Saturday, April 9, 2011

The Future of the IT Department

ReportTen Predictions that will Change the Focus of IT Service Management Reporting

What will the corporate IT department be like 10 years from now? I have been asking this question because the answer will tell us which information will be required by the IT manager of the future. Once we understand the information requirements, we will be able to infer the functionality that IT Service Management applications will need to offer.

Speculating about the future of IT is something I always enjoy. Whenever I get the chance, I pick the brains of IT leaders about what they see on the horizon. From these conversations, and from what I see happening around me, I have concluded that we are about to witness a gradual but major shift in the IT landscape. The forces that will be shaping our future within the IT industry are already apparent and will result in a shift that seems inevitable.

Today I would like to offer 10 predictions. Each prediction provides the basis for the next one. I hope they will invoke some debate and inspire more people to think ahead, so that we can start building solutions for the IT manager of tomorrow.

1. Most applications will be delivered as a service

This is the trigger that will gradually take us to an entirely new kind of IT department. Software as a Service (SaaS) will be the norm. This is unavoidable because the advantages are too great for both the software vendors and their customers.

In a true SaaS environment, we will no longer see traditional software hosted on a separate (virtual) server for each customer. Instead we will see a single production instance of an application. All customers will use the same instance to work securely with their own data. It will take some time for software vendors to rebuild the current applications to support this, but once they have, this will translate into enormous savings for them. When a customer reports a bug, they will be able to reproduce it very quickly. They no longer need to ask which version of the application the customer is using on which version of which operating system and on which version of with database. The vendor knows all this and has access to the log files.

The advantage for the customer is also enormous. Apart from skipping the initial steps of securing server and storage capacity, downloading the software and installing it, the customer will also get bug fixes shortly after they have been discovered. They do not need to download a patch, test it and install it. It will all be done for them. It is the responsibility of the software vendor to ensure that the production environment remains secure and responsive. If the vendor does not, all customers will be affected and the vendor’s reputation will quickly deteriorate to the point where customers will look for alternative vendors.

Ten years from now, we will simply not be able to comprehend how we were able to provide IT services to end users. It will seem hopelessly complicated when we consider how hard it would be to build and maintain our own enterprise application environment.

Naturally, SaaS will eventually bring other benefits (e.g. collaboration across organizational boundaries and benchmarking), but I believe the abovementioned advantages are sufficient for software vendors to want to offer SaaS, and for customers to demand it.

2. Cloud computing will grow dramatically

Most software vendors will not have the scale or the desire to host their SaaS environments. Today most software vendors are not fully capitalizing the benefits of SaaS. They simply make a completely separate hosted instance available to each customer. It is relatively easy for software vendors to ask traditional managed service providers to host their applications in this fashion. Over time, however, software vendors will adapt their applications to be able to offer only a single shared production environment for each application. Traditional managed service providers will not be able to offer the same global coverage that cloud computing providers already offer today. This is a key requirement for software vendors when they start to optimize their application response times for their customers around the world. Hence software vendors will use the services offered by the largest cloud computing providers, like Amazon, Google and Microsoft.

3. MSPs will suffer and consolidate

The corporate IT department has already figured out that it is a pain to provide processing power and storage capacity for all the enterprise applications. Many large corporations have centralized this in their datacenters to keep it manageable, others have already outsourced most of this. As more and more organizations choose to obtain applications for email, ERP, CRM, ITSM, etc. as a service, they will rely less and less on their datacenters and MSPs as these applications will be running in the cloud.

Fortunately, there is more to corporate IT than the enterprise applications. PC support, first line support, wide and local area network connectivity, printer maintenance, etc. will secure the relevance of external service providers in the future, but a large chunk of their business will move to the cloud computing providers. This will make the outsourcing industry even more competitive. Considering that there are literally thousands of MSP/ESPs in the world, it is likely that we will see a wave of consolidation in this industry.

4. Smaller ESPs will start to commit to resolution times

Historically, external service providers have done whatever they could to avoid committing to resolving incidents within a specific timeframe. They have only committed to response times, which of course are next-to-meaningless. Worse, ESPs even managed to ensure that their contracts include verbiage like: “…will use commercially reasonable efforts…”

To compete in the new, even more competitive, environment, small MSPs will be willing to commit to measurable results. Eventually this will force the larger external service providers to follow suit.

