When Abdullah Haydar stepped into the role of chief technology officer at Open Dealer Exchange LLC two years ago,...
he surveyed the IT landscape of the Troy, Mich.-based automobile finance company and saw an opportunity. He would refashion his department into a lean, agile group that facilitated and managed the use of external cloud services and internal offerings as a cohesive services organization.
Analysts call this setup "hybrid IT" or the "IT services broker" model. An increasing number of CIOs see it as a strategy that just makes sense. Given the competition from business users bypassing IT to buy cloud solutions on their own, as well as and their desire to consume IT as a service, IT must step in and become a services facilitator. Gone are the days of the CIO as technology manager, said Brian Hopkins, analyst at Cambridge, Mass.-based Forrester Research Inc.
"The successful CIO is stepping away from managing technology to being a business technology leader … figuring out how technology can support the business," Hopkins said. It's about being flexible enough to adapt to the rapidly evolving needs of the business, while keeping costs down: "No business is going to succeed in the future without IT being part of that success."
As Haydar realized, phasing out legacy systems, moving whatever possible to the cloud -- whether public or private -- will result in not only more agile systems, but also a reduced need for staff and better cost control.
IT is the front line and last line of defense when it comes to the digital assets of the company. Being a broker puts them in a better position to protect those assets.
"Every few years I'd have to re-up with hardware; now third parties handle that. You're brokering what you need and letting them fulfill it. There's a huge financial benefit to having that massive [off-premises] data center," Haydar said. "You don't have to hire people to do the busywork of loading servers, racking and stacking. I still need staff with specific knowledge of applications and programmers. What's changed is what I'm able to do with a handful of infrastructure techs to manage remote environments. I used to have to hire ten times as many techs to run the data center."
Another CIO adopting the strategy is Peter Whatnell at Sunoco Inc. That company's IT department set itself on the path to becoming a services organization when he outsourced the in-house email system. "Within two to three years I see the move [to IT as a services business] overtaking everyone in this industry," he said in an interview with SearchCIO.com. "In the '60s through the 2000s, IT was about constructing and operating; now it's about deploying services to the business, and there's a lot more services to deploy."
Gartner analyst Drue Reeves believes this model is a necessity for thriving in "the cloud era." "Your customers have become accustomed to [Software as a Service] and it doesn't matter if it's public or private, IT is going to be asked more and more to offer SaaS," he said. "So, IT must be able to get its arms around it and be able to properly apportion from either [public or private] -- and that means being the broker."
That also means looking at "shadow IT" -- the self-provisioning of technology by users -- not as a nemesis but as an opportunity. "Let's look at what consumers are using publicly, bring it in-house, vet it for them and understand what they need," Reeves said. "Create a stable, or network of providers, you can use when consumers need that cheap, pay-as-you-go pricing or quick provisioning, but also have discernment of when to put things in a private cloud."
Too often shadow IT creates problems that IT must fix, Reeves said. These range from simple inoperability to serious security problems. "[IT is] the front line and last line of defense when it comes to the digital assets of the company," he said. "Being a broker puts them in a better position to protect those assets."
The IT services broker model just 'makes sense'
In taking on the IT services broker role, it helps if the IT department is part of an organization unencumbered by legacy systems and entrenched IT job roles. As a joint venture between Automatic Data Processing Inc. and The Reynolds Co., Open Dealer Exchange was tied to some legacy systems; but by and large Haydar was free to build the sort of IT organization he believed made the most sense.
"IT, historically, you would buy a mainframe, a bunch of servers; and you would deal with all the cost of space, cooling, sorting, racking and stacking -- all those complexities. People just don't feel that's a necessary part of what IT means nowadays. They think providing services is what makes the most sense," Haydar said.
Haydar outsourced Open Dealer Exchange's ERP, human resources and customer relationship management, or CRM systems to cloud providers instead of building them from scratch. He also consolidated several email systems and outsourced email to Google Inc.; and he uses Citrix Systems Inc.'s GoToMeeting for Web conferencing, ADP's Network Phone service and a Voice-over-IP service from 8x8 Inc. for telephony.
Which systems didn't make sense for Haydar to move to the cloud?
- Microsoft SharePoint, because it was too expensive to move to a cloud provider.
- The company's enterprise content management systems, because it made no sense to pay for the costs of moving static data between its systems and those of a cloud provider.
- The call center's PBX system, because, based on Haydar's analysis, the less expensive option was to keep it in-house and integrate it with the telephony cloud provider's system.
"I've done everything possible to move into the cloud, everything possible to strip out the busywork in terms of maintenance and focused on what we need to get the job done," Haydar said.
From IT cost center to cost controller
Along with stripping away cumbersome hardware and redundancies, by design, the IT services broker model strips away some of the complexities of proving ROI and managing chargeback. "It's much easier as things become commoditized," Haydar said.
More about the CIO role
The services broker model will make it easier for the CIO to demonstrate the monetary value of IT, said Jeff Kaplan, managing director at ThinkStrategies Inc., a strategic consulting services firm in Wellesley, Mass.
"Because they are now able to reduce the cost or better manage cost and measure the productivity and business benefits generated by these services, they are in a better position to prove their value by demonstrating not only a higher ROI, but a faster time to value," Kaplan said. "In today's market, that is essential and should be appealing to everyone involved."
Challenges to services broker changes
In addition to the financial homework, another challenge is to forge or strengthen relationships within the business and with vendors who may be unused to dealing with a gatekeeper. And don't overlook the seemingly obvious question of whether doing so is agreeable to the CEO.
"Internally, does your business expect you as CIO to behave this way? Or do they still see you as 'trusted supplier of technology?'" Hopkins said. "The first challenge for the CIO is to get the business to realize the strategic value … that can be difficult, not all of the business is going to be there."
There are also political ramifications. When hardware and systems leave the building, so do workers. "It's disruptive of the old IT model, and nobody in the disruption who is going to lose their job is going to support that change," Hopkins said. "So, it becomes difficult to garner internal support for what you're going to do."
In turning his IT organization into a services broker, Haydar needed far fewer technicians, for example, but his knowledge workers were still at a premium. "When it comes to the actual knowledge workers, that hasn't changed at all," he said. "Fundamentally the same work is being done; all that's changed is where it's being hosted and how we're charging back for it."
Let us know what you think about the story; email Karen Goulart, Features Writer.