Externalization of IT (macro trend 1 of 3)

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Back in September 2009, the Burton Group (acquired by Gartner in January 2010) posted three predictions for the year to come. Three macro trends were determined and detailed: externalization of IT, consumerization of IT, and democratization of IT.

This blog post discusses externalization of IT; two follow up posts will cover the second and third trend and how these are enabled by cloud computing.

Externalization of IT

“Externalization plays an important role in IT economics, prompting value assessments of what capabilities should be treated as commodity. Enterprises are refocusing their efforts on core business capabilities while examining alternatives for the non-core activities.” (Chris Howard)

Two years after the predictions, we can easily see that externalization is still a hot trend. Not only is outsourcing of non-core activities still an ongoing practice in businesses around the globe, the evolution to cloud computing has increased the number of standardized services available on demand. Cloud computing offers great potential to compose or orchestrate your application landscape using commoditized IT services. Guidance of how to do this in a structured way, by using IT architecture, can be found in a previous blog posting.

Cloud computing offers both technical advantages and great business value. In a recent study (“The power of cloud“) by the IBM Institute for Business Value there are three cloud archetypes, classifying organizations according to the extent to which their use of cloud impacts value chains and value propositions. The archetypes are captured in the Cloud Enablement Framework, a proposed framework that enables businesses to plot their indented use of cloud computing and how this drives innovation.

  • Optimizers make use of the ability to rapidly provision and de-provision new services in a pay-for-use accounting fashion which also enables a quicker time-to-market. They use the cloud to incrementally enhance their customer value propositions while improving their organization’s efficiency
  • Innovators take the possibilities that all the various cloud services have to offer and orchestrate these services to complement their existing business model with new value propositions for their organization. They significantly extend customer value propositions resulting in new revenue streams, and transform their role within their industry or enter a different industry ecosystem.
  • Disruptors go even one step further, building their entire business models and value propositions based on only available cloud services. These organizations make most use of the wealth of options out there, creating possibilities we have not imagined before. They create radically different value propositions; generate new customer needs and segments. They disintermediate existing industries or even create new ecosystems

IT and business need to shared responsibility for cloud strategy and governance, and look beyond the organization’s borders to maximize value derived from cloud adoption. The advice here is that organizations need to assess themselves using the Cloud Enablement Framework and examine the potential to innovate by using the cloud’s business enablers.

When we think back on the subject of this blog posting, Externalization of IT, actually the “disruptors” not only seem to externalize their IT but their entire business processes. In any way, when we look at many of the large international research firms such as Gartner, Forrester, and IDC, cloud computing is here to stay and is changing the way we do IT and business.

Watch out for the next blog posting, where I discuss the second macro trend: “Consumerization of IT.”

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