IT-as-a-Service: Models for Consumption, Operations, Technology

In a week where products surely dominate the news (it's VMworld, in case you live under a rock) I want to share some non-product insights I've made while working with EMC's IT group regarding running IT as a Service.

First, running IT as a Service doesn't mean outsourcing IT. It's about transforming corporate IT into thinking of itself as an internal service provider. Catering to internal Line-of-Business customer needs. Providing pricing and rate sheets. Offering financial transparency. Even marketing against and competing against (external) services.

IT as a Service isn't just "more virtualization"

The market is equating virtualization with cloud, and worse, equating cloud with IT Transformation. And by IT Transformation, I mean the re-casting of the IT department to operate like an internal service provider, and to act like a business. In my opinion, Cloud (use whatever definition you prefer) is really just a critical enabler for IT transformation.

In both EMC's and VMware's similar 3-step "Journey to Your Cloud" models, at first glance you'd think that the end-goal is more virtualization and more automation. But what we at EMC (and a number of customers) have found is that the end-state is where the technology revolution winds down, and the organizational evolution begins to spin-up. Just having the technology in place is necessary, but not sufficient, for a transformation of how IT operates. So, as I've said, Cloud is the means, but not the end.

Our IT department has over 79% of services virtualized and running on standard platforms. And arguably the virtualization initiative is beginning to be completed. (Aside: The new VMware 5.0 product line supports even bigger VMs and leverages CPUs with more cores - allowing for production-scale databases to now be virtualized). Manpower is now being diverted into the NEW areas needing resourcing: Business Transformation of IT, and the services packaging, marketing, and management that comes along with it. Another way of putting it:  Now that the technology is posing less of a problem to design and manage, more time is being spent working with EMC's Lines-of-Business to cater to their needs and enhance their business agility.

3 Tenets of IT Transformation

After conversations with our CIO Sanjay Mirchandani and our VP of Infrastructure, Jon Peirce, it's clear that this final phase of the "journey" is only partly comprised of technology. At the core, there are 3 broad areas of focus when transforming IT: Consumption models, Operations models, and Technology models.

• IT Consumption Models
  Essentially this describes how supply is separated from demand, and that service capacity is created just-in-time. Services are generated from an approved inventory stored in a service catalog (self-service, if you're in IT), with each service having clear pricing, SLAs etc. The pricing could be variable and  "consumption based" that is, it's not only metered, but based on both true cost as well as opportunity cost for access to the infrastructure. But expect new challenges for IT finance.  Lastly, the consumption model can also include services brokering - that is, it can include services generated from outside IT as well as those generated within/by IT. Both sources are equally valid, so long as IT still provides common governance, access, pricing and secure delivery to internal LoB customers.
  
  
• IT Operations Models
  Another non-technological shift is how IT operations changes, morphs and grows. One would expect that the operations mechanisms become more automated with less human intervention. But the real shift in operations is the *mindset* of IT, shifting from a "technology builder" to a "service delivery" organization. This fundamental shift focuses on delivering services (internal, external etc.) to the internal LoB customer to meet their needs/requests. A business mindset might also mean that IT will have to grow roles that sound like "service manager" "service product manager" and "client marketing manager" skill that IT will need eventually to acquire/develop. Which ultimately implies a good dose of Change Management will be necessary - that the IT organization, skills, roles, goals, etc. will shift over time. (a very excellent blog by Chuck Hollis dives into this topic)
  
  
• Technology Models
  Last but not least is technology - but this part of the story isn't so much  about new technology so much as it is about how technology is used... and by whom.  Necessary, but not sufficient, is the use of a virtualized, automated, and converged infrastructure (cloud componentry).  Sans jargon, I mean an infrastructure that is virtual and pooled, so that it can be composed on-the-fly as business conditions require. Since this departs from the traditional vertical stack model where IT personnel *skills* are specialized, new skills will be in demand. We'll need more IT generalists, IT staff with horizontal *services delivery* skills, not point-product skills, and with comfort around automation. Oh - and the technology *roles* and *organizations* will change too to be consistent with the new model.
  

And finally, the need for Change Management

No, I don't mean Change Management in the context of ITIL/ITSM. Rather, it's in the context of organizational design and development (think: Management Consulting jargon). With all these new models, Change Management is critical to orchestrating the *non-technical* shifts in IT.  Our own EMC IT department employs a number of these types (ex-BCG, McKinsey, etc. folks) who help our staff develop new skill-sets, morph org structures, and create new engagement models for the business owners.

