The document discusses the evolving role of IT in businesses, highlighting the challenges CIOs face due to rising IT costs and the urgency to adapt to a more service-oriented model. It emphasizes the need for IT organizations to transition towards a service-based framework, where technology is intricately linked to business solutions, and suggests strategies for redefining roles and improving business relationship management. Finally, it raises questions that organizations must consider when assessing the suitability of a services-based IT structure.

1. Running IT as a Business
Dave McNally
IT Executive Advisor
July 2012
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2. Agenda
• Market Forces and a changing landscape
• The CIO Challenge
• The Service Management Organization
• Business Service Management
• IT Management Services
• IT Service Management
• Discussion about Aetna’s needs
• Next Steps
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3. Market Forces driving dissatisfaction and
disrupting the IT Operating Model
Technology was “not a Core Competency”
• Explosive growth in IT Costs, Staffs, and Complexity to put Infrastructure in place
• First generation solution to IT’s uncheck growth - IT Outsourcing
• Results: Proof of Concept and Cost reductions but only Moved the Problem
Broad adoption of External Business Services in the 2000s
• Business Process Outsourcing
• Cloud Services
• Mobile Services
• External Providers are deliver with unprecedented speed
• Results: By comparison, legacy IT looks even more broken
Technology is now a “Core Competency” and the mystery is gone
• Technology and Business are becoming inseparable
• Business Leaders are more Tech-Savvy
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4. IT has not “stood idly by”
Efforts to Professionalize and Create Value
Success stories of the past ten years
• Architecture
• Governance
• Planning
• Strategic Sourcing
• Lean IT and Agile Development
Work-in-Process
• IT Supply Chain
• IT Service Management
• IT Cost Models
Future Efforts
• Legacy Modernization
• Identifying Innovations outside of the IT Service Catalog
• Brokering Services
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5. Impact of Self-Service IT
The IT Supply Chain has been Disintermediated
IT connects the “Supply” of technologies and services with the “Demand” for business
capabilities
On the Supply-Side:
• Services are replacing technologies and delivery options allow immediate access
• Suppliers are selling to our (previously captive) customers
• Virtualization and Cloud Services allow IT to focus less on the technology stack
On the Demand-side
• For most companies, basic transaction processing needs are met and higher
order solutions are in demand
• Technology is an element of many business solutions blurring the lines between
an IT service and a business service
• Perceptions of quality and value are higher when it’s their solution
Consequences:
• IT will compete with external service providers (both App Dev and Infrastructure)
• You’ll need to define your products (service catalog) and cost model
• Manage the Business Relationship as a Service Broker, sourcing from external as
well as internal services.
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6. CIOs want to move up the Value Chain
IT resources heavily weighted in Operational Tasks
Chief
Customer Intimacy & Value
Aspirational Role Innovation
Officer
Business Change Agent
Value Added Roles
Architecture
Service IT
Essential CIO Roles Broker Architecture
Custodian of IT  Operational and Utility Roles
Services
Operational to Transformational
Run Build Buy Business Service Architect Business
Management Transformation
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7. IT Organization and Culture
Barrier to Running IT Like a Business
IT Organizations structured to Engineer, Build and
Operate systems are now an impediment to Services
Residual effects of the First Generation IT Silos
• Business and Vendor Relationships owned by Application Development
• Customer Relationship often owned by Service Delivery
• Solutions defined by Legacy Development and Maintenance skills / tools
• Infrastructure silos block innovation
CIO
App. Dev. Infrastructure Ops.
Bus. Function A, B, C Servers, Storage, Networks
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8. Standalone IT in 2012
The Challenge of Value and Relevance
Net Results
• Legacy IT Costs may be > 60% of SG&A without a value contribution
• Business leaders taking more ownership of IT
• A point of view that “There must be a better way to run IT”
Possible Outcomes
• Death of the IT department? A possibility in SMBs with simple technology portfolios.
