The "Impact of Cloud on IT Consumption Models" study explored the dramatic changes affecting IT at all key consumption lifecycle stages -- how businesses plan for, procure, deploy, operate, and govern IT. Once leaders have a clearer picture of where and how cloud will change IT consumption patterns, they will optimize the strategies to confront this change and deliver the services their businesses need to succeed. For more info:
Hello, this is Manjula Talreja, vice president of Cisco Consulting Services’ Global Cloud Practice. I am excited to share with you some findings from a ground-breaking study Cisco has undertaken, in partnership with Intel, on the impact of cloud on IT consumption models. Please note that you can download a copy of this presentation at the link shown at the end of this slide cast.
The Impact of Cloud on IT Consumption Models study explores the dramaticallychanges affecting how businesses plan, fund, procure, operate, and govern IT. While the growth trajectory of cloud has been extensively charted, there is comparatively little understanding of how cloud will impact IT organizations themselves, along with their remit, structure, and strategies. One of the clearest expressions of this cloud-driven change is the emergence of the lines of business (LOBs)—human resources, sales, R&D, and other areas that are end users of IT—both as direct consumers of cloud-based services, and as ever more prominent influencers of companies’ IT agendas. Cloud is enabling astonishing technology-led innovations, many of which are occurring beyond the purview of the “IT organization,” as traditionally conceived. The so-called “bring-your-own-device” (BYOD) phenomenon is but one example of this shift towards a new IT organizational dynamic. As cloud reduces barriers to adoption and places downward pressure on IT capital costs—while unlocking sources of potential innovation for the LOBs—the relationship between the business and IT changes fundamentally. So, what do IT leaders need to know about the role of the LOBs in the IT consumption lifecycle of the future? How do IT decision-makers perceive this sea change in their organizations? What will IT organizations fundamentally look like in three years? And what must IT leaders do to ensure their continued relevance to the business? Answering these questions is critical if IT is to continue to discharge an expanded role of enabling innovation and business agility.
The Cisco/Intel study, fielded in March and April of 2013, surveyed 4,226 IT leaders in 18 industries and in nine countries — United States, United Kingdom, Canada, Germany, Russia, India, Brazil, China, and Mexico. Respondents were drawn from both large enterprise and mid-sized companies; no small businesses were included in the study. All respondents were from the IT function,had to be conversant in cloud-related matters, and their organizations had to have experience with cloud (or be actively evaluating cloud initiatives). No line of business leaders were surveyed—just IT.
Among our key insights: Cloud is overwhelmingly a good thing in the eyes of IT decision makersDespite its challenges and disruptions , cloud is viewed, on balance, as a positive development for IT organizations. Four out of five consider cloud a welcome development.Cloud is here and growing—a significant share of IT spend has already moved to cloud. Cloud is not a future consideration—it’s a “here and now” reality IT leaders are grappling with.IT leaders in emerging markets are more enthusiastic about cloud, and are seeing greater impactsThis is one of the most interesting findings: the divergence between developed and emerging markets in terms of attitudes towards cloud. When considering cloud benefits, IT leaders in emerging markets seized first and foremost on the potential to transform their business and drive productivity and agility. By contrast, IT decision-makers in North America and Europe cited cost control and the appeal of a “pay as you grow” model as the chief drivers of cloud. This gives us some real food for thought in terms of how different geographies perceive cloud…Satisfaction with cloud providers is high, but so are expectationsCloud providers are well-positioned, but as the maturity of cloud implementation deepens, expectations for service, risk management, security, agility, and innovation are beginning to climb.Security concerns remain the chief brake on cloud growthWhether we looked at our data by industry or by geography—no matter what the lens—security dominates as the key concern and inhibitor to adoption.
There is no “one size fits all approach” – a world of many clouds will predominateOne thing that is becoming clear is that organizations will leverage cloud in a way that makes sense for a specific business need, whether public, private, or hybrid cloud.IT views itself as being front and center in the future…Another really interesting finding: IT leaders, especially those in emerging markets, anticipate the need for more centralization and more IT resources.…This is complicated by the fact, however, that the Lines of Business are gaining IT influence.Not just in funding or procurement, but throughout the entire IT lifecycle.As a result, IT must truly re-imagine how it partners with the business—in fostering consumption models that optimize delivery, create best-in-class user experiences, contain costs, and provide a platform for business agility, innovation and revenue growth.Cloud-driven impacts spanning the full IT consumption lifecycle therefore serve as a clear wake-up call for IT leaders
Seventy-five percent of our respondents believe that IT planning will increasingly involve stakeholders from the lines of business. This is a paradigm shift from decades of IT tradition, as cloud is creating a more distributed IT environment spanning multiple stakeholder groups. But according to our IT respondents, a key additional role is evolving for IT. Seventy-six percent of respondents believe this will involve acting as a “broker,” or intermediary, of cloud services, orchestrating the planning and procurement process for LOBs across internal and external clouds. Nearly three-quarters also believe that IT planning will increasingly take place with direct involvement from third-party vendors.The net is we will see LOBs and cloud providers influencing IT planning to a greater degree than ever before. And IT views itself as playing a central role as orchestrator.
