This is how EMC Corp.’s Peirce, senior vice president of IT, described the structure of the company’s IT department. In the beginning, we didn’t know how rapidly our IT business model would go away if we didn’t change it.
These are the cloud-based business services that are available. In contrast to the DMV, the IT department is no longer the only game in town — at least not anymore. Today, anyone may download a mobile app to a company smartphone, or a department can subscribe to cloud services like Microsoft’s Windows Azure to access a virtual computer environment. The term “shadow IT” refers to the practice of acquiring software and infrastructure without going via standard corporate channels. Peirce’s team couldn’t compete at EMC, and he understood that.
In Peirce’s words, “people were trying to source around us because IT was interfering with their business value.” A new IT paradigm was needed to stay relevant in the future.
Taking a chance with IT
IT at EMC had a dilemma that many major organizations have it could never keep up with demand and the company’s fixed IT budget couldn’t keep up with the ever-increasing demands. With the company’s revenues doubling between 2005 and 2012, IT couldn’t keep up with the increasing data and storage requirements. For Peirce, like for many other IT managers struggling with data influxes, virtualized environments allowed him to eliminate legacy infrastructure stacks and save money on hardware. Virtualization and storage virtualization in an integrated private cloud were both commonplace in EMC’s data centre by 2010, when it had 70 percent of its servers virtualized and storage virtualization implemented. Analysts, on the other hand, credit EMC with being a forerunner for what transpired afterward.
As of 2011, EMC’s IT department began offering IT as a Service, adopting the managed service mentality (ITaaS). The group can now source both on-premises and off-premises cloud services for other departments, instead of having to spend time establishing servers as it used to. IT shops around for the best cloud provider to meet the company’s needs, comparing costs and SLAs.
To keep costs down, all services are billed back to the proper department rather than being considered a capital item, which would come out of the IT budget.
According to industry experts, the change from a common customer service model that relies on a centralized budget to an on-demand, usage-based approach is an important milestone in IT’s evolution.
Self-service IT demands that CIOs instruct their teams to go beyond virtualization and cloud computing, to become service architects who design enterprise stores for downloading approved applications, build service catalogues with a menu of choices, and support company innovation to drive shareholder value.
According to Aberdeen Group Inc. analyst Dick Csaplar, IT thus becomes a strategic partner with the line of business. As a result, you’ll need to learn some new skills. IT will still require traditional IT skills like coding and project management for some mission-critical applications, but the future of IT lies in contract negotiations and service level agreements (SLAs).
The organization will need to undergo significant changes because of such a large-scale shift in operations, and such changes will not occur overnight.
Wayne Pauley, an analyst with the Enterprise Strategy Group, remarked, “The largest problem for business is not the technology, but the organizational and governance reform.” Pauley trained the EMC team on how to be ITaaS architects before joining the company in January. According to him, IT must become “cloud-capable” and familiar with new technologies, particularly object-oriented programming languages like Ruby and Python, to complete this process effectively.
EMC had to put in a lot of work to make the transition to ITaaS, but it has been well worth it. When EMC began moving to virtualization in 2004, maintenance spending dropped from 80% of total IT outlays to 58 percent, according to an Enterprise Strategy Group audit of the ITaaS transformation there. Meanwhile, “innovation spending” increased from 20% to 42%. The company also saved $157 million in capital expenses and $66 million in operational expenses. A 34 percent boost in energy efficiency was also achieved through the consolidation of infrastructure.
It’s not uncommon for ITaaS providers to keep their customers in the dark about what they’re doing because they see it as a competitive advantage.
At Cubist Pharmaceuticals Inc., a fast-growing biopharmaceutical company in Lexington, Mass., the IT department may fine-tune in-house IT procedures while relying on its IaaS partners for the administration of their infrastructure.
‘My customer has options,’ Rajesh Padmanabhan, senior director of business application services at Cubist, said. “Being in competition with every other vendor besides Cubist keeps us focused and helps us grow,” says one member of my team.
Even as Cubist starts on a five-year quest to extend its global footprint and increase its revenue to $2 billion, Cubist’s IT department is in a strategic position to focus on services rather than become bogged down by everyday system management
activities. If you’re going to have a new business plan, IT is going to be a huge part of it because we have the potential to scale,” Padmanabhan added.
Investing in a bigger productivity
An IaaS platform developed by Cisco Systems Inc. in San Jose, California, began providing capacity on-demand to customers in 2009. A cloud-based solution, Cisco IT Elastic Infrastructure Services (CITIES), was developed to automate the delivery of IT services. An online portal allows users to access self-service infrastructure and software provisioning in this “pay as you go” model. Cisco’s own technology, including the Intelligent Automation for Cloud software suite and the Unified Computing System server line, reduced server setup from eight weeks to only fifteen minutes.
Cisco’s director of technical services for CITIES, Michael Myers, confessed that it was difficult to maintain initially. “To build the framework, we used scripts written by subject matter experts. For our automation to work and allow us flexibility in how we scale up the services, we assembled a stack.”
According to Myers, now that self-service provisioning has been automated, developers may focus on initiatives that have a greater impact on the company’s bottom line. In addition, the IT department is delivering value to the business. It is the same as using a third-party cloud provider when Cisco personnel purchase IT services like Web servers, middleware, or database capabilities. Cisco customers, on the other hand, are only being charged enough to cover their IT costs, unlike service providers who pad their prices to make more money.
A similar shift has occurred in the way EMC charges for ITaaS, which is now based on a monthly fee rather than an upfront fee and a long-term commitment. Consequently, IT finances are more accessible to the general public. Peirce remarked, “It opened a lot of eyes in our business.” “We had no idea how much an entire service would cost from beginning to end. A profit-and-loss approach was implemented to better understand the service’s unit cost and how it changes over time as we make investments and increase the volume of service.”
EMC has virtualized 92% of its infrastructure too far, but the company’s IT transition is far from complete. This is something that will never be finished because it needs to be constantly adjusted to meet the needs of businesses, Peirce stated. Fortunately, the IT department at EMC can now more easily compete with third-party cloud services.
When he spoke, he stated, “Our first motivation was fear.” “However, we’ve become better business partners as a result. As an IT organization, we are now viewed in a more positive manner and strategically.