IT transformation does not simply happen as a result of new technology. Rather, all of the products you buy are simply enablers to help you get to the really Hard Work. But the payoff is enormous.

Cloud Is Not The End - It's The Means.

Once you get a new tool, you ask: What can I build that I couldn't before?

Cloud computing, at its core, is an operational transformation - mostly focused on infrastructure. If you're an enterprise IT shop, you're right to think that such a change will (ultimately) simplify your world. But simplification, faster time-to-provision, and on-demand capacity aren't the end points of IT transformation. They are the new tools that are the Means to a more aspirational end.

What every business craves is the ability to respond to new ideas (innovation) and to market pressures (competitive, consumers) faster and more completely - Agility.  A recent McKinsey study shows that the top 3 metrics of "agility" were centered on revenue growth rather than cost reduction - signalling that companies value growth over expense-cutting. And IT is the chief approach to enabling revenue growth for many  enterprises.

But merely having faster infrastructure is necessary but not sufficient for an enterprise to achieve real business agility.

My thesis is that Cloud computing - whether Private cloud, or a mix of Private/Public (Hybrid) - is really the means to a bigger end: Enabling IT to serve and enable the business, rather than simply respond to technology requests. Think of IT as an internal Service Provider (ITaaS) - developing, marketing, pricing and refining technology to meet the specific needs of Line-of-Business users.  Forrester research even makes the valid observation that IT (information technology) needs to undergo the conceptual transition to BT (business technology).

The Goal is IT (I'll continue to use the term for now) that is structured and goaled to serve the business. And that is a whole lot more than just providing a virtualized cloud infrastructure.  

A great overview of this ITaaS restructure was recently written in Chuck's Blog, where he outlines the skill, organizational, and financial transitions that must necessarily accompany the infrastructure transformation.

In his blog, Chuck cites an oft-used slide by John Peirce, EMC's VP of IT Infrastructure and Services.

This is a great analogy to how IT was traditionally (and will be) built and operated. In effect, IT will continue to progress toward an on-demand, if not cloud-like resource that business can tap into.

But consider the corresponding change to how the IT organization itself will be built, run, and operated. In fact, consider how IT skillsets will need to change, and how it will need to partner with the lines-of-business to ensure that they're equipped with the right technology at the right time.  In fact, if the "new" IT does its job right, it will even work with the business owner to understand their business better, and suggest new tools (think Big Data analytics, etc.) that might add even more value.


So I then got to thinking, we need a companion slide: That ITaaS transformation isn't about infrastructure only... it includes how IT works with the business as a Service Provider - at times actually competing for business against "Shadow IT" from external sources. There are for basic facets to think about this transition

• From "monopoly" to "market": Rather than IT being "the only game in town", Shadow IT is causing indirect competition - where IT will have to offer and price services in a manner (and speed) that will cause internal customers to want to purchase from them.
• From vertical to horizontal: where the organization shifts from stack-focused to service-focused. Literally, the orgcharts and skills-sets change over time. Chuck also does a great job of explaining EMC-IT's transformation over time)
• From "enterprise tax" to consumerized pricing:  Rather than the fixed-price (frequently capital-expense) based pricing for standing-up a stack, IT will shift to a variable-priced model based on consumer needs and competitive pricing
• From IT as a cost center to IT as a center of value, where IT teams with the LoB to create and offer services that move the business - whose job it is to generate revenue - forward.

These 4 areas don't necessarily assume there is a cloud infrastructure in place - and indeed, don't require one. But to get the value out of a cloud infrastructure, you do require to implement them.

The desired end-game is for the enterprise to be more competitive, responsive, and agile. Cloud is an enabler - but don't overlook what needs to be paired with technology to get the full effect.

In future Blogs I will plan to go deeper into each area, exploring best practices, as well as how our own EMC IT department is faring on their own journey.


More Info

• IT Operations in a Cloudy World (James Urquhart)
• From Silos to Services (Chuck Hollis)
• EMC-IT on the Cloud Journey

IT-as-a-Service: IT Competing for Business vs. “Shadow IT”

As I begin to sink my teeth into the realities of IT Transformation and the operational change to IT-as-a-Service (ITaaS), it’s becoming shockingly clear that adoption challenges aren't technology issues.

Although debate continues over what cloud computing means, clarity is beginning to take shape as public/commodity cloud, private cloud, and hybrid cloud models evolve.

