How the Cloud is transforming IT departments

Image Credit: Kevin Dooley via flickr

The Cloud is often considered an amalgamated progression of web2.0 (SaaS) and virtualization technologies(IaaS) - which it indeed is! However, the emergence of Cloud Computing also draws from a organizational shift in IT departments - from in-sourced to outsourced. What started in IT depts as routine maintenance outsourcing is now taking shape in form of the Cloud which promises to not just outsource routine operations but everything including financial management (move from Capex to Opex) of IT infrastructure owned by the company.

As the organizational structure shifts from in-sourced IT to the Cloud - it impacts the role of the CIO, which has been a much talked about topic. However, what has not been talk about much is how the Cloud will impact the rest of the IT department and the roles of techies in it. To understand the impending metamorphosis - we need to understand the existing position of the IT department.

Across organizations departments are divided into core business departments (Manufacturing or Service Delivery - including Supply Chain and , Sales, Marketing, Finance / Accounting) and support departments (Admin, HR, Procurement, Customer Relations, IT etc.). While the activities of core departments varies drastically based on the industry in which the company operates, the activities of the support departments remains more or less the same.

Even more, almost all support departments do the same core activity - vendor management. Yes - think about it! Your Admin department doesn't employ the office boys or sends runners to deliver the couriers; heck you don't even own the office space most of the times - so all the Admin department does is to manage vendors who provide these services. Procurement - as the name suggests clearly does just one thing - procure services and goods from vendors. Human Resources - well may be not vendors but they manage "employees" providing their services to the company; if you think of employees as freelancers - HR is again just 'sourcing' and 'managing' freelance vendors.

IT however, has had an uncommon origin - IT started with some computers being used by the company, grew into a mini-factory of its own within organizations and large IT departments ended up managing warehouse sized data centers with huge server farms and loads of techie (read: non-business) activities being carried out day-in day-out. Remarkably, this also happened because till mid 90's "IT vendors" continued to concentrate on core stuff like making computers more and more powerful or creating smarter networking devices and operating systems.

Untill mid-90's,when Indian IT companies rushed to the scene and the likes of IBM and HP realized the huge potential in 'IT services', many IT departments had already grown to humongous sizes - especially in computing intensive sectors like Financial Services and large FMCG's (which needed large ERP's). IT department was doing so many activities which no one else in the organization understood but were understood to be so critical to the organization's functioning that no one dared to interfere with IT.

All this started changing with outsourcing when large components of IT organizations operations were taken over by outsourcing partners. But, there was a critical dependency, due to concerns around ownership of data and privacy and other data related regulations in many sectors - the infrastructure (data center, servers etc.) continued to be owned and controlled by IT department. In many cases the actual workforce managing the infrastructure was outsourced but the management power remained with IT departments.

The Cloud is going to break this last link to bring down the hegemony of IT department / management! The Cloud adds a layer of abstraction between the business usage of IT and the underlying infrastructure. For example, when an business starts using a SaaS application - all it needs to do is to pay to the vendor directly per user. So as far as a business department knows which service fits its business purpose, there's nothing for the IT department to do!

Even in case IaaS - even if an organization opts for an internal Private Cloud, the server farm is virtualized and business is directly provided with "virtual servers" which they can scale up and down anytime without bothering to think about security, performance, provisioning additional capacity etc. All that is taken care by the Cloud orchestration platform underneath! The application is anyway managed by a IT Service provider.

Thus, with  the Cloud coming in, the IT department's role is also squeezed to vendor management. Help business select the best vendors (referred to in the IT services parlance as 'sourcing') and manage contracting and service levels of existing vendors. That definitely means of course is shrinking the size of an IT department; but more importantly also means a change in nature of activities performed by IT department.

However, that doesn't necessarily mean bad news for the IT administrators and other techie staff - they are not likely to loose their jobs - rather just re-position themselves from the internal IT department to the rolls of an IT services company. But yes, it does mean bad news for the 'traditional IT managers' - who will quickly need to gain skills in more strategic activities which have to do with leveraging technology for business gains or activities relating to vendor management such as vendor sourcing.

All this of course means more agility to the organizations and better control for business departments!
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