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.