So if we now know how to build clouds, where does that leave our IT operations? What of our IT organization, skill-sets and CIO’s? How does the technology map to enable lines of business? How will infrastructure change the game for the enterprise?

IMHO, these are the questions we still must answer in order for “cloud” to be the next successful model for IT.

Enter IT-as-a-Service

Much the way that the internal combustion engine was the technology transformation catalyst for new forms of transportation and resulting commerce, cloud technology is transforming how information infrastructure impacts organizations and business models.  The Technology is the enabler of The Services.   But the automobile alone didn’t alter the landscape. It needed infrastructure, customization, and even rules for safe operation. Same goes for IT technology.

EMC’s own IT department, led significantly by Jon Peirce, VP of EMC’s IT and Private Cloud Infrastructure & Services, thinks of the infrastructure relationship this way:

IT as a Service is a delivery model leverages cloud infrastructure to enable business users to be more agile through readily-consumable IT services that have transparent prices and service levels.  While it is built on technology, ITaaS isn’t a technology.  It is an operational model that transforms our traditional approach to IT into a services-based world.

Good timing.  Because there is another trend afoot:  The emerging external set of services – from public cloud service providers – to attempt to compete for the same attention. And dollars.

Competing with “Shadow IT”

John observes that IT’s days as a “monopoly” on technology are gone because

• Users are global, mobile and social, with impatience for having information at their fingertips.  They’ll instantly use any alternative if it’s accessible. IT needs to plan for this – or have a competitive alternative
• Access:  iPads and other edge devices are pervasive. The days of “IT-approved” access devices (the corporate-issued laptop) are numbered. Users will demand their own type/style of devices.
• Public clouds are clamoring for developer’s attention and $.  Essentially developer with a credit card has the potential to release corporate IP to the outside.  IT needs a model to deal with this… and an attractive alternative.
• SaaS alternatives are courting business managers.   And worse, IT isn’t necessarily informed when business managers use these services. Governance and access models need to be created, since there will always be external SaaS options.

So, as users and LoB’s turn outside the company, this “Shadow IT” phenomenon arises : the use of external IT resources.  Appealing because of their on-demand nature, yet dangerous because of their security porosity, lack of usage governance, and lack of financial transparency/control.

So IT finds itself in a competitive position vs. Shadow IT. 

John then asks a question this way: If our internal line-of-business customers had a choice, would they use us (Enterprise IT)?  When IT was the only game in town, it didn’t matter what they charged or how good the service was because LoB’s had no choice.  But now there is. So we have an unavoidable imperative to be more competitive.

Unavoidable Implications for the New IT

As I think about IT Transformation to IT-as-a-Service-for-the-business, there are two implications that are inevitable and unavoidable.

• IT cannot resist this transformation.  It will be forced upon them because of the use of, and competition from, Shadow IT - as well as from the increased demands from LoB.  So IT needs to be better-acquainted with the competition, their services, their SLA’s, their pricing.  Like any competitive situation, IT needs to do *external* benchmarking in all of these areas.   Because if they don’t their CFO will do it for them.
  
• IT needs to think competitively.  IT orgs need to think in terms of winning the internal business by actively selling and creating demand for products (services). This is opposite from how they’ve been conditioned to behave – so IT has to develop basic business skills and even organizations to operate in a competitive business environment. These include product marketing, product management, financial management, and even competitive analysis and sales skills.

This is an exciting time for IT. And while most are focusing on the technology, I urge you to look at the business and operational aspects of this change.  While any change can be scary at first, it also can provide a brand new set of competitive opportunities for the business.



For more info:

• Is Shadow IT or Rogue IT Fueling the Cloud? (Richard Ingram)
• Cloud DevOps and Shadow IT (James Urquhart)
• Cloud: The Ultimate Shadow IT (HP Grounded in the Cloud) 
• Organizing from Silos to Services (Chuck Hollis)
• The Cloud Concierge:  The new CIO - Creating IT as a Platform (Brian Gracely)

A Morning With State Government... Talking IT Transformation

Think your enterprise is challenged as it struggles to move toward IT-as-a-Service and a shared IT services model?   It seems that state and local governments are also trailblazing as well.

Earlier this week I had the honor of spending a morning in EMC's Executive Briefing Center with various members of a state legislature - and members of their IT staff - looking to learn more about their investment in a Vblock, and how it could enable a shared services infrastructure that could save them $ millions while upping services to citizenry.

