By Stephen McGrady
Associate
A big question facing many CIOs today has to do with the changing nature of enterprise IT organizations. What is the best delivery model for the applications on which their businesses depend? Should they keep everything in-house? Should they keep the servers and applications on-premises but outsource all of the development and/or management? Or would it be better to switch to a Software as a Service (SaaS) model, and let others handle it all?
While I cannot give you a one-size-fits-all answer, I can provide a framework for the evaluation process. Here are some of the most important questions you need to ask:
1. Is the technology new to your organization? If so, for the in-house IT option you need to find out if you have people in-house with prior experience working with this technology.
For example, say you’re considering switching from disc-based storage to a Flash-based storage system. Before you make the decision to handle this all in-house, you need to find out if any of the members of your technical staff have worked with Flash-based storage systems before. If so, do they know how to run a proof of concept to evaluate this? On the business side, do you have people in-house who can do a technical and financial analysis of this new Flash technology versus tried-and-true disk technology? And do you have a laboratory in which to test it all out?
2. If you’re lacking technical expertise, where can you get it? If you do not currently have in-house IT talent capable of working with the technology under consideration, then what? In this case, potential options for keeping the technology on-prem include:
a. Hire employees or in-house contractors – How hard would it be to hire people who have the necessary expertise? Can you afford these folks? Would you be able to give them the tools they need to do the job?
b. Hire a vendor – What about going the outsourced IT route? Do you have a relationship with a trusted vendor that can help you? For example, getting back to the storage example, perhaps you’ve been with EMC for years. You might choose to trust EMC to lead you through the move from discs to flash technology. Or you might want to introduce a new all-Flash vendor like Pure Storage to shake things up.
3. Are there physical site planning issues to look at? If you are leaning towards an in-house IT model, you need to consider whether or not this is physically practical. Is there enough room in your current data center for the technology under consideration? Can you meet any special environmental requirements that this technology needs?
For our storage example, you’d need to look at whether the new storage system would require more power or air conditioning, whether the Storage Area Network has port capacity, and whether vacant rack space in the data center is physically close enough for cabling, and so forth.
4. Are there time considerations coming into play? How quickly do you need to have the new technology up and running—and is a given IT delivery model capable of meeting this timeline?
5. Would offshore IT be best? If you’re finding that you need a less expensive way to deliver the desired technology, the next question to ask is if you’re willing to either locate the equipment offshore or locate the people who will manage and maintain the equipment offshore.
Often organizations cannot move their IT equipment off US soil due to government regulatory requirements about where data lives. In this case, you can still have a hybrid offshore IT model, for instance by having your on-prem system managed by technicians who are located in India or Eastern Europe.
If you’re working with established technology, this hybrid offshore IT model can work well. But with new technology, it can be problematic, as the low-cost offshore IT providers are typically on the trailing edge of technology. They use best practices that have been developed over the years for that technology, and train their people on how to implement these best practices. While offshore IT providers are usually very good at following established procedures, they may not have much experience working with something that is on the cutting edge.
6. What about SaaS and cloud-based IT? Of course, there are a lot of good reasons why so many CIOs are choosing to move towards buying software and storage as a service, and letting others handle managing the system. Why build when you can buy?
Why deal with managing an in-house storage system (or email system, etc.) when you can just rent storage space (or software, etc.) from Amazon or Google or Microsoft or some other industry player with an excellent reputation for doing a great job?
If you are not subject to any government regulations that would preclude going this route, you simply need to be aware that it requires a different mindset. Once you switch to the cloud your in-house IT organization is no longer responsible for producing the service. Instead of doing the plumbing you’re now hiring the plumber. Which makes the details of your service contract extremely important.
Pay special attention to terms and conditions for disengaging from the selected cloud provider. To extend the plumbing metaphor, you’re not just hiring a plumber, you’re buying your water from the plumber instead of buying it from the water company or tapping your own well. Proceed with due caution.
Be aware that a SaaS or cloud-based provider will work to the contractual terms, not to whatever it is that your management might demand that’s not in that all-important contract. Think long and hard about all of the things that you are asked to do, and make sure that you negotiate provisions for these services before you sign on the dotted line.
Conclusion
The bottom line is, when evaluating IT delivery models you must think beyond what company’s name will be on the box and how many dollars are in the purchase order. Your decision will have a significant long-term impact on your organization. Think in terms of processes, systems, capabilities, economics, office politics and maybe vendor/partner relationships, and walk through all of the “what-ifs” before you decide. Because whatever model you choose you are still responsible for delivering the services to your company.
About Stephen McGrady
Stephen McGrady has served in technology vision and leadership roles, including Vice President of Services, Chief Information Officer (CIO) and General Manager, for over 20 years. Since 2006 he has focused on executive management consulting that enables business clients to improve performance through intelligent use of information technologies.
About CIO Professional Services
CIO Professional Services LLC is a top-rated IT (Information Technology) consulting firm, based in the San Francisco Bay Area, specializing in strategic IT consulting and business / IT alignment. Companies come to us seeking assistance with their information technology strategy as well as to source interim CIO / CTO employees or fractional CIO / CTOs.
