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What cloud computing means for the future of IT organizations

Bernard Golden | April 10, 2013
At this year's Cloud Connect conference, discussion moved from defining cloud computing to discussing practical enterprises applications of the cloud. That is, until two McKinsey consultants suggested that the cloud could spell the end of IT organizations as we know them.

'New IT' Apps Emphasize Engagement

However, the McKinsey speakers did identify a category of applications for which cloud computing is an enabler. Moreover, unlike transactional systems, these applications offer significant opportunity going forward.

The McKinsey term for these applications is "new IT," and the distinction between traditional IT and new IT can be drawn as follows:

Old IT: Labor automation, individual worker productivity and nonhuman-scale computing such as record digitization.

New IT: Business model transformation, team and corporate productivity growth and digital-only products.

While new IT might seem, at first glance, to be rather squishy, the speakers offered a number of examples: Amazon cross-selling (business model transformation), Deloitte teams using Yammer to collaborate and Google AdWords being offered as a digital product.

A common term for new IT is "systems of engagement," which captures the digital, social and extended nature of new IT applications. The promise of New IT is engaging more deeply with customers to identify and implement innovative opportunities and increase financial performance. These are areas CEO are highly interested in, and they've identified cloud computing as the vehicle by which they can be achieved.

Unlike cloud computing for old IT, where the primary benefit is somewhat reduced costs, CEOs look to cloud computing for New IT to increase business flexibility and offer elastic capacity. For CEOs, reduced costs is only third on the benefits of cloud computing.

What Happens to Old IT When New IT Comes to Town?

The fly in the ointment for the CIO is that CEOs don't believe their current IT organizations can really implement new IT. They're going to look to public cloud computing for the infrastructure. Even worse (from the perspective of the CIO), CEOs may very well create another, parallel, new IT organization, unhampered by responsibility for legacy environments and uncommitted to traditional processes and practices.

It's a striking vision that the McKinsey speakers outlined. Old IT looks to cloud computing to achieve incremental efficiency within the context of established practices, while CEOs chase new IT to create new business offerings and implement deeper customer relationships--all without the existing IT organization, thank you very much.

The fact that CEOs would consider setting up a separate, parallel IT organization speaks to the deep dissatisfaction with IT as it's currently practiced. In a way, however, this perspective accounts for the steep growth of AWS, the rise of "shadow IT," and the fact that a new type of cloud buyer has come onto the scene.

I don't know how widespread is the phenomenon that the McKinsey representatives described, and it's impossible to predict how it will all play out. However, there's no doubt that old IT is under siege, threatened by the arrival of on-demand computing and the impatience of CEOs under pressure to achieve better financial results and bring new offerings to market. One thing is safe to predict: Cloud computing is going to look much different than the common IT vision of faster service desk support.


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