measure resource usage independent of computing environment, allocating costs based on IT-defined criteria, and providing flexible and in-depth reporting of that usage.
Comsci - (Iselin, NJ) Establishes product and unit costing metrics for benchmarking and/or chargeback; quantifies and presents the TCO for all IT applications and solution; provides actionable metrics and analytics for cost reduction opportunities and comparison to alternative solutions
Cube Billing (Dallas, TX)- a cloud-based application with two service offerings: An Internal Billing/Chargeback System and an External Billing System. ability to easily understand cost information via a cost allocation and chargeback application. We help make financial data transparent across sales, delivery, account teams, and external clients.


Other Resources & References


Tuesday, February 21, 2012

IT-as-a-Service: Resources and Pointers

IT-as-a-Service. Possibly another buzzword that may reach the peak of hype and then fade away in a millisecond. But even if so, this new concept will persist by some other name.

Unlike IaaS, PaaS, SaaS, etc. ITaaS isn't a technology model. It's a new mind-set and approach to delivering enterprise IT services - where IT operates and competes for "business" as-would a service provider.And, like a commercial SP entity, it actually tries to encourage service consumption, rather than discourage it.

This is in contrast to the stereotypical IT department that runs a bottleneck help-desk, issues locked-down equipment, charges the enterprise with a flat operating "tax", and is organized along purely technological lines.

This "new" IT thinks more like a business - not that it needs to deliver a profit per se, but that it's more customer (line-of-business) focused, understands its costs, and "competes" against alternatives that users now have outside the enterprise (a.ka. Shadow IT). The new IT thinks Self-Service provisioning, Choice Computing (BYoD), monitors variable costs and unit consumption, and is organized to deliver services, not technologies. 

ITaaS Model - Components and Pointers

When IT begins thinking about becoming an "internal" service provider, there are 3 conceptual models that need to shift - (a) how services are generated and consumed, (b) a shift in how technology is leveraged, and (c) a change in operations and organization.

Where can you find the most authoritative information about ITaaS?  I'd like to believe that EMC is leading the way with, among others, our own IT Department.  But resources abound on the topic...  I've begun to collect useful pointers from many points of view. And, from time-to-time, I will update this list with additional pointers, insights and success stories.

ITaaS Overview
Don't take my word for it. Others are beginning to write about ITaaS, its benefits, its positive impact on business agility, and about where to start your plan:
IT Leadership
If the enterprise is to undertake the ITaaS transformation, then senior IT leadership - as well as line-of-business leadership - has to be 100% behind it.  But the traditional CIO-as-Technologist model necessarily has to give way to CIO-as-businessman.  Running IT like a business means complementing technology with knowledge of how the enterprise's core business runs, IT financial management, IT organizational transformation, and even IT services-supply-chain management.

IT Financial Transparency
A key characteristic of transformation to ITaaS is the ability to understand the costs of delivering individual services, and thus be able to allocate and price them appropriately. Once variable IT costs are understood, measured, and shared with the business, IT has a higher stake in ensuring that services are delivered and priced efficiently and transparently.  And, by creating and assigning per-unit costs to services, IT can more efficiently match supply with consumption. Ultimately, improved IT financial transparency ensures more accurate decisions made both by IT and lines of business.
 Reinventing the IT Consumption Model
In a transformed IT environment, the goal is to drive an increase in service consumption by the business. The shift also includes IT viewing its business model as a profit center rather than a cost center, with more of a commercial mindset.  To accomplish this, IT must change its operating model to simplify access to services, and to facilitate delivery of services – regardless of whether they are internally or externally generated. And, if IT is to become this ‘broker’ of services, it must develop a customer-centric supply-chain approach to delivery of services that the business demands, no matter their origin.

Transforming Organization, Roles, Skills
As the IT organization transforms itself to become more like a service provider to the enterprise, internal IT skills, roles, and even the entire organizational structure will necessarily change. Traditional technology specialization areas will make way for more general, services-centric roles. Skills will shift from specialists who craft technology stacks, to generalists who manage holistic systems that produce user-centric services.  Service product managers (both in-bound and out-bound) will also be in demand to maintain value alignment with line of business users.
Success Stories
IT-as-a-Service is still new, and most companies who have embarked on the transformation are still mid-stream. But a few are making their journeys public. Here are a few I've found.
Analyst Perspectives
Industry analysts are beginning to adopt the "Run IT like a business" perspective, and even the ITaaS label. Here are some pointers (some reports require Analyst website logins/subscriptions)


    Tuesday, November 8, 2011

    A Marketing Lesson For IT

    In an earlier post of mine, "An Image Makeover for IT" I shared about a surprising meeting I'd had with our IT department -- where they were looking to learn how to better market their services within the company. I felt that this was a harbinger for the "New IT", and I think I was right...