5. The term of outsourcing contracts will become much shorter

When you ask IT managers whether they are happy with their ESPs, you typically get the sense that they are very unhappy with one or two of them, yet they have come to accept their fate. Why? Because the ESP was already there when they took over and the contract will remain in place for several more years. The wording of the contract is such that the ESP cannot be forced to improve, so they feel that there is not much they can do about it.

External service providers will also benefit from SaaS. It allows them to use IT System and Service Management applications and pay on a monthly basis for their usage, without any long-term commitment. They will no longer need to acquire expensive software licenses when they onboard a new customer. In the past, they had to write-off these software licenses over a period of roughly 3 to 5 years. By also separating any hardware ownership from the agreements, an MSP will be able to substantially reduce the minimum term of an outsourcing contract. Whether they will be able to offer their services on a month-to-month basis remains to be seen, but the MSP that is able to do this will certainly have a competitive edge.

6. The corporate datacenter will disappear

As the enterprise applications are slowly moving from the corporate datacenter to the cloud, the datacenters will become smaller and smaller. With network and internet connectivity already managed by an ESP, there is little need to maintain the datacenter facilities.

7. The IT department will no longer require specialized technical skills

The elimination of the datacenter will cause a large part of the organization’s technical IT skills to move to ESPs and cloud computing providers. The rest of the technical IT knowhow will move in the same direction as organizations start to feel more comfortable with the idea of outsourcing. This renewed trust in outsourcing will stem from the increased willingness on the part of ESPs to be held accountable and the new ease with which customers can switch between ESPs when they are not satisfied.

Organizations will entrust different parts of their IT infrastructure to different ESPs. The days when corporations would outsource all of their IT to EDS or IBM are long gone, and it is unlikely that companies will ever again put themselves in a position where they are so dependent on a single external service provider.

The only technical skills that companies may choose to retain are those needed to develop and/or configure their core business applications from which they derive a competitive advantage, and for which a detailed understanding of the business is needed. Still, it may well be possible to only specify the functional requirements and leave the development to contractors.

8. The new IT professional manages agreements

Organizations will attract a new kind of IT specialist. They no longer need this person to manage a local area network, configure a new server, or install an application. These skills have moved to the managed service providers and cloud computing providers. The new IT professional will need to be able to negotiate and manage the agreements with the MSPs and the business users.

9. IT will again be managed by the Finance department

In the early days, the Finance department was responsible for IT. Back then they were the largest consumer of IT, so it made sense. Slowly other departments also started to rely on IT services to continuously improve quality, efficiency and predictability. At the same time, IT became more and more complex. The finance people no longer understood what these IT people were talking about. Eventually Finance was happy to grant IT its independence.

In the years to come, the Finance department will realize that they are better at negotiating and managing agreements than the IT department is. When this happens, we will see the responsibility for the IT services move back to the Finance department.

10. Dependence on IT Service Management reporting will increase

The IT manager of tomorrow will need to negotiate changes when service level targets are not being met, when costs need to be reduced, and when functionality needs to be adapted to meet new business requirements. Negotiating and managing agreements requires different information than managing technology. The information that this IT manager requires will focus on service levels and the financial aspects of service provision. This information is as important to IT managers within external service providers as it is to their peers who work for their customers.

What does this mean for IT Service Management applications? They need to be able to provide data that can be trusted by ESPs, their customers and auditors. This data needs to be structured so that it will be possible to measure not just the level of service provided to the business, but also the level of service obtained from the ESPs and software vendors.

One might argue that IT managers already require this information today. I totally agree. It seems, however, that until the responsibilities for the technical and operational complexities are removed from the corporate IT manager, this person will not be able to focus sufficiently on the service levels and service costs to make these the key requirements for selecting an IT Service Management solution. This may explain why it is still so incredibly hard, if not impossible, to extract this information from today’s leading IT Service Management applications.

This article was originally posted in October of 2009 on Westbury's blog.