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Outsourcing 3.0 coming in 2015

Chris Morris | Sept. 27, 2012
The CIO's role will evolve into a broker of services come 2015, when 'cloud-sourcing' becomes as common as deploying internal IT services across all departments.

Apart from the obvious technology transformations to be dealt with, there are also the commercial and cultural aspects of cloud services to be considered. The CIO will need to continue the transformation of all elements of the IT operation and balance those with focus on staffing resources. As more cloud services are used, the typical bias towards technical skills in the IT organisation will need to evolve to include a higher proportion of staff that are capable of providing the end-to-end IT service management (ITSM) skills necessary to manage services through their lifecycle -- from identification and procurement through to retirement. Inherent to this evolving skill profile is the ability to manage relationships with providers, monitor SLAs and identify business requirements before matching them with cloud-sourced services. Technical staff will of course still be required -- but will be a lower proportion of total IT staff. Retraining of existing staff would be preferable as it maintains corporate IP. Accordingly, budget must be allocated to facilitate this change in role. Hiring of new staff will ultimately be more expensive as experienced ITSM professionals are scarce in Asia/Pacific (excluding Japan) or APEJ and will come at a high price.

From a commercial perspective, there are some characteristics of cloud services which can slow adoption rates. A big factor is the immaturity of some cloud service contracts. Close inspection is needed to ensure service contracts meet business goals and the associated service level agreements (SLAs) comply with necessary legislation.

Another factor is IT budgeting: Two cloud characteristics will combine to force change on existing IT budgeting programs.

Firstly, the increase in operating expenditure (opex) brought by increased 'cloud-sourcing' will necessitate a rebalancing of the capital expenditure (capex) vs. opex split. With most IT budgets tied to an annual cycle, a move to multi-year OPEX based budgeting may take a number of budget cycles to achieve.

Secondly, many of the enterprise cloud services will be purchased directly by the LOB managers, using their own budgets. They will expect that these cloud applications will run on the existing enterprise network infrastructure and be supported by the IT department as part of its corporate responsibility. Convincing these LOB managers that they will need to pay additional costs on top of what they pay to the cloud provider for the usage of the network and for provision of service desk facilities will require the use of chargeback processes where currently they do not exist.

In the future cloud scenario, the sourcing of business and IT services from multiple external suppliers will result in a need to manage services from multiple providers across an extended service delivery chain, with enterprise-grade SLAs for all but the lowest value applications. In effect, the CIO then becomes a service broker and an aggregator. They will need to source, integrate then manage the services on behalf of their business units. For most, this responsibility will prove to be a major challenge, since ITSM processes are not yet fully implemented for existing on-premises applications in most organisations. In fact, most user organisations across APEJ do not yet have the ITSM maturity to do this.

 

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