    Then last week I was given a draft Data Sheet by EMC's IT department.Whoa, you say. A Data Sheet? Isn't IT supposed to operate down there in the bowels of the data center keeping the "lights on"?

    As you know, EMC's IT group has been progressive, from their virtualization initiative to building an internal Private Cloud for the company, to organizing for success, to marketing themselves as if they were a competitive service provider. Which is just the way more IT groups will have to think.

    Why would IT Want To Market Themselves?
    If IT is to think more "competitively" then they need to organize and act competitively, including driving demand/consumption for their services. This isn't about internal politics (validating their annual budget) but rather about driving awareness, demand, and preference for their services. Because IT's new competition is "shadow IT", the advancing commercialization of IT. More simple-to-use, aggressively priced external services are being offered to users who are accustomed to the convenience.  So IT finds itself having to do the same.

    And there is the education component too... because while the enterprise consumer might want to compare internal vs. external services purely based on price (think: AWS, DropBox, MobileMe), IT has to show that there are hidden costs to these: Risk exposure, inability to prove compliance, cost of securing data, etc. etc. So IT turning to traditional marketing devices isn't all that odd in the final analysis.

    A Data Sheet for IT...
    Back to the Data Sheet I received. The IT dept did their homework - Like all good product marketing summaries, it included components to project leadership and to drive demand:
    • Service components: In this case, it is an IaaS style service, replete with the value proposition. It defined the service, the pain-points it alleviates, and why internal EMC engineers should consider using it.
    • Overall Value: IT also did a great job of illustrating the *total value* of the service - not just economic value, but the value of agility (time-to-provision) and convenience.
    • Value of Risk Avoidance: Some marketers like to market to the paranoid... in this case, IT illustrated the risks of not using an IT-sourced service.Security, compliance, SLAs, etc.
    • Competitive comparison: In particular, I like the fact that the internal private-cloud based service full-up cost was compared to that of popular public cloud providers. It illustrated that the actual cost of external services isn't always just the bare-bones hourly cost on your credit card...
    • Availability roadmap: I also like the fact that IT set expectations with its customers. What's available now, and what new services/features will be available when.
    • And a little bit of Esprit de Corps:Yep, good old pride in what the company is doing, and how the IT department is helping drive the top-line business. 
    ...And Enabled By New Roles, New Skills
    If IT is to succeed as a "competitive" provider to the enterprise, simply publishing a Data Sheet is just one deliverable in a larger story. The organization needs to think, act, and hire like an internal service provider - and ask itself "How do successful SP's drive business demand?"

    The process begins with a cultural and leadership shift to a desire to act not as an internal (monopolistic) cost center, and more like a competitive business catering to the varying demands of its internal customers. This is a CIO-level decision, often done in partnership with LoB's and even with the CMO.

    And who executes on this new approach? What new functions need to sediment into IT? Well, it's not about technology skills anymore. Rather, IT will need to acquire traditional business and marketing skills. A few suggestions:
    • Develop In-bound and out-bound Marketing: This refers to classical Inbound product management (listens externally to customer needs, and helps determine product features, plans, pricing - and classical product marketing, helping drive external awareness, preference and demand. In both cases here, Inbound/outbound functions work as closely with internal lines-of-business to understand their needs, roadmaps and futures.
    • Initiate client "relationship management": Somewhat akin to a "sales" function, these individuals are assigned to sit closely-aligned with business users of IT, and work closely with in-bound product management. These folks detect leading indicators  of how IT can better serve the business, and look for ways to add value either with competitive technology, services or analysis.
    • Include Pricing and Financial Management: Pricing and costing of services is a shift away from tallying-up gross capital and operational expenses, with a move instead towards activity-based costing. The ability to discern the true usage-based cost of an IT service means that the organization can better align supply with demand, and make better buy-vs-build decisions. This "financial transparency" allows the CIO, CFO, and Lines-of-Business to make better overall decisions regarding using IT to support the enterprise.
    If IT is to be competitive, it has to act competitive. Marketing of IT is far from the only shift that needs to be done - and arguably, it probably follows shifts in IT technology and IT operations. But marketing IT is nonetheless an illustrative example of what is to come with a larger IT transformation initiative.