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IT as a service isn’t a technology

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It’s a new name for an old idea — that IT should run itself like a separate business serving “internal customers.” It can work, but it’s a lot harder than its proponents make out.

By Bob Lewis | April 7, 2014
Topics: Industry Commentary, ITaaS, Metrics, Organizational Design, Organizational Effectiveness | 5 Comments »

In the absence of a new idea, a new name for an old one will have to do.

Which is about the only justification I can imagine for ITaaS — IT as a service.

No, ITaaS isn’t a new technology that serves up everything a traditional IT department does, only over the Internet and into your browser. It’s the twentieth-century model of IT service delivery, where the IT department envisions itself as a supplier to the rest of the business, selling various forms of information technology to its internal customers, who pay for it through a system of chargeback.

As regular readers have surely figured out by now, this isn’t a model I usually endorse — in most circumstances, integrating IT into the business leads to superior results.

But instead of piling on more criticism (or even drearier, repeating the same old ones) let’s figure out how to make it work, because there are situations — centralized IT supporting more-or-less autonomous business units, for example — where ITaaS is the only practical alternative.

Where to start? The same place real businesses start: by choosing their basic business model, “business model” meaning the buttons and levers the business can push and pull to turn its actions into profitable revenue.

Somewhere in my IT Catalysts detritus I have a list of twenty or so business models, which successfully describe every business I’ve ever run across (not all of them are good models, just as not all businesses know how to sustainable make a profit). And while there are a lot of them, three are dominant:

By the way: while every well-run business has one business model that’s its lead story, that doesn’t mean business leaders get to ignore the others. Product innovators still have to operate efficiently, just not with relentless efficiency; likewise they shouldn’t treat their customers like dirt, even though they can’t offer them custom-tailored solutions the way a customer-intimacy company does.

And so on.

Ready for the punch line?

IT that’s integrated into the business is close kin to the customer-intimacy business model — so much so that the rest of the business doesn’t think like a customer at all and IT stops thinking like a supplier. In this model they and we become peers and partners.

ITaaS? IT’s CEO (the CIO, but we’re modeling IT as a separate and independent business) has a choice to make. IT can be a product/service innovator or it can be what, in pre-cloud days, was called an information utility — a purveyor of inexpensive commodity solutions.

It can be finer-grained than this. For example, IT infrastructure services can have a different model from application services, with the former focusing on hyper-standardization in support of operational excellence while the latter provides technology leadership to the rest of the enterprise in the guise of product innovation.

Don’t like these business models as a framework? Come up with a different one. That’s fine — these simply illustrate the more fundamental point: With ITaaS the whole nature of IT strategy and governance undergo profound changes.

With IT as an integral part of the business, its strategy is a consequence of the overall business strategy. As an independent business its strategy is derived independently … although, like any good business, it has to guide its strategy with its understanding of marketplace (or, as it’s all metaphorical, “marketplace”) trends.

This, by the say, is one place many ITaaS proponents miss the mark. They start by defining an IT services catalog. It isn’t that having an IT services catalog is a mistake. It’s that without a business strategy behind it, an IT services catalog is just a list of stuff we do.

Strategy precedes product.

Governance? With integrated IT, governance is how the business makes sure IT’s project portfolio optimally supports business priorities. With ITaaS, revenue is revenue — IT governance is mostly a matter of which business units have the budget to do what.

Which might explain the appeal of the ITaaS relationship model: It results in a lot less arguing.


5 comments on “IT as a service isn’t a technology

  1. Just out or curiosity, Bob, what are the other 17 business models in your IT Catalysts detritus?
    — Karl

  2. Excellent article that I wanted to share with a group of people on LinkedIn. Unfortunately your site makes it very difficult to link directly to an article. Do you have a trick, or URL that could be suggested for future reference?

    RJL

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my photoBob Lewis is a senior management consultant with Dell Services. He has published these columns once a week in one form or another since 1996.

Disclaimer: All opinions, statements, representations, allegations, images (if published) and anything else that appears here is the sole responsibility of the author. Dell has and had nothing to do with it, other than saying it's okay to continue publishing KJR.

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