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Using IT4IT for cloud finance: Three things to remember

KeithMacbeath

IT4IT cloud finance.jpg

 

By Keith Macbeath

 

The Open Group’s IT4IT forum provides the IT4IT reference architecture for managing the business of IT, offering standards that are designed, among other things, “to prepare for emerging enterprise IT industry trends faster and with reduced cost and risk.” So how does it help with the managing of Cloud, one of the biggest shifts in the management of IT at present?

 

Cloud, when used at a moderate or high level of maturity, will force three principal shifts in IT’s operating model:

 

  • Service orientation: IT becomes a business unit that delivers services at a price, not a cost center that executes functions within a fixed budget.
  • Decision rights, roles and actions: With Cloud, automation reaches a point where tasks like infrastructure provisioning ‘shift left’ to DevOps System teams (service consumers of IaaS) or to application software itself (for example, via containers).
  • Financial capabilities and risk: When IT is committed to instantaneous delivery of infrastructure services on demand, it has to invest in capacity ahead of time so it bears more financial risk than in the days when capacity was bought to order.

In this blog I will talk about how the IT4IT reference architecture can help deal with these shifts, especially through the lens of the financial implications.

 

  1. Don’t ignore the supports.

The IT4IT reference architecture consist of four value streams and a series of supporting activities, as shown in the IT4IT Value Chain:

 

IT Value Chain.png

 

 

 

 

 

 

 

 

 

 

It’s important to note that the word “supporting” can give the wrong impression: The supporting activities are often mission-defining or mission-critical; they are supporting in the sense that steel beams support a building. So, the first thing to remember when using IT4IT: Remember your supports.

 

This becomes obvious when we consider a shift-to-Cloud use case: if you want to provide Cloud services on a pay-for-consumption basis from a priced catalog, for the Request to Fulfill value stream you had better include financial capabilities (Pricing, Ordering and Billing) as well as technical fulfillment capabilities. Consideration of the financial processes you want can have significant impacts on the people, process and technology you will use.

 

  1. You need capabilities for the service lifecycle end-to-end, and services top-to-bottom

A core concept of IT4IT is the full lifecycle value chain for an individual service offering, with the service model as the backbone of what gets done through the lifecycle. The Service Model for a particular offered service evolves through the process of instantiation—where the real world and the framework meet, creating an instance, as illustrated here:

 

Service model.png

 

 

 

 

 

 

 

You can imagine how this applies to a single service. Take the example of an Infrastructure-as-a-Service offering like Windows Compute:

 

  • In the Strategy to Portfolio value stream, you have participation analysis capabilities you use to decide what services to offer (for example Windows compute in large/medium/small variants) and what service options to offer (such as data back-up and availability monitoring).
  • In the Requirement to Deploy value stream you have capabilities to stand up the service and service options you will offer, both the order and fulfillment capabilities and the resources they will use to deliver services.
  • In the Request to Fulfill value stream, there are capabilities for ordering and fulfilment that are available to consumers or consuming applications that need the IaaS services you offer.
  • In the Detect to Correct value stream, the IT service management, monitoring and data back-up/restore capabilities are used to keep the service running in line with SLAs.

Of course the analysis and automation capabilities required to achieve even this single-service delivery are not trivial. But with the higher levels of automation now becoming available through Cloud containers like Docker, you also need to think top-to-bottom in terms of the service model across multiple layers: business services consuming application services consuming infrastructure services.

 

Layers.PNG

 

Increasingly, with containers like Docker it is the multi-layer service model that will actually get executed through automation in what some are now calling the software-driven data center (or centers) with a DevOps methodology. That has “blow-back” impacts on the level of capability required in the Strategy to Portfolio value stream:

 

The Applications team will want to “impact analyze” the infrastructure cost through the full lifecycle since they won’t be ordering any of it manually at each stage in the SLDC and release cycle. The good news is the data structures required to execute this higher order of automation can be used to run impact analyses, and the analysis itself can be automated with machine learning.

 

The higher levels of automation may be confined to early adopters today, but change in Cloud capabilities is accelerating. At the very least, you want to make sure that the data model you use for configuration management is fit for multi-layer Cloud services and that it connects to an enterprise service model repository which holds the Application layer and Business layer artifacts.

 

  1. Map financial “support” capabilities to each Value Stream

According to Gartner, the adoption of Cloud by enterprises has followed an interesting path, essentially starting outside IT with SaaS solutions that business functions may use directly (Salesforce, Workday, Adobe Marketing Cloud and so on) followed by what Gartner calls Mode 2 use of Cloud: Agile capabilities for new applications and a DevOps orientation, often executed by ‘internal startup’ groups using public cloud services.

 

For internal IT shops that set up a private cloud or become a cloud broker, the challenge is to get their offerings used by application teams for Mode 2 as well as in traditional IT methods applied to systems of record.

 

Based on their experience with public Cloud providers, businesses and application teams have come to expect Cloud Services to be offered on a price-per-unit basis and to pay for the quantity of units they consume, whether on a subscription or metered basis, and so the financial supporting activities for Cloud need to match the transformation in the technical value streams.

 

We can see this clearly if we revisit the value streams with a medium-to-high maturity state in mind, and look at Cloud technical and Cloud finance outputs for each value stream:

 

Value streams.PNG

At this level of maturity, we can see a significant degree of interdependence between the capabilities required for the technical and financial outputs, very much in line with what we expect to find in mature supply chain management systems. Indeed, I see an effective Cloud management platform (CMP) as enabling IT to finally be able to match supply chain systems in terms of end-to-end effectiveness. This is the promise that IT4IT can help us to make good on, but only if all the supports are in place.

 

To learn more, read our ebook, Ignite Innovation in IT on how to take an IT4IT approach to brokering services, accelerating application delivery, and delivering cloud services.

 

Macbeath head shot.pngWithin HP Software Professional Services, Keith is responsible for IT Performance Management solutions. These solutions help instill a performance-based culture in IT that focuses on business outcomes: tracking IT performance against measures that the business lives and breathes. You can follow him on Twitter

 

 

 

 

 

 

Related links:

Blog post: The CIO’s new role: service broker

Blog post: Straight talk about DevOps

Blog post: How do you make IT more responsive?

Blog post: Transform to a services-led culture

Blog post: Why do you need IT governance? So you can stop adopting the wrong solutions

Blog post: To keep cloud customers happy, you need to monitor your services

Blog post: The secret to IT success—delight your customers so they come back for more

About the Author

KeithMacbeath

Keith Macbeath is a senior principal consultant in HPE Software Services specializing in applying BI techniques to IT Performance Management, including Cloud Financial Management. Keith has years of experience in data services, solution delivery and consulting to the financial services industry in London, Tokyo and New York.

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