Cloud isn't Social, it's Business.

Adopting a cloud-oriented business model for IT is imperative to successfully transforming the data center to realize ITaaS.

Much like devops is more about a culture shift than the technology enabling it, cloud is as much or more about shifts in business models as it is technology. Even as service providers (that includes cloud providers) need to look toward a business model based on revenue per application (as opposed to revenue per user) enterprise organizations need to look hard at their business model as they begin to move toward a more cloud-oriented deployment model.

While many IT organizations have long since adopted a “service oriented” approach, this approach has focused on the customer, i.e. a department, a business unit, a project. This approach is not wholly compatible with a cloud-based approach, as the “tenant” of most enterprise (private) cloud implementations is an application, not a business entity. As a “provider of services”, IT should consider adopting a more service provider business model view, with subscribers mapping to applications and services mapping to infrastructure services such as rate shaping, caching, access control, and optimization.

By segmenting IT into services, IT can not only more effectively transition toward the goal of ITaaS, but realize additional benefits for both business and operations.

A service subscription business model:

Makes it easier to project costs across entire infrastructure
Because functionality is provisioned as services, it can more easily be charged for on a pay-per-use model. Business stakeholders can clearly estimate the costs based on usage for not just application infrastructure, but network infrastructure, as well, providing management and executives with a clearer view of what actual operating costs are for given projects, and enabling them to essentially line item veto services based on projected value added to the business by the project.
Easier to justify cost of infrastructure
Having a detailed set of usage metrics over time makes it easier to justify investment in upgrades or new infrastructure, as it clearly shows how cost is shared across operations and the business. Being able to project usage by applications means being able to tie services to projects in earlier phases and clearly show value added to management. Such metrics also make it easier to calculate the cost per transaction (the overhead, which ultimately reduces profit margins) so that business can understand what’s working and what’s not.
Enables business to manage costs over time
Instituting a “fee per hour” enables business customers greater flexibility in costing, as some applications may only use services during business hours and only require them to be active during that time. IT that adopts such a business model will not only encourage business stakeholders to take advantage of such functionality, but will offer more awareness of the costs associated with infrastructure services and enable stakeholders to be more critical of what’s really needed versus what’s not.
Easier to start up a project/application and ramp up over time as associated revenue increases
Projects assigned limited budgets that project revenue gains over time can ramp up services that enhance performance or delivery options as revenue increases, more in line with how green field start-up projects manage growth. If IT operations is service-based, then projects can rely on IT for service deployment in an agile fashion, added new services rapidly to keep up with demand or, if predictions fail to come to fruition, removing services to keep the project in-line with budgets.
Enables consistent comparison with off-premise cloud computing
A service-subscription model also provides a more compatible business model for migrating workloads to off-premise cloud environments – and vice-versa. By tying applications to services – not solutions – the end result is a better view of the financial costs (or savings) of migrating outward or inward, as costs can be more accurately determined based on services required.

The concept remains the same as it did in 2009: infrastructure as a service gives business and application stakeholders the ability to provision and eliminate services rapidly in response to budgetary constraints as well as demand.

That’s cloud, in a nutshell, from a technological point of view. While IT has grasped the advantages of such technology and its promised benefits in terms of efficiency it hasn’t necessarily taken the next step and realized the business model has a great deal to offer IT as well.

One of the more common complaints about IT is its inability to prove its value to the business. Taking a service-oriented approach to the business and tying those services to applications allows IT to prove its value and costs very clearly through usage metrics. Whether actual charges are incurred or not is not necessarily the point, it’s the ability to clearly associate specific costs with delivering specific applications that makes the model a boon for IT.

Published Aug 31, 2012

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