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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
- You’re the CIO, the meeting is tomorrow and your CEO is asking impossible questions. Who can you call?
- The position of CIO is changing and there are more people in the role from less technical backgrounds than in the past.
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.
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.