A couple of months ago I started sharing a concept with some colleagues and Burton Group clients that I called The Wal-Martification of IT. With the expectation of a large focus on cloud at next week’s VMworld North America conference, I thought now would be a good time to discuss this concept publicly.
The industry is never short on Wal-Mart metaphors – CIO.com’s Bernard Golden just highlighted his own last week. In his article, Golden does a very nice job discussing IT supply chains as they relate to internal cloud. In my talks with clients I’ve used the Wal-Mart metaphor from a different angle.
At Catalyst, I told a story of two anonymous factory workers – let’s call them Laverne and Shirley. There was a time where many folks could work an entire career at the same factory. In many industrialized nations, that’s no longer the case. Manufacturing jobs have moved overseas and factory workers were left to retrain and launch new careers. If you consider the momentum behind public cloud, the IT worker in the local company data center should see this as a threat that puts him on the same career trajectory of the modern day factory worker.
How does Wal-Mart fit into the equation? Think of public cloud providers as the neighborhood Wal-Mart. In many towns across the US, small businesses were swallowed by Wal-Mart. Many of these businesses were unwilling or unable to change their existing business processes or target markets in the wake of Wal-Mart’s entrance to their community. At the same time, Wal-Mart doesn’t exist in ghost towns. Look around most Wal-Marts and you’ll still see plenty of successful businesses.
That leads us back to public cloud. Like it or not, public cloud as a platform for enterprise IT infrastructure is coming. Issues such as concerns over regulatory and security compliance will keep many public cloud alternatives at bay for the immediate future or limit its use to non-critical applications. However, those concerns will be solved through both technology and policy. By conservative estimates, public cloud will be a viable alternative for most business applications in the next 5-10 years. This means that the clock is ticking.
When a business unit compares the cost of running an application via internal IT to that of running it with a public cloud provider, the costs had better be close. In many cases the internal solution will need to cost 20% less than the outsourced cloud solution in order to be economically viable. If the cost of internal hosting is equal to or higher than that of the external solution, all bets are off.
The days of business units buying physical assets and IT managing those assets are terminal. IT organizations should be motivated to work on cloud-based internal infrastructure like their jobs depend on it, because in my opinion they do.
So what should you do? Here’s some food for thought. If you’re going to VMworld next week, engage the cloud service providers. Yes they’re your enemy, but at the same time your friend. IT organizations can get more efficient by leveraging public cloud resources where the solution fits. At the same time, these cloud providers may one day directly target your individual business units, if they are not already.
Service-oriented delivery of IT infrastructure will require organizations to change many traditional practices. To be a cloud, IT must own the organization’s physical assets. Changing existing business procurement processes may be one of the most painful steps on the path toward internal cloud, but it’s also the most necessary.
IT services and user self-service requires a service catalog. The time is now to rethink the traditional service catalog models and look at the service catalog in business terms (that’s how competing public cloud providers target individual business units). Vendors will be showcasing their service catalog models on the VMworld show floor next week, and it is a good idea to spend some time with them.
Service-oriented IT and internal cloud adoption will also be highly disruptive to your existing billing and chargeback mechanisms. Take some time to evaluate chargeback solutions. Even if you start with “show back” as a means to communicate the cost of IT to internal business units, that’s a good first step toward chargeback.
Business and IT process realignment is never fun and often at the bottom of most folks’ to-do lists. However, it’s not something to continue putting off for a rainy day. Public cloud’s day is coming and Wal-Mart-like cloud providers aren’t far behind. Re-architect for internal cloud and IT service-oriented delivery like your job depends on it. It does.
Summary: Business must adopt ITIL prescribed Service Management best practices, to achieve the agility necessary to out/in/cloud source all their workloads; while retaining enterprise level Governance, Risk and Compliance:
http://www.novell.com/media/media.php?media=building-a-service-driven-data-center-part-one
Posted by: Robert Wipfel | August 28, 2009 at 01:24 PM
There is no doubt that the Wal-Martification of IT is squarely in the the sights of the big services shops. For example, HP is building a data center in Colorado Springs for the expressed purpose of offering cloud services to customers operated by a dozen of less system administrator.
IT is one of the most tumultuous parts of any business. There is constant need of technology refit both of assets but of employees as well without clear benefit to the business. The cloud computing promise appeal to decision makers by moving the responsibility of ROI from internal teams to external ones. This changes the roles of the internal IT leaders from delivers of value to watch dogs. In this way, this promise mirrors that of the outsourcing of project work from internal government teams to contractors and of internal IT labor to over seas labor.
Having seen this process from the inside, I can tell you that the technology is not the biggest cost. The biggest cost can often be the inability of internal customers to organize their thoughts and goals to effectively apply the solution to computers. As well publicized but often forgotten, current computing technology can not deal well with fuzzy goals and parameters. This is often not the fault of the technology but of the people designing the solution. But those that can effectively define their problems and solutions can bring new value to their employers, like the development of cloud computing technologies (i.e. Amazon).
The Wal-Martification of IT, through cloud computing, will also mean that applications run on the cloud will be offered as a solution as well as the cloud infrastructure itself. Given the undefined nature of what a cloud is, it is likely that once the definitions are solidified, only the cloud provider will have any real depth in implementation any one of those definitions. As such, this process is very much like that of the adoption of CRM and ERP solutions from major vendors and the retirement of internally developed solutions of the same type.
Given this, cloud computing may mean not only the elimination of IT folks from companies, but also the elimination of the ability of the adopting companies to solve their unique problems with computers.
Posted by: Steve Hand | August 30, 2009 at 09:15 AM