This was not a technical crowd in the least. These were state representatives with constituencies who cared about things like better services and lower-cost government. But they wanted to know that they'd chosen the right horse, the right technology.

But what was fascinating was nobody wanted to drill into the technology... or even really get educated about it.  Rather, they were simply acutely aware of the opportunity to save money while upping service.  They knew that government agency data centers were siloed. They realized how long it took to deliver new IT services.  They acknowledged how un-integrated inter-departmental state data was. But they all wanted to be part of the solution, to get the rest of the legislature to a point of appreciating the opportunity before them.

The notes I took might sound familiar:

• Where do we start?  VDI sounds like a shoe-in. But after that, which departments, offices and data centers should become part of the shared-services model? [What workload migration and ROI model should they adopt?]
• If we do end up saving money, there's the risk that the savings will be taken away from us - how do we ensure it's plowed-back into innovating and creating higher-level services? [How to meter IT costs? What higher-level services could be proposed to the lines-of-business? How to facilitate IT educating departmental management in what new opportunities are available?]
• Every office and department feels like they have a "special IT need" that only their own data center can provide. Is that really true? [How to illustrate the versatility of a cloud environment? How to guarantee differentiated SLA's?]
• With a shared infrastructure, how do we ensure that sensitive information (e.g. the Highway Patrol department) is kept secure from prying eyes of other parts of IT... and indeed, other parts of the state government? [How to illustrate multi-tenancy? security? auditability?]
• How can we ultimately simplify the government experience for citizens? e.g. Reduce paperwork for driver's licensing? Work permitting? Unemployment applications?  [How to go about merging and analyzing structured and semi-structured data from diverse sources?]

While this was not the forum to solve the problems, by the end of the morning we were all happy to have the issues laid-out on the table for discussion.  And to have educated the policy-makers and users that they can in fact operate their state government IT as a 21st century infrastructure.

The other good news is that this state is not the first to make this transition. A very good initial resource, for example, is from the Center for Digital Government - their paper on IT-as-a-Service for State and Local Government which gives a number of very good examples of state governments taking the right steps for the right rationales.   There is also an excellent paper published by the US Department of the Interior and their IT Transformation plan.

Stay tuned on more of what IT Transformation makes possible, and how to migrate to a service-based IT organization.... ITaaS.

Real-World Financial Services Cloud

Cloud computing has been made very real today.

As I subtly alluded-to in March, The New York Stock Exchange (NYSE Euronext) today launched their Capital Markets Community Platform (CMCP) along with partners EMC and VMware. It's essentially a high-performance, low-latency, special-purpose cloud IaaS, replete with customers and roadmap. Register Coverage  FIN Alternatives Coverage

This is a very notable event for a few reasons:

• Cloud is not a commodity: Unlike general-purpose public clouds, NYSE has constructed a high-performance, low-latency infrastructure to meet the specific needs of trading firms. From these perspectives alone, use of a public cloud (AMZN, RAX, etc.) would never meet the stringent performance requirements. My belief is that we'll see even more of these industry-specific clouds arise. Differentiators will likely vary based on needs for performance, privacy, security, scale, etc.
• Cloud is highly reliable:  A lingering question has been whether the cloud - and associated automation controls - was reliable enough for mission-critical applications. NYSE is no stranger to Financial-Markets levels of reliability, and has clearly taken great pains to ensure that their experience carries-over to the CMCP.
• Cloud is highly secure: Ditto to above. the CMCP is accessible to customers only via a highly-secure network and only to pre-validated users.
• Cloud enables new forms of business: For me, this is the most exciting aspect. NYSE's cloud now allows small firms (picture 3 hedge fund managers and their dog in a garage) to take advantage of enterprise-grade hardware and data... say to test and run new trading algorithms. Access to resources such as this would have been far outside of the reaches of the small firm.
• The Cloud + Big Data story is real: What's also nifty about NYSE's implementation plan is that it allows users to create DB's on demand, and will allow users to access massive data in the form of market play-backs.  This DBaaS will obviate the need for tenants to replicate TB or even PB of data as they test algorithms against historic market data.

NYSE's partnered with EMC and VMware to construct the cloud, and VMW has also posted an excellent Blog on the topic. A few excerpts:

"So, why is this better, and why is NYSE Technologies the right organization to deliver? For hedge funds and other buy-side firms, their value isn't in integrating compute, storage, networks and security -- it's in analytics, trading strategies, algorithms, application strategies and other proprietary expertise. The NYSE service means those IT organizations no longer have to struggle with integrating data dumps and feeds into their infrastructure and operations. Trade execution speed can be critical, so physical location and proximity to the market matters. NYSE's experience in operating large scale, mission-critical VMware-based infrastructure -- the NYSE and Euronext exchanges -- is unquestionable....

