In the late 1980s I was at an industry function, dining with a tableful of CIOs, and talking about various IT-related trends when I was shocked to be complemented on the breadth of my knowledge. While my grasp of key trends driving the industry was relatively broad (easy to do when a big portion of your day is spent on staying on top of news and trends), the depth of my understanding was virtually nonexistent, but the CIO said with his responsibilities, even a surface awareness of everything going on was impossible.
Fast forward 25 years later and the complexity of IT has pretty much paralleled Moore’s Law, what with virtualization, Big Data, mobility, the Internet of Everything, and consumerization. Technology and its applications are getting more complicated, faster, their importance is increasing exponentially, and the resources to deal with them are lagging further and further behind.
Back then, I thought offloading tactical IT initiatives, where appropriate, just made sense. If it wasn’t strategic, why waste time and resources when you could let somebody else do it as well, if not better, generally for lower costs? In 2004 noted management consultant Peter Drucker offered the following words of wisdom: “Do what you do best and outsource the rest!”
Today, it’s even truer. Managed services — IT as a Service — is no longer simply an attractive option, it’s becoming an essential element of a CIO’s toolkit, and one he can’t do without. With organizations spending upwards of 70-80% of their IT budgets just on maintaining things, and 20-30% on innovation, the CIO’s focus has to be on where she can get the biggest bang for her buck, and keeping the lights on isn’t it.
ITaaS, also known as utility computing, treats IT as a commodity, providing the customer with exactly the amount of hardware, software, and support needed for an agreed-on monthly — or even hourly — fee. Gartner estimates that global spending on public cloud services will almost double from 2012 to 2016, reaching $210B in 2016, led by IT – or Infrastructure – as a Service (ITaaS/IaaS). It’s growing the fastest at over 40% compound annual growth rate (CAGR).
A recent report predicted ITaaS can save $11 billion to healthcare organizations or 9%, of their costs over the next three years. US Government agencies and departments have identified $2.5 billion in IT savings that can be achieved through ITaaS by fiscal 2015.
Storage, virtualization, and security powerhouse EMC adopted ITaaS in 2011, driven in part by the IT group never having enough capacity — or budgets — to meet demand. On top of that, the company’s revenue more than doubled between 2005 and 2012, and IT couldn’t keep up with the data and storage needs of the growing business. EMC’s results have been impressive. From 2004 — when it began its move to virtualization — through 2012, maintenance spending dropped from 80% of total IT outlays to 58%; while “innovation spending” increased from 20% to 42%; the company also logged $157 million in capital expense avoidance and $66 million in operational expense savings. Furthermore, infrastructure consolidation resulted in a 34% increase in energy efficiency.
Cisco Systems started even earlier, deploying an IaaS platform in 2009 that was designed to provide users with capacity on demand. It evolved into Cisco IT Elastic Infrastructure Services (CITEIS), a cloud-based system that automates the delivery of IT services through built-in workflows.
This is all part of a sea change going on in IT, where rather than being the technology gatekeepers — and losing badly to all of the above-mentioned aspects, as well as Shadow IT — CIOs must become the business partners, advising their ‘customers’ on the best way to accomplish their objectives. “The skills traditional to IT, like coding and project management, will still be needed for some mission-critical applications, but negotiating contracts and managing SLAs are the skills that will be required by IT in the future,” said Dick Csaplar, an analyst at Aberdeen Group.
The bottom line is that all of the elements driving IT and business today — speed, agility, change, complexity and cost — make ITaaS a necessity.
Image credit: Amanda Mar (flickr)