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July 10, 2023
This will not be a year to realize grand ambitions, according to Gartner analyst Paul Delory. “Rather, 2023 marks a moment to refocus, retool and rethink your infrastructure. Within a crisis, there is an opportunity — in this case, the chance to make positive changes that may be long overdue.”
Infrastructure modernization presents an opportunity for positive change for both short-term and long-term benefits. The challenge is delivering transformation value. Very few internal transformation projects deliver business value on schedule or budget.
Gartner highlighted the “skills crisis” among infrastructure and operations teams as a key concern for 2022. “As we look to 2023, this crisis has not abated. If anything, it has worsened. Lack of skills remains the primary barrier to infrastructure modernization initiatives,” Delory said.
Infrastructure modernization is a business imperative, yet only some organizations can manage this transformation without expert help or advice. Finding the right IT transformation partner is among an organization’s most critical decisions. It determines the business’s future by determining its ability to be agile and remain competitive or whether it will stagnate and fall behind.
Effective transformation partners understand IT modernization is, at its core, an IT financial transformation. The partnership between the CIO and CFO has historically focused on aligning the IT budget with an annualized business revenue forecast. Historically, IT plans for capacity based on past performance and seasonal peaks were manageable. Traditional IT budgets are based on a fixed percentage of projected annual business revenue ranging from 1.5% to 5%, following the industry norms for the business. However, this legacy approach creates challenges in maintaining a quality of service during peak business volumes or when there is a need to respond to market volatility resulting from unforeseen events.
The pandemic, regional natural disasters and the effects of supply chain constraints have caused CFOs to scrutinize business forecasts. Volatility from unplanned market conditions represents significant business risks from long-term capital and labor commitments. CFOs are driving business leaders to leverage variable cost, or utility cost models, to limit risk due to market volatility. As a result, IT budgets are taking on the characteristics of activity-based costing (ABC) models that couple a business’s indirect costs with revenue and are commonly used in manufacturing, healthcare, nonprofits and service industry businesses.
For example, we can own a car, lease one or use a ride-share service. Buying a car to drive to work every day, take the kids to school and go to the grocery store makes financial sense. But buying a car when taking a business trip to get from the airport to the hotel would be cost-prohibitive and using a ride-share service is a more cost-effective option. Reflecting on the “how and why” we pay for our transportation provides insight into how we can think about our options for acquiring information technology. Technology should be evaluated based on what functionality it provides to the business. However, the business value is determined by how we pay for that functionality.
CIOs strive to maintain cost efficiency in partnership with the CFO, all while enabling their technology environments to meet market volatility. While the strategies for achieving these goals vary with the industry and businesses, all journeys follow the same steps.
As infrastructure modernization continues to evolve, there are five key considerations companies must think about when …
… looking for a partner.
Understand organizational change management. Infrastructure modernization isn’t just about implementing new technologies but also modernizing business processes. An IT partner must understand the concept of organizational change management (OCM), a structured approach to transitioning individuals, teams and organizations from a current state to a desired future state. It involves managing the human aspects of change, such as resistance to change, communication and training, in addition to the technical aspects. IT teams often need help to grasp the breadth of impact a modernized infrastructure entails. The role of a trusted IT transformation partner is to manage all the business process changes.
Provide everything-as-a-service (XaaS). The cloud attributes of flexible capacity and consumption costing aren’t limited to the public cloud. The concept of everything as a service (XaaS) includes a range of services available on a pay-per-use model, including hardware, software, engineering services, operations staff and more. XaaS helps organizations align costs with business activity, increase flexibility and scale operations as needed. The XaaS model also allows businesses to quickly adapt to changing market conditions and technological advancements as new services and solutions become available. Like a ride-share service for transportation, XaaS may be more expensive per unit of work. However, its flexibility can provide significant life cycle cost savings in volatile business environments and reduce business risk associated with long-term financial commitments.
Infrastructure as code, automation and orchestration. Even traditional physical infrastructure is transitioning to a consumption model. The concept of a private cloud is more than simple virtualization of hardware. A private cloud requires a different architectural design, including infrastructure as code, new asset management strategy and automation to enable scale-up and scale-down capacity. Modernized IT requires new financial models and capacity planning techniques to realize IT cost and business revenue alignment.
The goal of many IT modernization projects is the unification of private-cloud and public-cloud automation. Unified private-cloud and public-cloud orchestration enables organizations to take advantage of the benefits of both private and public cloud environments while also avoiding the drawbacks of using only one or the other. By combining the two environments, organizations can achieve greater scalability, reliability and cost optimization while optimizing the placement of workloads based on cost and financial commitment.
Monitoring and security. In an environment built on automation and orchestration, monitoring is critical. Before the cloud, IT had basic infrastructure tools to identify an overused server or storage that was reaching capacity. Humans could review activity logs to determine if resources were used as expected or if something needed attention. One feature of legacy environments is that the cost of operating it didn’t change without a human making a change. It was straightforward.
Not anymore. When you start to automate spin-up and spin-down, you create a dynamic financial exercise within the environment. You must be able to watch that very closely, or you can put the business at risk. New policies for resource approval and expiration must be created. New capabilities to monitor consumption and report anomalous activity often require new, AI-enabled tools.
A highly orchestrated environment also comes with risk. Cloud security is a challenge, from malware and ransomware to distributed denial of service attacks, even high-jacked capacity that drains business resources. In a unified cloud world, data is everywhere. Applications are running all over the place. Monitoring and protecting business resources, data and financial assets is complex and requires a specialized focus and new AI performance-monitoring capabilities.
People as a service. An organization can’t hire its way to infrastructure modernization. As technology infrastructure moves into a unified cloud architecture to realize modern business capabilities and financial agility, the leaders and co-workers who envision, build and support the environment must also adopt XaaS attributes. Every aspect of the technology co-worker model should be re-examined to balance cost and business risk.
Virtual co-worker teams involved in modern unified cloud environments are increasingly made up of salaried employees working with augmented staff, contracted business partners and managed service providers. Increasingly, these co-workers leverage collaboration tools to form geographically distributed teams to ensure the right skill and cost balance is present to achieve the task on time and within budget.
In his book titled “The Agile Leader: How to Create an Agile Business in the Digital Age” (Kogan Page; 2021), Simon Hayward describes how diverse agile leaders can help a business adapt, pivot, grow and thrive through business transformation. This approach to dynamic leadership, staffing and capability creation is key. Working with an IT partner that supports and facilitates this kind of agile leadership model is essential to IT modernization.
The relationship between the CIO and CFO is essential to IT supporting optimized business outcomes. The concept of dynamic workload and IT consumption costing did not exist 10 years ago, or at least wasn’t practical to implement. Together, we are building the next evolution of IT as a service and the integration of IT into the business.
This is a journey, and business leaders must find the right partner to help navigate it. They must find a partner knowledgeable and experienced in building unified public and private cloud solutions. Choosing the right technology partner who can support you — from end-to-end vision, strategy, road map and change orchestration — is critical. The right partner shortens the transformation journey and accelerates the value that IT modernization provides. The resulting agility and cost alignment makes IT a strategic asset to all businesses serving complex, volatile and evolving local and global markets.
Jim Rice is vice president of digital transformation at CDW. He has more than 40 years of experience leading teams of IT consultants and enhancing IT service environments that improve the organizational value of information technology. You may follow him on LinkedIn or @CDWCorp on Twitter.
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