"...NYSE represents an alternative cloud future: one that contains a vibrant ecosystem of clouds, both internal IT departments and external cloud service providers, with unique understanding and focus on customer needs, married with the ability to deliver through scalable, on-demand and trustworthy IT services. What internal IT organizations and cloud providers like NYSE share is a rejection of the concept of an inflexible cloud monoculture. Instead, they choose to build high performance, secure and scalable infrastructure because it meets critical business needs. They obsessively focus on value delivered to the customer and never confuse that with cost of service.

And that's it. Cloud is now about Value, even more than it has ever been about cost reduction.

Hosting/Cloud Index: Update

Back in December, 2009, I proposed an index of hosting and cloud providers, and posited that these sample portfolios would be an excellent gauge of the market's perception of the state of the business. I also made an update in December of 2010.

I thought I'd make an update again, and review the state of the business.  Also, it would seem that others are adopting the same idea, as I was recently reminded by Software Advice.  Good to see that these types of metrics are being adopted...hopefully they cut through some of the vendor hype.

Now, on with the statistics.

First, I created an index of a superset of publicly-traded hosting providers, some of whom also provide cloud computing resources. My only litmus test was that these were *not* SaaS providers, and that they provided hosting/IaaS services as their primary business. The performance was compared against the NASDAQ composite, and has been quite positive. The large increase in index price was primarily due to Verizon's acquisition of Terremark for a hefty premium.

Next, I took a subset of the providers who solely claimed to provide cloud-computing services.

As I had suspected, this index has vastly out-performed the NASDAQ - my supposition being that the market is placing a higher premium on any business conducting "cloud"-related business. 

The market would appear to still be going strong, and I'll continue to update progress every few months.

It's All Just Data to Me

Now that I’ve been with EMC for a few months, my relationship to storage, computing, and networking has once again shifted. And, in the context of the cloud computing operations model, my relationship to the physical location of data - and processing of that data - has shifted too.

My new perspective starts with Computer Science 101: Where, at its heart, computing is simply data and instructions (stored on similar media) which are combined on a device (CPU) and produce an output.

Since computing began, this model was consistent – but as the data and instructions grew in size and abstraction, the media changed to the point where instructions (code) and data, were each stored in physically separate locations.

Until recently the data and instructions would be transported (over the network) to individual physical CPUs (with their own sets of OS) where they would be combined and executed. And then, the resulting data generally was transported back to its place of residence.

Servers are Just Bits

Now, enter the Virtual Machine.  At the heart of it, it's simply another file (e.g. VMDK) – in other words, just more data.

So in the modern virtualized data center, what we have – at the extreme – is a model where not only the data and instructions are bits… but the servers are bits too. All they require are physical CPUs to execute.

In the ‘traditional’ model, the data and instructions were brought to where the physical servers and O/S were.  But today, with pervasive farms of generic physical servers, we have the situation where *either* the data bits can be brought to the server, or the server bits can be brought to the data.

Some of the implications you’ve probably already thought of – such as vMotion of a VM from one physical server to another, or using a DRS-style control to re-locate VMs from failed physical compute resources elsewhere.

But consider another situation that’s happening with increasing frequency: The need to work with “Big Data” – such as running analytics on unstructured bits that could be on the Terabyte to Petabyte scale.  Here is a case where it makes sense to send Mohamed to the mountain than the other way around… To literally re-locate the servers (which are, after all just data themselves) closer to, or co-incident with, the data.

Or, consider a “follow-the-moon” strategy for data center energy efficiency: where the most energy-efficient (and least expensive) physical servers are chosen to handle workloads. Once again, the data (which includes the virtual server, data and instructions) is simply transported to the optimal set of physical processing resources.

Cloud Infrastructure and Data Management

From where I sit, the importance of data storage, data management and data portability suddenly becomes paramount. It can reasonably be argued that physical servers are now merely execution platforms for the VM data bits, and that the network is simply becoming flatter and fatter.

So the future data center and cloud model might be thought about as a data management problem. Where and how to locate bits, back-up bits, scale bits, operate on bits.   True, this is a data-centric view of the world. But it's also a healthy perspective from which to view the renewed importance of data and its dynamics, versus the other more static components of the data center.