The growth of cloud and mobile computing and of cloud consumer services is changing user expectations about IT in multiple ways. Much has been written about how IT business consumers today expect internal IT to deliver highly reliable services — not computers or software — to their laptops, tablets, and smartphones. But the consumer cloud experience is also changing the expectations of senior management.

For IT the real message of the last five years is that you are now in competition with the cloud, and if you cannot discuss your costs and business value in language that makes sense to senior management, you are likely to find the that management replacing your IT shop piecemeal with SaaS and similar external offerings. To compete, you need to start seeing IT not as a collection of stuff – servers, storage, network switches, etc. – but as a set of business services that provide measurable business value at a specific total cost.

This is how your senior management sees IT, and what the CEO and CFO want to know most is how much does each service cost and how does that compare to the measurable business value that service provides. When the CIO retreats into discussions of cost-per-byte of storage or similar technical measures, which still happens in too many companies, CEOs and CFOs only get frustrated, and these days that can mean that the CIO will soon find large chunks of the IT department being replaced by SaaS services behind his back, because the cloud service vendors do sell business services at a specific price.

To compete, therefore, you need to reorganize your thinking and that of everybody in the IT department to see your jobs as delivering business services at the quality level the business needs and at a price that is at least close to what the same service would cost from the cloud. The first step in this process is to find out what you have. This requires a comprehensive inventory of the services you provide, who you provide them too, and what back-end software and hardware you use to provide them. Fortunately, much of this information should already be in your software asset management inventory. If that is not up to date, you will need to start updating it immediately. However, software does not necessarily equal services. For instance, your ERP provides a variety of services to different operating groups. Manufacturing, of course, uses it to control workflows and track the progress of jobs. Sales may use it to track progress on orders and to generate realistic delivery promises for customers. Finance uses it to capture costs of manufacturing and operations in general. All of those are services or parts of services that are vital to entirely different groups within the organization.

Exactly what you need to know depends in part on your overall strategy and the size of your shop. SMBs that are planning to turn everything over to SaaS vendors, for instance, do not need the detail that shops planning a hybrid public/private cloud strategy will require. But they still need to define the business services they need, and they still need to research what relevant SaaS services are out there, develop good negotiating skills, and develop services measurement and management skills as well. Organizations operating in special regulatory environments such as medical providers and financial services need to take that into account in their strategy as well.

Services Angle

Whether you know it or not, as a CIO you are in the business of delivering business services. Those shops that already publish menus of the business services they provide have a big leg up on this. If you do not do that now, start working toward that goal. And in the process, reorganize the IT budget according to the cost of providing each service, which may involve fractions of the cost of infrastructure. In my next piece I will discuss issues in creating a strategy for delivering the right services at the right price to your business, but before you can do that you have to know what you have and what it costs today.