IT must become a service provider, or die

The traditional role of IT departments is shifting, metamorphosing, even vanishing in some cases. It used to be that IT was the “department of no”. But a couple of decades ago, open source became a thing. Suddenly anyone could obtain world-class software without any license cost. Then a decade later, along came the cloud, in the form of SaaS companies like Salesforce as well as IaaS like AWS. With SaaS, anyone could sign up for a subscription-based purchase for a few bucks a month. Most people never did the math to understand what that looked like in the long term, but at least it fit within their purchase limits. With IaaS, anyone could now obtain the hardware as well, for a cost that fits within the typical developer’s expense budget for a single server.

Thus began shadow IT — people buying things that would’ve typically fallen under IT purview, but outside of its budget and control. Most ironically, in some cases shadow IT happened from within IT itself, as a rebellion against its own processes, budgets, and bureaucratic overhead. Before long SaaS and IaaS became dominant methods of procurement for new applications, and even grew existing share in so-called “brownfield” use as well.

However, most IT shops haven’t seriously considered the long-term implications. Departmental budgets coming from marketing and from lines of business are leaving IT, and over the course of a few years, this will transition to subtractions directly from IT’s budget. In other words, departmental budget dedication to IT becomes a voluntary contribution — they’ll put the money wherever it seems most useful, much like college tuition.

So IT must change. Here are two examples, from Mike Kail (Yahoo CIO formerly of Netflix) and from Facebook. In both cases, they’ve transformed the role of IT into a true service organization rather than a gatekeeper. In particular, note that they’ve moved toward approaches reminiscent of self-service (vending machines) and of Apple’s Genius Bar.

Even in “enterprise” level purchases, the role of IT is shifting. Consider the case of Solidfire. As they told me at their analyst day, their solid-state flash arrays start around $200K, and yet they’re adding REST APIs, and their customer base is shifting increasingly toward Fortune 500 IT shops rather than purely service providers.

That’s because IT is becoming an internal service provider in its own right, with the same competitive landscape that its external competitors face. The difference is that its mission must be to provide a lower barrier to entry. From the shadow IT buyer’s point of view, internal IT has the competitive advantage of avoiding much of the purchasing, infrastructure, and billing overhead that external vendors and outsourcers have. IT can transparently monitor to get what it needs while helping users avoid the burdens of registration and payment that they’re accustomed to with public cloud. This is an opportunity, so IT must seize the day.

The next step? That’s true integration with the business, and a focus on business value. But becoming a service provider is a vital step along the way.

Disclosure: Salesforce.com and Solidfire are clients. AWS has been a client. Apple, Facebook, and Yahoo are not clients.