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More business models for ITaaS

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There are quite a few different ways for companies to make a profit. If you’re going to run IT like an independent business … the ITaaS approach … you’d better know what they are.

By Bob Lewis | April 14, 2014
Topics: Industry Commentary, ITaaS, Organizational Design, Organizational Effectiveness, Strategy and Tactics | 5 Comments »

A couple of years ago I “reported,” in InfoWorld that “… the Silicon Valley Rabbinical Society is reportedly experimenting with services as a service, and the Conjunction Society of America will soon offer “as” as a service.”

While we haven’t sunk quite that low … not yet, at least … we do have IT as a Service (ITaaS). This isn’t, fortunately, an attempt to package everything IT does into software you can access through your browser. It is, somewhat unfortunately, the resurrection of the old idea that you should run IT as if it is an independent business, selling to its internal customers.

Last week’s column pointed out a logical consequence – that if you’re going to run IT like an independent business you’ll have to actually run IT like an independent business. Among the ramifications: You’ll have to run IT according to a clearly enunciated business model – a well-defined account of the levers and buttons you pull and push to gain profitable revenue.

In real businesses the “big three” business models are product innovation, customer intimacy, and operational excellence. Likewise ITaaS.

But while these are the most common models, they’re hardly the only ones, and so, in response to popular demand, here’s the first half of the rest of my list of business models employed by real corporations, along with a suggestion of how they might apply to ITaaS.

Business models

Product/service innovation variants

We covered the basic version of product innovation last week, but there are three variants that deserve special mention:

The rest


5 comments on “More business models for ITaaS

  1. Bob: For those of us from the Pacific Northwest, foresty is NOT extraction, but renewables — there are areas in Washington State that have been harvested at least three times, 40 years apart. Coal, oil, gas, and minerals (gold, silver, et al.) need a bit more time than 40 years, so the issue has not come up. The point I want to make is that “data” that IT assembles and stores (and hopefully, on request analyzes and re-presents) is NOT a one-time use until empty thing like oil or gold, but a renewable resource like trees. I think an IT department that focused on being the “smart file cabinet” for an enterprise (trees, not gold) might have a bright future.

    As always, I am a big fan of your writings. This is a slight tweak to an otherwise great piece.

    Rollie Cole, PhD, JD
    Founder, Fertile Ground for Startups, Small Firms, and Nonprofits
    “Think Small to Grow Big”
    Author of WHOLESALE ECONOMIC DEVELOPMENT http://preview.tinyurl.com/wholesaleeconomics

  2. If it is really going to be ITaaS, then it must be subject to market forces:

    1) It must compete with outside vendors to keep its business, and

    2) It must be free to sell to outside business. If it cannot, then the separate run as a profit making unit, fails because it is not allowed to develop a full market.

    The 2nd is the most important reason this approach is a very bad idea. It has a built-in conflict between self-management and enterprise security.

  3. Sara Wasserman on said:

    Would it be useful to think of IT as a non-profit type of service/business, or does that ruin the notion of “business” being efficient? Non-profit organizations can have different models from for-profit businesses, since they are not out to make money, but basically to cover their costs to provide a service.

    I was thinking of a trade-organization type model – you are marketing to a specific set of people (those on your trade/company) with a common/specific set of needs. A good trade organization will have a unifying “we’re in this together” affect on their market (trade/company). But the non-profit in this case still has to work hard to maintain their membership – they have to offer real value, and do so efficiently to keep their costs down.

    Another metaphor/analogy might be as a utility, like electricity or the phones (which if phones haven’t been integrated into your IT department yet they probably should be, or will be soon).

    I don’t know if this is a useful addition to this discussion, or a useful way of thinking about an IT department, but it’s what came up when I read your column and it won’t let go.

    I agree with your main tenet that thinking of any one department in a business as a separate business is rather silly. You can have an organization that is a collection of separate businesses, but that’s the model for the org as a whole. If the model is a single company, then each department is just that – a department – and not a separate business. So the tightrope you walk is to be as efficient as possible while meeting the needs of the whole organization. Which is enough of a challenge without throwing other elements at it.

    • Sara … this is just my initial reaction and not a well-thought-out response. What it is: The difference between for-profit and non-profit businesses is smaller than you might think. I’ve worked for trade and industry associations, and consulted to several charitable organizations, and in all cases they still need to engage in sales and marketing, still have to focus on growth (because steady-state inevitably becomes shrinkage) and have to operate in the black.

      The big differences are that (1) they don’t get to accumulate large cash reserves … or at least they aren’t supposed to … and so long as they’re in the black they’re okay – there isn’t a level of return on investment they’re supposed to generate for shareholders.

      More thought and I might reach a different conclusion, though …

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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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