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The pros and cons of treating internal IT like a business

Aligning IT with the business has become a CIO mantra – but now digitisation has pushed IT to the top of the business agenda

An initiative called IT4IT, from industry consortium The Open Group, aims to establish a framework to enable CIOs to run the IT department like a business, servicing other parts of the business.

IT as an internal service provider looks attractive and IT4IT's programme represents one of several frameworks that helps IT become more business-focused. It joins others – such as Cobit (Control Objectives for Information and Related Technology) and ITIL (IT infrastructure library) – in attempting to link the work IT does with business outcomes.

From a purely IT management perspective, the CIO needs a grasp of how much effort, in man hours of work and the cost of materials, is required to complete a unit of work. But often, the metrics IT uses bear little resemblance to something that matters to the business. In effect, the cost and people resourcing required to complete the work should corelate with the business benefit.

Dave Lounsbury, chief technical officer and vice-president of services at The Open Group, said: "IT has a lot of material on how you solve particular problems. What it lacks is a model of how to look at IT as a business.” Running IT like a business means the IT department needs to become a business asset. “In a modern enterprise you have assets and value streams." IT needs to find its competitive advantage, he added.

This competitive advantage, to quote the economist Michael Porter, can either be achieved through operational efficiency or by differentiation.

Organisations using IT4IT include oil company Shell. Shell uses IT4IT to improve interoperability in a multi-supplier environment by providing greater control through insights into the cost, value, risk and performance throughout the IT lifecycle.

Speaking last year when the Open Group originally announced IT4IT, Scott Wahl, CIO at Shell global functions and IT4IT decision executive, said: "In our industry, control of the end-to-end IT value chain is mandatory."

However, understanding value is not without risk. Brinley Platts, founder and chairman of CIO Development, said: "The IT department as a profit centre became very voguish for a while in the market-test era of the 1990s, before simpler solutions like outsourcing and offshoring became widespread."

While it may be a great idea on paper, Platts said: "IT as a profit centre within a host organisation either fails or becomes transitory because its leaders want the right and make the argument that they would be even more cost-effective if they could take in business from outside."

Platts argues that if a product or service has a price then it becomes transparent and has to be justifiable whether or not the buyer has any real choice in the purchase decision. This immediately exerts a downwards pressure on pricing and forces the supplier to demonstrate competitiveness, he said. "CEOs may love this but CFOs know that the problem is not usually transparent prices – it is transparent costs and, without a major effort around activity costing, it is often impossible to know what things truly cost."

A service catalogue can go some way to make IT more transparent. An extensive service catalogue can work like an enterprise app store, holding all the IT products and services available to the business.

But as Platts points out, big costs are bound up in infrastructure services that have to be shared in some arbitrary way. This is why the cost of a user’s company email address can amount to £1,500, which makes no sense to a business person used to buying the equivalent IT service for significantly less.

Read more about IT business alignment

Breaking free in corporate IT

Knowing the true cost of these products and services could actually undermine the competiveness of IT, especially given that people in the business are already usingf external service providers and software as a service (SaaS).

The challenge is that IT builds and maintains complex legacy IT infrastructure, often deployed several years ago. The systems were commissioned for an era very different to the way the business now needs to operate. According to analyst Forrester, CIOs must switch to crafting architectures and systems that deliver business agility, even at the expense of efficiency.

Speaking to Computer Weekly during the OpenStack Summit in Tokyo, John Engates, CTO, Rackspace, said: "Every business needs to figure out what it means to be digital, to compete with startups. But 'new' legacy IT is holding them back." His so-called "new legacy" are technologies such as virtual machines; these can replace physical hardware but they do not funamentally alter the underlying IT architecture.

OpenStack's raison d'être is to offer IT a way to deploy internal cloud that mimics the flexibility of a public cloud such as AWS. Business users pay for what they use, just as with public infrastructure as a service (IaaS).

Next, IT could look at building its own internal platform as a service (PaaS) on top of this private cloud. Application programming interface (API) management tools make this possible by enabling the IT department to expose internal systems, which can then be accessed by developers working for other business units. Sumit Sharma, chief API evangelist at API management company Mulesoft, said: “IT 'productises' assets and you start to see a developer culture.”

As an example, he said IT could create APIs onto the systems of records IT systems, such as API access to a mainframe system. The API becomes a re-usable component for a core business process.

A private cloud infrastructure with internal IaaS and PaaS could offer a foundation on which IT can operate more like a business.

Misalignment

IT business alignment is as old as IT. An IT service desk could be deemed aligned with the business if it provides a suite of functions agreed with the business and an associated service level. It represents an IT-centric view of IT business alignment. True alignment requires a change in mindset, from the top down.

While business leaders want to be seen publicly as innovators, Gartner distinguished analyst, Steve Prentice, argues that they secretly want to maintain the status quo. "People at the top don’t want to knock away the underpinnings." This argument equally applies to IT.  For IT to become a business unit there needs to be an appetite from the CIO down to tear up the rule book, rethink the management of IT and then start from scratch on a new IT infrastructure to support this strategy.

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I agree with the challenges of attempting to treat internal IT. The development of a clear strategic plan to chargeback the cost of internal IT resources assigned to projects or for work done to resolve issues can become a nightmare for the entire organization. The chargeback cost has to be competitive enough for the IT department, but not ostentatious that the business suffers.
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Good article and thank you.

I really like the Platt reference - “The IT department as a profit centre became very voguish for a while in the market-test era of the 1990s” as I remember this well and I recall IT departments running as profit centres who were killing their associated businesses due to extortionate cost.

I think there is a fundamental mind shift required. IT should not run “like” a business. It should run “as the business” and at last digitisation gives the opportunity for this to happen. IT and the business as one, operating to be the most efficient and effective to drive business success.

We really need to break down these barriers that still exist between IT and the business. And as someone who has worked in IT all my working career it saddens me to say that I still feel much of this is down to IT and the constant “techno speak” that we use. In my opinion this is where IT4IT has a really strong play. Simply using the vocabulary of IT as a Value Chain and the supporting Value Streams at last starts to move us away from technology “speak”.

I have even found that we can simplify some of the IT4IT Language when we speak to the business (but again this is testament to the IT4IT reference architecture and the great work that has been done to define the value streams). For example
1. We want to fix something before you know its broken or worst case when you tell us we do it quickly and restore the full service you had (IT4IT calls it Detect to Correct)
2. We want to provide you goods and services that give you the complete service you need when you order from our catalogue (IT4IT calls it Request to Fulfill)
3. You want something new and available for your use (IT4IT calls it Requirements to Deploy)
4. Your business is changing and we want to ensure IT continues to support you and provide the appropriate services (IT4IT calls it Strategy to Portfolio)

Just by a simple use of this style of vocabulary (and no Techno speak) you would be amazed how positively the business will respond and as mentioned this is not running IT “as a business”, it is simply acknowledging IT is part of the “business” and not just a support function.

I have to say I am a big fan of IT4IT (and have a vested interest as its my job) and I am yet to find an environment where it can’t be deployed and where benefits cannot be realised through its use.

Well done the OpenGroup and thank you for the article!
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