Given the growing pressure on IT to deliver corporate value, it has never been more important to achieve a resilient, reliable and scalable infrastructure. Yet with organisations enduring declining budgets, under-staffed IT teams and aging technology, many CIOs and their departments are facing additional challenges in managing Business as Usual (BAU) let alone respond to business demands for strategic improvement.
Add in evolving demands for true IT expenditure measurement that includes every aspect of the facility – from space to electricity – and the IT cost/value equation is looking increasingly unappealing at board level.
The shift towards subscription-based IT solutions – not only Software as a Service (SaaS) but, increasingly, Infrastructure as a Service (IaaS), provides access to key components such as storage, communications and networks in a flexible, scalable and affordable fashion Indeed, when compared with the true cost of an IT infrastructure – those costs that IT has traditionally chosen to overlook – the financial benefits of IaaS are truly compelling.
Can IT still operate as a cost centre? As technology now underpins every aspect of business operation and performance, CIOs are under ever greater pressure to deliver and demonstrate quantifiable business value. However, this shift is far from straightforward. The pace of technology change continues to create new challenges and business demands for innovation and real time services are escalating – yet CIOs are not being provided with the additional budget required to meet evolving demands.
With management demanding greater cost transparency, IT is increasingly being asked to demonstrate and justify the true cost of delivery – and that includes not only staff costs but also the cost of the data centre space and, critically, spiraling electricity bills.
Given that data centres can consume up to 100 times more energy than a standard office building according to figures from the US Department of Energy, it is more than reasonable for IT to take responsibility for energy consumption. Yet add these facilities costs to the IT budget and the cost/value equation is likely to look even less compelling for the business.
Considering these pressures, it is no surprise that growing numbers of organisations are exploring a raft of cloud-based subscription models that offer flexibility, scalability and a manageable, known cost-based. Yet while many organisations are familiar with the concept of Software as a Service (SaaS), indeed many have explored cloud-based applications for email, CRM and document management, growing numbers of organisations in both the public and private sectors are now considering the opportunities for extending the subscription-based model.
As a result, Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) are gaining significant traction across organisations of every size. According to Gartner, the worldwide IaaS market is forecast to grow from an estimated $3.7 billion in 2011 to $10.5 billion in 2014.
So how does it work? IaaS is a provision model in which an organisation outsources the equipment used to support operations, including storage, hardware, servers and networking components. This model can extend to include a number of aspects, including hand-held devices and Internet services.
The service provider owns the equipment and is responsible for housing, running and maintaining it; while the organisation can retain control over operating system and applications, if desired. The cost is typically per user or usage volume basis – offering the business the benefits of scalability plus, typically, the lower costs enabled by the provider’s economies of scale.
The contract is based on a strict service level agreement that enables the business to focus on underlying corporate requirements – speed, user numbers, availability and resilience – rather than the underpinning technology elements.
The model is compelling for a number of reasons. Firstly, five years into a recession that has severely constrained IT investment, many organisations are struggling to deliver the flexibility, scalability and resilience required by 24×7 global operations within the current infrastructure. Add in the squeeze on IT staff – and the trend for many, especially in the public sector, to take early redundancy – and many IT departments are struggling to maintain business as usual.
It is, therefore, extremely tough to even consider how to support evolving strategic business goals with the current infrastructure. How can a shared services model be delivered for example? How can an organisation manage the risks associated with sharing infrastructure with another organisation? And what is the true impact on the IT cost base?
How can the automotive industry even begin to address the implications of the planned European Union removal of block exemption that will enable dealers to move away from the traditional one marque sales model and work with multiple manufacturers? How can the existing infrastructure be scaled to support this fundamentally different sales model without adding untenable cost or risk disenfranchising both dealers and customers?
The flexibility, scalability and, critically, cost transparency of IaaS offer CIOs a clear route forward, enabling accurate and reliable costs in response to new business needs, access to the latest technology components and, critically, the ability to confidently predict provisioning timescales.
It is important to understand that IaaS is not just about providing high quality infrastructure components. With vendors offering cut price access to data storage, communications and Internet services, it may be tempting for organisations to shop around and piece together a range of cut price solutions.
However, the business risk associated with this approach is significant. Yes a service level agreement can determine the resilience and availability of each element of the solution. But what about the flexibility of provisioning new services? Or putting in place the resources and expertise to ensure back-ups are handled continuous or ensure that hand-held devices used in warehouses to update stock information in real time are immediately replaced to maximise productivity?
These infrastructure components are not stand-alone; they are the fundamental building blocks of an IT model that not only reflects business needs but can proactively drive operational improvement. So while the quality of the data centre facilities and communications is critical, it is also essential to work with a supplier with a track record in delivering high quality outsourced services; a supplier with the depth of expertise and resources required.
In an environment of declining IT budget and escalating IT demands, IaaS offers significant benefits for CIOs and IT departments looking to reduce costs and speed up the provisioning of new services. By removing the data centre from expensive office locations and signing up for a subscription-based service that encompasses every element of infrastructure delivery, the CIO can immediately meet Board demands for cost clarity with the benefit of a flexible model that enables IT costs to scale in line with business usage and demands.
Critically, the adoption of a flexible model from a proven supplier enables unprecedented speed of response to strategic demands. IaaS truly enables the IT department to make the transition from cost centre to a centre of demonstrable corporate value.