The New IT model: A Seller & A Buyer

Posted 08.05.14 in View from the Top by Nlyte Software

Delivery of IT Services is now a Seller/Buyer game

Delivery of IT Services is now a Seller/Buyer game

The IT world has been stood up on it’s head in the past few years. In years past, corporate users simply wanted what seemed like a never ending level of capabilities which were usually only partially defined in nature, and IT wanted nothing more than to satisfy as many of those needs as humanly possible and as soon as they could get to it. Corporate users were entirely captive to their corporate IT organizations, so everyone just made the best they could with the cards they were dealt.

Times have changed and we are transitioning to a buyer/seller dynamic. Your IT organization is now the SELLER of IT “products”, and your users are now BUYERS.  Luckily, your buyers are still giving their IT organizations the first crack at solving their needs.  They are asking them to come up with a plan for the IT services they need, commit to it’s cost, timeframes and support levels and then deliver it as agreed. Just like any seller/buyer relationship, seller must be able to meet the need of buyers.

Make no mistake, this is NOT a simple re-labelling exercise of the old relationships users have with their IT organization. That relationship is gone. This is different and the IT organization’s very long-term existence is at risk. A handful of years ago, Gartner made the prediction that 20% of Business will own no IT assets by 2012. BYOD, Cloud, SaaS, Virtualization were all part of the trends cited which are contributing to this decrease. Whether you agree with the numbers or the timing is mostly irrelevant, it is directionally sound. This is the time for IT organizations to put their business hats on and think about delivering services as if they were an external vendor trying to sell their wares to new customers. What they’ll find is that as a seller or supplier of products, they have the same needs to innovate, engineer, position, market and support their products, albeit with a ‘slight’ advantage of having a historically-captive audience. No longer entirely captive, that audience has somewhat of a preference to at least try to shop for their IT products internally first. How much of a preference? According to Ellen Messmer at PriceWaterhouseCoopers, 30% of all IT spending is happening outside of the IT organization. Other various analyst estimates put the figure between 15% and 35% but ALL agree that the number is BIG and it is growing! How can this be? Well it turns out that if a seller doesn’t offer the right products, available in the right timeframes and at the right cost, customers will go elsewhere. That’s why ONE-THIRD of the spending in IT is happening as a “Shadow-IT” process today!

So what does this mean to IT organizations that wish to stay in business? It means that today is a great time to re-evaluate your core approaches to service/product delivery.  The products you choose to deliver, the costs to do so, and how agile your infrastructure is to allow rapid turn on new applications.  Your “buyers” are willing to pay a certain price for each and every need they have and hopefully find one of the IT organization’s offerings to be a fit. The buyers will require delivery of those in a timely manner (their time by the way).  In fact they may be willing to pay a hint more and take delivery a bit slower to allow internal IT to be the seller, but only a tiny bit. Ultimately, they will vote with their dollars.

So that brings me to DCIM. Once an IT organization determines which products it wants deliver as its core business, they must think about the COST to deliver those products, the PRICE they will charge their customers and the speed at which they can deliver each. Whether these offerings are EMAIL services or STORAGE services or COMPUTING services, everything is a “product” that must have a higher VALUE to your customer than the price you will be charging them, must cost less to deliver than the amount you charge and must be deliverable in the timeframes the buyers set.

So there are two questions that should be at the top of  YOUR mind at this moment. The first one is “How can I determine the price I wish to charge my buyers if I don’t know my true COSTS are to implement those products?”  The key is we are not talking about approximations or best guesses here. It’s not just about estimating simple costs like it was in the old days. This is not Monopoly Money. IT spending is real money and is being spent externally a third of the time already due to the lack of alignment between buyer’s needs and seller’s capabilites!  So an IT organization must be very precise when considering the costs models and these must be all-inclusive to be a value business planning tool.  Sellers (remember, that is the IT organization)  that wish to stay in business can’t just guess what their cost is and then sell their products above their guess. They must KNOW what their actual costs are. Some of the basic costs are easy to recognize and to add up. These usually consist of the costs of hardware and software licenses. Just a little bit harder to see would be the cost of power for running the active gear and the cost of management and administrators.  But there are many ‘hidden’ costs that simply don’t get included in the traditional cost analysis and in this new model of IT, these can’t go unaccounted for any longer. The cost of the building, cooling and water. Costs of financing and depreciation. Warranty costs, support costs, cost of everything!  All of it needs to be accounted for before you are able to determine what your ‘selling’ price should be.

The second question is “How can I manage my data center capacities more proactively, to allow new applications to be implemented faster?” This is all about building a data center structure that is more agile. A structure that can be modified at a minute’s notice.  Adding or removing devices should be simple. Understanding the cascading effect and upstream/downstream relationships should be matter of fact. The business use of each and every device should be very clear and well defined.

That is where DCIM comes in. A comprehensive DCIM suite allows you to understand exactly what is in production (right down to the patch cable color) as well as quantify all of these costs involved in delivering IT services (product offerings). A solid DCIM solution allows you to create a financial model that supports your product catalog of IT products. Each IT service/product that you wish to sell can be quantified to determine the true cost to deliver that to each customer and the timeframes involved. The DCIM suite also enables you to plan and manage technology refreshes of aging equipment, which affects costs as well. DCIM enables the IT organization to shorten delivery times. DCIM really is a fundamental business planning tool for those IT professionals looking forward, rather than backward.

And what happens if you don’t implement DCIM and find your costs are different than you originally guessed, or if your turn-around times are too long? Buyers go elsewhere. A third of them to be exact. Buyers want the right products, at the right price and in a reasonable timeframe. In the “New IT” model, buyers have the ability to go elsewhere for these IT products, and IT organizations must adapt to delivering their offerings in a competitive market according to buyer’s rules. DCIM is the enabler to do so.

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