Balancing Cost/Quality with Agility/Innovation
At CMI, we have the opportunity to work with hundreds of clients. Through that lens I am able to observe I.T. Organizations across industries and in various sizes of enterprises. I have been around Enterprise I.T. for many years and in that time I have had responsibility for shaping a company’s I.T. capabilities during significant advancement/changes in the underlying technology stack. Through all of my experiences though, I have never seen a time period like today where the pace of technology change and the magnitude of the changes is so rapid and broad. The biggest challenge for enterprises today is how they can practically adopt effective emerging technologies to meet desired business outcomes.
Most enterprises that have been in business for more than ten years have a heritage of Enterprise I.T. rooted in working with the objective of delivering high-quality and reliable systems at the lowest possible cost. Most Enterprise I.T. budgets are based significantly on prior annual benchmarks – with the addition of funding for ‘new projects’. But even any new funding is usually calculated from the perspective of utilizing or expanding existing technology investments. This paradigm becomes a “Cost and Quality” mandate for Enterprise I.T. Management. Since the depreciation and maintenance on prior investments typically comprises a large portion of an I.T. budget, the levers on “Cost and Quality” principally are limited to process improvement, staff development, and targeted incremental spending. Capacity expansion in this environment is typically done by investing in expansion of existing infrastructure.
Some of the younger enterprises that I have been able to observe built and chartered their new I.T. Organization to focus on “Agility and Innovation”. With access to new enabling technologies, and the mandate to build nimble and agile technology stacks, some younger enterprises have (since birth) built more strategic I.T. Organizations.
Of course, the movement from an “operational objective” for an I.T. Organization to more of a “strategic objective” is not completely confined to young companies versus older companies. In fact, I argue that the movement from operationally focused to strategically focused is becoming a business imperative. Working toward the objective of delivering high-quality and reliable systems at the lowest possible cost is a vital business requirement, but aligning with the business strategies by building innovative and agile technology stacks will add tremendous value to an enterprise.
I think there are two components to successfully maturing and evolving an I.T. Organization. First, the I.T. Executive should have an accurate financial model on how their services are delivered. I call this “calculating the cost to serve”. I.T. Executives understand their budget line items but are they able to financially model what it costs (infrastructure, network, people, tools, etc.) to deliver their mission critical services to their end users? More importantly are they able to model what it will cost to expand that capacity incrementally to meet new demands (Or new services)?
The second component to successfully maturing and evolving is to use those underlying financial models to be able to create accurate scenarios for meeting new demand (capacity planning). These fundamental financial models will help you be able to build business cases for more strategic investments in your technology stack. We see the goal in shaping a technology stack to accomplish “agility” is to get to the point where the I.T. Executive has the ability to “build or consume” infrastructure when facing new demands that require capacity expansion. The ability to choose “build or consume” (or buy compute/storage for on-premise data center versus subscribe to compute/storage from a Cloud Provider) becomes a possibility when that organization has a hybrid-cloud capability.
With an innovative hybrid-cloud model, an I.T. organization can dramatically lower their time to provision new resources and achieve the objectives of agility and innovation. With a Cost-to-Serve financial model, an I.T. organization can optimize their resource expansion investments and achieve the objective of cost and quality.
CMI has built our “Adaptable Data Center® Practice” around the ability to help enterprises achieve both of those objectives (agility/innovation and cost/quality) through developing the Cost-to-Serve financial model for enterprises combined with hybrid-cloud architecture.