The influence of third-party vendors also bears on our next finding, which is related to the procurement stage. A further 71 percent of respondents believe that the cloud-release cycles of vendors will impact IT buying decisions. In short, greater attention will be paid to the offerings of vendors; their latest solutions, capabilities, and launch dates will influence when companies decide to make purchases. A substantial portion of our respondents (69 percent)believe that authority over buying decisions will increasingly move to the lines of business. Overall, we found that 44 percent of IT funding is already coming from LOBs, a significant finding in and of itself.And 65 percent believe chargebacks to business units will be the primary IT funding mechanism. Interestingly, this trend toward increased reliance on chargebacks highlights a potential disconnect in terms of LOB expectations. While traditional “lump sum” chargebacks are a straightforward and fairly conventional model for IT funding, the most innovative IT organizations will demonstrate their partnership with business leaders by pricing services according to business value achieved. Chargebacks may in fact serve as a disincentive for adoption within the business; this can act as a brake on IT impacts.
Meanwhile, the influence of LOBs is being felt strongly, especially in the area of public cloud adoption. Our respondents identified the top three influences in this area as:identifying business requirements, recommending solutionsresearching products, technologies, and brands.Given the much-increased influence of LOBs across all lifecycle stages, it is imperative for IT to rethink its strategy. Indeed, LOBs can no longer be considered as buying centers alone. The LOBs are clearly moving into areas such as planning and governance, and IT will need to partner with them on a deeper level than ever before. LOBs are actively shaping the scope of IT needs and gaining influence in identifying problems, recommending solutions, and suggesting products and technology.
LOBs are making their influences felt in multiple ways. While IT leaders expect to maintain much of the oversight and authority that has characterized their role vis a vis the LOBs, they also are seeing increased “shadow IT spend”—where LOBs go directly to third parties, circumventing IT. 55% globally indicated they were seeing somewhat or significantly increased incidence of so-called “rogue purchasing.”
As we have seen, evolving IT consumption models carry deep implications for IT’s mission, organizational structure, and strategies. According to our respondents, the greater use of third-party cloud services will not marginalize IT departments. On the contrary, an overall total of 57 percent believed that the role and responsibilities of IT would increase relative to that of third parties. The percentages were higher in APAC (68 percent) and LatAm (64 percent) while Europe and North America lagged at 50 and 46 percent, respectively. Regardless of the differences, in all regions a minority sees their role waning in the next three years. So again we see a real divide between emerging and developed nations in terms of these attitudes.
As for the size and scope of IT, some observers have predictedIT departments will shrink and fragment in the cloud era. Yet our IT respondents disagree. A majority of respondents believe that their IT organizations will become larger and more centralized. Again, this relates to the increased complexity that comes with a cloud environment. But if IT is to be increasingly driven by the demands of disparate business units, our survey respondents assert, IT will need to be more coordinated and centralized to maintain order and prevent chaos. Indeed, among our respondents, 56 percent saw IT becoming more centralized. Fifty-seven percent of respondents saw the size of IT increasing (i.e., in full-time IT headcount). In APAC, this was 80 percent, and in Latam 69 percent. In some respects this may seem counterintuitive, given LOBs’ expanding reach in IT consumption. Yet respondents consistently pointed to the need to provide a level of coordination, consistency, and security atop what is clearly a fragmented innovation landscape among LOBs, including both customers and partners. Whether centralization and greater resourcing for IT is realistic remains to be seen. What is clear, however, is that IT and the LOBs will shape IT consumption together, and to a far greater degree than ever before. Notably, respondents in Asia Pacific and Latin America are nearly twice as likely to project an increase in the size of their IT organization than were their counterparts in Europe and North America, where just 4-in-10 foresaw a cloud-driven increase in headcount.
Cisco believes the survey data fuels 3 business imperatives for IT…Collaboration: IT leaders will increasingly need to collaborate with LOBs, who are influencing all IT lifecycle stages. In particular, the interlock and relationships between IT and LOBs will need to change as IT transforms to an “as-a service” model.Value Creation: IT leaders will need to reimagine what it means to partner with the business and share in value creation. This extends to funding mechanisms, budgeting, metrics, planning, governance models, and all aspects of how IT—as a function—is managed. Innovation: IT leaders should actively seek out opportunities to drive business transformation for their companies, making IT an engine for growth.
Thank you for taking the time to learn about these key findings on cloud impacts on IT.