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How can the IT operating model help turn promise into benefits on your cloud journey?

Authors

  • Philippe Oertli

    Director, Technology Consulting in Financial Services | EY Switzerland

  • Simona Pistalu-Patrut

    Senior Manager, Technology Consulting in Financial Services | EY Switzerland

  • Erik Norell

    Director, Technology Consulting, Financial Services | EY Switzerland

6 minute read 30 May 2023
Related topics
Consulting
Financial services

Enhance your IT operating model capabilities to give your cloud transformation journey the greatest chance at success.

Download "Transforming the IT operating model for cloud" whitepaper

In brief

  • For most organizations, the cloud transformation journey is well under way, but anticipated benefits often fail to materialize.
  • A focus on the IT operating model (ITOM) is essential to lay the groundwork for successful cloud transformation.
  • In our recent whitepaper, we explored four key areas to consider from an ITOM perspective; these are summarized here.

As cloud technology comes of age, it’s difficult to imagine life without it. From scalability, cost optimization and agility, to security and business continuity, the cloud promises improvements at various levels. So it’s hardly surprising that so many tech leaders have been pushing for cloud transformation within their organizations. However, as the first ambitious cloud initiatives come to completion, the anticipated benefits have not materialized for many. Even worse, some observe a rise in overall costs with limited tangible improvements.

It’s vital to enhance the ITOM capabilities first so you can reap the full benefits of moving to the cloud.

Simona Pistalu-Patrut

Senior Manager, