How to Use Cloud Computing to Transform into a Service-Centric IT Organization

By Keith Jahn  |  Posted 2010-03-29

How to Use Cloud Computing to Transform into a Service-Centric IT Organization

In the childhood story of Chicken Little, a frantic fowl travels on a seemingly life-or-death journey to warn the king that the sky is falling. Along the way, she garners support from like-minded friends who take up the cause and join the journey to inform the king. The group eventually runs into a tricky fox who convinces them that he has a better path, one that will enable them to reach their destination much more quickly. There are two popular ending scenarios:

Scenario No. 1: The animals are eaten by the fox and never see the king-espousing the age-old lesson of "Don't believe everything you hear."

Scenario No. 2: The king's hunting dogs intervene and dispatch the fox, enabling the king to hear the story-teaching a lesson about courage and perseverance in pursuing goals.

This story explores a scenario that IT organizations could face in the future, brought about by cloud computing. It's a scenario that forces radical change for IT as we know it-perhaps even eliminating the function altogether. If IT organizations are eliminated, this will quite obviously have a significant impact on the entire technology supply chain.

The natural rhythm in IT is to view cloud as a technology disruption and assess it from a delivery orientation: how can this new technology enable us to deliver solutions better, faster and cheaper? An equally important (but often ignored) dimension to pay attention to is how cloud services are consumed: these services are ready to run, self-sourced, available anywhere, subscription-based or pay-as-you-go.

As cloud services mature and grow, new capabilities will emerge. Businesses will be able to solve new problems that weren't addressable before. In addition, they will be able to solve old problems quicker, cheaper and with higher quality results.

Because of this, cloud services will usher in new business models, which in turn will force IT to reinvent itself in order to remain relevant to the business. This means that IT must move away from its exclusive focus on delivery and management of assets, and move toward creating a world-class supply chain for managing supply and demand of business services.

In this scenario, cloud services actually become a forcing function-forcing IT to transform. CIOs that ignore this fact and fail to take transformative measures are likely to see their role change from innovation leader to CMO (Chief Maintenance Officer), responsible for maintaining legacy systems and services sourced by the business.

Parsing the Cloud to See the Right Patterns

Parsing the cloud to see the right patterns

News flash: the cloud isn't new. It's been around for years now, starting with what many now refer to as the "Internet era." Remember when IT people used to talk about what was being hosted "in the cloud"? This was the first generation/version of cloud. Cloud 1.0 was an enabler that originated in the enterprise. Commercial use of the Internet as a trusted platform revolutionized supply chain management (SCM) processes and eventually became mainstream-fundamentally changing the IT architectural landscape.

As this model evolved, it gave birth to thousands of consumer-class services. These services-using next-generation Internet technologies on the front end and massive scale architectures on the back end-delivered low-cost, good enough services to economic buyers. This ushered in a more advanced generation or version of cloud: Cloud 2.0.

Cloud 2.0 and beyond

The current generation of cloud is driven by the consumer experiences that blossomed from Cloud 1.0 living rooms. Internet-based shopping, search and countless other services have brought about a new economic model and introduced new technologies. Services can be self-sourced-from anywhere and from virtually any device-and delivered immediately. Infrastructure and applications can be sourced as services in an on-demand manner.

Most of the attention around cloud services today is focused on the new techniques and sourcing alternatives for IT capabilities: IT as a Service. Using standardized, highly virtualized infrastructure and applications, IT can drive higher degrees of automation and consolidation, thus reducing the cost of maintaining existing solutions and delivering new ones.

While many companies are wrestling with the technology transitions required to move from cloud 1.0 and 2.0, the volume of services in the commercial cloud marketplace is increasing, propagation of data into the cloud is occurring, and Web 3.0/semantic Web technology is maturing. And, because of this, we are starting to see the next generation of cloud materialize: Cloud 3.0.

Cloud 3.0 will enable access to information through services set in the context of the consumer experience. This is significantly different; it means that processes can be broken into smaller pieces and automated through a collection of services, woven together with access to massive amounts of data. It eliminates the need for large-scale, complex applications that are built around monolithic processes. Changes can be accomplished by refactoring service models, and integration achieved by subscribing to new data feeds. This will create new connections, new capabilities and new innovations surpassing those of today.

IT Must Reinvent Itself

IT must reinvent itself

The business just wants the services. They want the right technology-enabled services that help them get their job done. But here's the problem: IT is typically organized around the various technology domains taking in new work via project requests and moving it through a Plan-Build-Run life cycle.

This delivery-oriented, technology-centric approach to IT has inherent latency built into the model, which has in turn created increasing tension with the business it serves.

IT must reinvent itself in such a way that it becomes the central service-sourcing control point for the enterprise or realize that the business will source them on their own. Doing so will ensure that IT can maintain the required service levels and integrations. In order to get there, changes to behavior, cultural norms and organizational models are required.

There are legitimate barriers that stand in the way of mainstream cloud 3.0 acceptance (security, reliability, etc) in the business-but time and maturity have a way of resolving issues and breaking down barriers.

The sky is falling indeed!

Cloud Forces a Service-Centric IT Organization

Cloud forces a service-centric IT organization

In order to survive, IT must transform itself from a technology-centric organization (providing and managing assets) into a service-centric organization. Service-centric represents an advanced state of maturity for the IT function, enabling it to operate as a business function-a service provider, structured around a set of products that customers value and are therefore willing to pay for.

These services come into being as part of the business strategy and are organized into a service portfolio. The differentiator between this model and the capability-centric model is that the deliverable is a service that is procured as a unit through a catalog and for which the components (and sources of the components) are irrelevant to the buyer. Contrast this with the capability-centric model where the deliverables are generally a collection of technology assets that are often visible to the economic buyer and delivered through a project-oriented life cycle.

In a service-centric function, the organizing principle is the service. This means that everything is structured around the sourcing, delivery and management of services. Employing a structure similar to a supply chain model, the work associated with the services can be completed using a configure-to-order approach where standard components are used (sourced internally or externally) to quickly fulfill a service request.

The service-centric model will eliminate some existing roles and generate new ones within the IT organization. What emerges is a more nimble, agile IT organization, one that can quickly respond to changing business needs and can compete head-on with commercial providers in the cloud service marketplace.

Cloud 3.0 as a Business Enabler

Cloud 3.0 as a business enabler

Cloud 3.0 is an enabler for business-it enables business users to source services that meet their needs quickly, at the right price, at a good enough service level, and on their own without the help of an IT organization. It will usher in innovations and breakthroughs at a pace and scope not seen before. It will introduce new threats in existing markets for companies and open new markets for others. Therefore, cloud is more of a business revolution than a technology evolution.

It would be unwise for IT organizations to focus exclusively on positioning themselves to adopt and implement cloud technology. Instead, an effective approach would be to focus on transforming the IT organization into a service-centric model, one that is able to source, integrate and manage services with world-class efficiency.

As with the original Chicken Little story, there are two possible endings:

Scenario No. 1: IT will ignore the fact that its role is being threatened and follow the fox to its den by continuing to focus on the delivery aspects of cloud. Even those that see virtualization, automation and/or private cloud as the end-state are at risk. As a result, many CIOs will be eaten alive, leaving their organizations to spend an ever shrinking number of maintenance funds while the business invests in innovation on its own.

Scenario No. 2: IT is rescued by the king's hounds in the form of transformation to the service-centric organization model and becomes the single sourcing control point for services in the enterprise. This will lay a strong foundation for embracing the next wave of cloud (or other) disruptions, putting IT in the driver's seat for fostering business innovation.

Keith Jahn is a Director in the office of the CTO for HP Software and Solutions. During his career as an IT practitioner, architect and strategist, Keith has successfully designed and implemented technology, automation, and service management strategies. He has also led several large-scale transformation initiatives. Keith has a passion for IT-led business effectiveness and has held leadership roles in IT and commercial outsourcing at several Fortune 500 corporations. He can be reached at

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