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Cloud Operating Model Transformation


Author:  Wiemer Kuik, IT Transformation Strategist, HP Helion


More and more organizations are realizing the benefits of a dramatically different operating model for providing IT services today. They are looking at a cloud-centric IT operating model in which services are sourced and delivered dynamically to meet changing needs quickly, efficiently and at a variable rather than at a fixed cost. But, this totally new way of sourcing and delivery raises the question: How do we organize all the technical and non-technical aspects of cloud, how do we transform the current IT operating model into the cloud operating model needed in the new world?


This operating model transformation is driven by changing business requirements--so it’s important to first understand the business requirements as a fundamental change in the continuous balancing act of an enterprise in investing, generating revenue and managing costs to ensure profitability.


Typically an enterprises use two major enterprise structures to maintain this balance:


  1. Functional structures--Using this structure, a company organizes around its core competencies like sales, manufacturing, administration, finance etc. These competences help ensure that available resources are optimally utilized and positioned in the right places within the company, and that these resources are not wasted. The focus on competence and functions delivers stability and long-term continuity. For this enterprise structure, IT organizations are typically a separate function or sub-function, often as part of Finance, reporting to the CFO.
  2. Business unit structures--Using this structure, companies optimize to manage profitability. The company structures the workforce based on the markets within the company needed to operate. Each business unit operates more or less independently in each market to maximize profits. This structure drives focus on cost effectiveness and external view. Within this structure, IT organizations preferably organize as Shared Service Centers to minimize the functional overlap created by the business unit structures.


As companies shift the balance between the functional structures toward business unit structures, shift from an Capex to an Opex mindset, IT organizations will have to align with their IT consumers moving from a traditional functional IT toward a services-centric structure.


This Cloud Operating Model Transformation describes the stages in the evolution of an IT organization from a traditional IT support function into a services based delivery model.


At one end of the continuum, IT operates within an Enterprise as a competent, predictable consumer of resources to make IT capability available for the Enterprise as requested by the enterprise functions.  


At the other end of the continuum, the IT delivery model is used to provide IT services on a commercial basis. Typically, IT organizations operating at this level within the model are structured as a mature service organization. They  deliver defined/agreed IT services that that conform to market-based, pay-per-use, value-based pricing per service. There is no committed consumption forecast from the service consumer. This type of delivery model enables IT consumers (business lines or external customers) to dynamically manage their IT spending and affordably consume IT services as needed from a centralized IT environment. Companies operating within a stable or shrinking market environment prefer this.


To protect their profits, business units need to be able to dynamic adjust their business unit OPEX costs to respond to fluctuations in business revenues. As an IT organization moves to the higher delivery states IT becomes more adaptive to ever changing business needs.


To get a clear non-technical insight into this transformation a clear customer roadmap is needed. The HP Service Transformation service creates a custom roadmap that describes in detail the transformation of an IT delivery organisation into a service-based delivery model by extending the technology dimension that first comes to mind with five more dimensions (service management, GRC, Culture and Staff, Processes and Service portfolio) while relating it to five relative perspectives of progressive service capabilties built up.


By applying this five by five matrix to a specific customer situation a surprisingly clear view can be obtained on how to truly change the current IT operating model into the operating model required by the change in business needs. Suddenly a customer can have true insight into the seemingly isolated projects.  Only a roadmap can provide this type of insight. Combining the key questions -Why, What, How, When and with What - with a program plan and cost benefit analysis is a powerful cocktail. If you think this business drive IT clarity is needed in your company feel free to contact us.


Senior Manager, Cloud Online Marketing
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About the Author


I manage the HPE Helion social media and website teams promoting the enterprise cloud solutions at HPE for hybrid, public, and private clouds. I was previously at Dell promoting their Cloud solutions and was the open source community manager for OpenStack and at Rackspace and Citrix Systems. While at Citrix Systems, I founded the Citrix Developer Network, developed global alliance and licensing programs, and even once added audio to the DOS ICA client with assembler. Follow me at @SpectorID

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