Cloud Modernization’s Impact on Organizational Structure

Author by Nathan Lasnoski

The movement to the cloud is driving not only workload transformation but team transformation as well. A common question I’m asked is “how does the move to the cloud change my IT org structure?” The movement to the cloud is only one of the factors impacting the change of the IT org structure, while it is also being impacted by the movement of technology into the business vs. living in a corp IT entity.

Reality of “IT” Spend

The average corp IT spend continues to go down or remain stagnant as a percentage of revenues. Is this representative of the focus companies have on leveraging technology? No. It only tells part of the story. The reality is that although corp IT spend is reducing as centralized IT becomes commoditized, the technology spend has drastically increased as a percentage of revenues in product development (IE. ‘in the business’).

Another way to look at this is in relationship to payoff, not just costs. The business understands, or is understanding that tangible ROI comes from product investment that leverages technology because it can be monetized in new revenue. Digital Workplace technologies ALSO monetize in new revenue, if they are thought of as ROI producing products, not as corp IT infrastructure services. As you can see below, the corp IT infrastructure value continues to remain stagnant or decrease in comparison to corp IT spend over time.

So, where does this leave the corp IT organization? Does it still have a purpose and how does it shift to address the new demands and concerns? The corp IT organization is needing to change from addressing needs of non-commoditized infrastructure deliverables which are heavily siloed, to focusing on cloud multi-capability skills and cloud enablement. This is in conjunction with roles that CIO / CTO tend to fulfill within the organization. If you look at that shift in terms of functions vs. actual positions in a company (understanding sometimes one person holds both responsibilities). You’ll notice in the graphic below the move toward “high focus” activities in the CTO org (or function) which is driving product revenue or employee engagement vs. focused on base delivery. You can also see the struggling place of the corp IT organization, but as we’ll discuss, still having a very relevant place in the picture:

The corp IT organization focuses on governance, platform, and enablement of the cloud environment for the organization, with traditional commodity dropping off and moving into model and governance only vs. delivery. These provide value that business may not address out of best interest. Think about it in terms of economics, where market failures exist in a purely capitalistic system and some level of controls are necessary to protect the market from itself. This is somewhat like what corp IT will continue to provide surrounding cost, enablement, security, and governance. The corp IT organization also has the ability to move into the “high focus” zone by engaging in transformative technologies that provide capabilities to the business vs. just infrastructure. By capabilities I’m talking about Digital Workplace type technologies that bring ROI mapped efficiency and results not just cost savings. In conjunction with that change, I’m seeing the overall move look something like this:

What I find is the traditional IT organization is drained into the modern technology organization, specifically the “corporate cloud arch and ops” organization on the right. The security organization tends to remain seperate and the “product” teams and “innovation” teams tend to exist in the business and with a CTO respectively. Somewhat like this:

The movement of corp IT resources into the cloud architecture and operations organization is about the confluence of valuable functions while the skill matrix changes and certain depth skills fall off the map. The moment is toward skill shift, consolidation, and execution on the corp IT and cloud practitioner side, while the other organizational elements take on their new skills as well. The corp IT modernization looks like this, with some of these skills making their way into application and production devops teams within the business.

The goal of corp IT needs to be to build an effective partnership of delivering, normalizing, and providing value around corporate governance, in partnership with the development teams and product teams that live in the business.

The maturing environment looks more like this:

  • Corp IT – Governance, Standards, Policies
  • Innovation & Business Enablement – Driving What’s Now & Next
  • Application DevOps Teams – Product Development
  • Security – Cross functional CISO & security teams

Each team needs to move as “high focus” as possible, as a customer-first organization, but to deliver on that, organizations like corp IT need to support by providing shared assets. Will corp IT ever completely cease to exist? Perhaps, but it would require not the elimination of protections and delivery, but the retargeting of them. In the case of things like storage and VMs, we’ve re-targeted the delivery to clouds or simply eliminated the concept of VM altogether. In the case of PCs we’ve moved to concepts like Modern Desktop and BYOD.

The challenges I have for every business today is:

  • Move to product focus with “high focus” on disruptive revenue production vs. legacy market
  • Refactor corp IT with the cloud to change the delivery model and the efficiency of executing on technology capabilities
  • Shift teams into refactored models which better support the future while draining the current environment of legacy demands

Questions? Let’s challenge the concepts and chat.

Nathan Lasnoski

Author

Nathan Lasnoski

Chief Technology Officer