Cloudy Organizations
A few weeks back we talked about the impact of cloud computing on IT innovation, and argued that focused innovation (on the right parts of your business where it matters) remains absolutely essential. Cloud, as a delivery model, really doesn’t change things much — it simply provides another, perhaps easier, way to offload non-core IT activities.
So what do cloud and IT innovation have to do with organizational design? Let’s first explore the types of models.
When it comes to enterprise IT organizational models, they typically fall into three broad categories.
- The Independent Service Line model (ISL), where IT is aligned directly with the business function to ensure it is highly responsive (if not proactively) with respect to the needs of the business.
- The Leveraged Model (LM), where IT is centrally controlled and optimized in silos.
- The Hybrid Model (HM), which encompasses aspects of both models.
The ISL approach provides the best support for the business, but inevitably causes duplication and is therefore more expensive. The LM is extremely efficient, but tends to score poorly with business leaders—”IT takes too long, doesn’t listen to my requirements”. The HM provides the best of both worlds, but unfortunately there’s no universal formula for drawing the line on what should be a leveraged service or provided in an independent service line.
Now we add the cloud variable and make things a bit more complicated. Care to make a wager on which model is most likely to adopt cloud? The prize goes to those who answered ISL, but let’s explore the reasons why. If an IT function is truly close to the business, they aren’t going to be threatened by something like cloud. In fact, they will probably explore it proactively. In typical ISL structures the variable compensation (bonus) of IT is largely tied to the success of their business unit. What do you think will make a bigger impact on that bonus; a 5% decrease in operating costs due to some optimization effort, or a 50+% decrease in provisioning time for new resources in support of business initiatives based on Cloud adoption? Hopefully this example also helps clarify why organizations with a leveraged model will likely resist a move to the cloud.
As stated earlier, an ISL model is more expensive so how do you balance the need for business performance with the need for IT efficiency? It comes back to same concepts we explored when mulling IT innovation … knowing the difference between parts of your business that are core and identifying those that are commodities. Areas that fall into the commodity bucket should be supported in a LM, while those that determine the success of your business deserve the focused support of an ISL approach.
For the right balance of business intimacy and cost efficiency, the hybrid model should become the norm for companies adopting cloud, but we would be remiss if we didn’t point out some of the shared functions. Some are easy to identify, such as testing and quality assurance, or monitoring and the “command center” for IT operations. However, the dynamic nature of cloud technologies also requires new roles that belong in shared groups. For instance, a “policy definer” is a crucial role for capturing the business service level agreements (SLAs) for a workload (under what conditions does this workload get more or less resources, what are the rules for where this workload can run, what is the priority for recovery, etc). Another role is that of deployment and activation: the work to fully automate the provision of the workload on physical resources as well as future patches/updates. Both of these roles are not found in most organizations today, and given the specialized skills should be managed in a shared pool.
Don’t fall into the trap of treating cloud like simply a new technology. Cloud offers many benefits to organizations prepared to embrace it…and pitfalls for those that are ill equipped. If you’re ready to take the next step give us a call.
Category: Cloud Computing, IT Management
About the Author
Jim is a co-Founder and the Chief Technology Officer of Adaptivity. In his CTO capacity Jim interacts with prospects, clients, and key technology providers to evolve capabilities and partnerships that enable Adaptivity to offer its comprehensive solutions for Cloud, Application Optimization, and Data Center Transformation. In addition, he engages with key clients to ensure successful leverage of Adaptivity's Blueprint4IT portfolio. In his prior role Jim was the SVP and Architecture & Strategy Executive for the infrastructure organization at Bank of America, where he drove legacy infrastructure transformation initiatives across 40+ data centers. Previous to that he was the Head of Utility Product Management, where he drove the design, services, and offerings for SOA and Utility Computing for Wachovia's Corporate and Investment Bank. Jim has also led leading edge consulting practices at IBM Global Services and Deloitte Consulting.View Author Profile
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Jim, you raised very important points about intent here. What is the purpose of this new deployment model to the Business Area affected. Once that concept is understood as a principle, then intelligent assessment can be made. Understanding how important an application is to the business area is a good start, understanding the expectations of the business regarding that application is even more critical. As an example, if that Business Area is client facing, and depends upon being responsive to market changes, possibly through changes in business rules, it is likely strategic in nature and might not be best for a a cloud deployment. That is why we emphasize Understanding a Business’s KPI’s such as Cost, Market Agility, etc. We also ask the client to consider the degree of importance that app has to a set of business areas, so that a good decision can be made about cloud.