Cloud CIO: In defense of corporate IT

Last week's blog post, Cloud CIO: Yes, Your Job is at Risk, was one of the most widely-read-and definitely the most -post I've ever written for CIO.com. Clearly, the discussion of cloud computing's effect on a CIO's career struck a nerve with readers.

One comment in particular stood out. The writer agreed with the piece, but took it a step further. She said when IT is truly a utility, a CIO is an unnecessary encumbrance who can be replaced by a contract administrator. In the future, this writer averred, smart software architects who can integrate the external services used to deliver IT functionality will be necessary, while "the CIO is increasingly just a person with business skills who does a turn in the IT ghetto until they move on to bigger things."

I don't want to pick a fight with the commenter, as the statement might have been made flippantly for effect, but the characterization of IT as a ghetto is akin to many pejorative descriptions of IT that we've heard in the past. It's a characterization that I strongly disagree with. In my view, IT is evolving into something far more important to companies than it has ever been before. Companies that treat IT like an afterthought, annoyance or unimportant backwater do so at their peril.

In the past, IT was a fairly isolated function primarily focused on transaction processing. After the "real work" of a company was done-i.e., a sale was made, a marketing campaign mailed, a widget manufactured, an invoice produced, an inventory updated- that activity would be captured in an application. IT was, essentially, the statement of record, where facts were stored.

Today, IT is far different. It touches every element of businesses. Marketing, for example, is increasingly carried out online, with sophisticated web interactions that result in analytic mining to understand lead- and buyer behavior. Sales today has no use for paper brochures, but instead allows reps, working onsite with customers, to do proposal generation based on product configuration and real-time viewing of supply chain data to determine potential ship dates.

These are just two examples. Dozens more could be identified. Simply put, IT has moved out of the back office and is now the basis of how companies operate every aspect of their business.

A compelling example of this showed up yesterday in the context of a story about whether public cloud computing is less expensive than internal IT. The company in question is eHarmony. It moved a Hadoop-based application from a public cloud provider to an in-house Seamicro array, and saved a bunch of money in the process. What was interesting to me about this story was not so much the economics (more on that in a moment) but the application eHarmony was running. To quote the article:

"eHarmony uses algorithms to analyze 29 different attributes of its member profiles and suggest matches. As its user base scaled to tens of millions of members, eHarmony turned to Hadoop, an open source technology that allows many small independent servers to work together. Hadoop enables applications to work with thousands of compute nodes and petabytes of data."

eHarmony relies on IT capabilities to run its business. Without being able to perform analytics on member profiles and suggest appropriate matches, it has no differentiable business proposition.

It might be tempting to portray eHarmony as a different kind of animal-an online business that relies on IT-but that would be a mistake. Every company is becoming that kind of animal, no matter what business it is in.

And that's the crux of the matter. IT is becoming more important, not less important. Consequently, IT organizations have to change to perform in that central role. That's what last week's piece was really about. Not the threat of job loss due to IT dwindling into irrelevance and becoming nothing more than a contract management outfit; rather, the threat of job loss due to not getting ready to assume a much more important position in the firm.

If you accept last week's blog statement that IT is becoming an information factory, the logic that it is more important than ever should be obvious. Do you think that manufacturing companies treat the head of operations as a contract administrator? Not a chance. Does Intel consider its chip foundries ghettos that high-fliers pass through on the way to somewhere important? No way.

The real theme of last week's post was that IT is too important to continue business as usual. A revolution in the role of IT is in the making, and CIOs need to prepare for it. The first order of business is to re-examine all established modes of operations and costs. Plainly stated, the traditional patterns of investment have to be radically rethought in light of the changing role of IT. Budgets have to be shifted from maintaining high-cost legacy applications to supporting new business initiatives that require scale and elasticity. CIOs have to ensure that every deployment decision is the most cost-effective alternative possible and not just assume that internal deployment is the least expensive option.

Which brings us to the other part of the eHarmony story-the cost of running the application internally or externally. As I mentioned in my recent post, How IT Can Become a Cloud Service Provider, many IT shops assume they can run an internal cloud less expensively than a public option. However, for most of these IT shops, the basis for this assumption is little more than wishful thinking seemingly made real by virtue of being instantiated in spreadsheet form. The fact is, most IT organizations are woefully unprepared to operate as an information factory because they have no real grasp of the marginal cost of providing resources and services-and until they do, assertions regarding lower costs than public providers are nothing more than that-assertions.

Enter the announcement that VMware purchased an IT economics company called Digital Fuel. In the blog post announcing the acquisition, Ramin Sayer noted that with the rise of external cloud providers, it is now possible for IT to be benchmarked against alternatives. Moreover, the nature of applications in a "cloud world" is changing, due to use of external services, uneven elasticity patterns, and so on, and that makes calculating their costs more challenging than in a world of stable loads and purely internal resources.

The days of de facto internal IT monopoly are long gone, and the days of making easy assumptions about the cost advantages of internal IT resources are ending as well. For IT to step away from its "ghetto" image and assume its rightful role as an information factory powering the operations of the company, a significant shift in operations, budgeting, and economics is crucial. It's clear that VMware recognizes this and has acknowledged it with the acquisition of Digital Fuel. As a CIO, are you ready to embrace that future?

Bernard Golden is CEO of consulting firm HyperStratus, which specializes in virtualization, cloud computing and related issues. He is also the author of "Virtualization for Dummies," the best-selling book on virtualization to date.

Follow Bernard Golden on Twitter @bernardgolden. Follow everything from CIO.com on Twitter @CIOonline

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