• Diminished role of IT? In lieu of new roles, IT will simply get smaller over time.
• A new role for IT? CIO Leadership may effectively rebrand IT as Information Services,
reflecting the on-going abstraction of technology in providing services.
Possible Solution: Running IT Like a Business
• Separate the IT Service Delivery from the Essential and Value Add roles
• Redefine Business Relationship Management and Service Delivery
• Develop a Business Service Catalog and Benchmark SLAs and Costs
• Let the market for IT Service prevail
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9. The Services-based IT Organization
Running IT Like a Business
Realigned Roles and Refocus Objectives
• Business Relationship Management sources Information Services both
internally and externally
• Architecture manages an Extended Information Architecture
• IT Management Services deliver common capabilities
• Apps, Infrastructure & Operations are captive suppliers competing for
market share
CIO
Relationship Arch. IT App. Dev. Infrastructure Ops.
Mgt. Management
Services
“Business Service “IT Service Management -
Strategy, Sourcing and Competing for Services”
Innovation”
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10. Business Relationship Management
Delivering Information Services not Technology
Dedicated Business Services Function
• Business Relationship Management
• Single point of contact for Customer Services
Customer Services
• Service Strategy
• Service Design / Owner
• Service Management
• Demand Management
• Business Architecture (Process and Data Management)
• Program and Change Management
Measures of Success
• Pent-up demand
• Utilization of external as well as internal services
• Business Agility – support for start-ups
• Business ownership of Information Services
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11. Business Relationship Management
Transition Practices to Run IT Like a Business
I. Develop a Customer Relationship Management strategy
II. Business Relationship Managers are embedded in the business and
perform a range of functions:
• Industry benchmarking – use of technology by function
• Strategic advisory – opportunities to create value or innovate
• Report on the State of Applications (Business Services)
• Project Planning and Change Management
III. Conduct an Application Portfolio Review
• Identify business owners
• Measureable value
• Lifecycle status
• Costs to maintain (TCO)
IV. Project Portfolio Management
• Consolidate demand
• Analyze IT project cost and business investment by business function
• Assess strategic and financial value
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12. IT Service Delivery
Increasing Alternatives to Market-Based Services
Integrated & Discrete Services available across Apps & Infrastructure
• IaaS: Data Center, Hosting, Data, Network, Archive
• Infrastructure Management (e.g. Incident Mgt.)
• Cloud Integration
• All procured Internally or Externally
IT Service Management as a Sourcing Mechanism
• Infrastructure leaders are analyzing service alternatives within the technology stack
IT Service Catalog (fully loaded with Costs) will drive clarity
• You can pay someone to manage an E-Mail service and all underlying IT Services
and still not know what to charge the Business for E-Mail Service.
Or you can buy Gmail
App. Storage Server Network Device Support
E-Mail Service
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13. IT Management Services
Shared Services or Fiduciary Activities
Common Support Capabilities
• IT Strategy
• Governance, Risk and Compliance
• Architecture
o Solution Architecture
o Integration Architecture
o Information Architecture
• IT Financial Management
• Program Office
• Strategic Sourcing
• Vendor Management Office
• IT Service Management
o IT Service Strategy
o IT Service Catalog
o IT Service Desk
Measures of Success
• Benchmark services
• Overhead costs structure
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14. Situation Assessment
Is a Services-based Organization the right fit?
Some questions to consider before making the move:
• What are the business perceptions of IT that need to be addressed reorganizing?
• What else is driving the interest in Running IT Like a Business?
• Other than the CIO, who owns Business Relationship Management?
• What impediments are there to realigning Roles, Responsibilities & KPIs?
• Which resources would be impacted by the creation of a Business Services
Management function?
• Is there a Service Management Framework?
• Does the Service Catalog include Business Services?
• Are vendor contracts and Service Level Agreements aligned to Business priorities?
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15. Thank you!
dmcnally@idc.com
@dave_mcnally
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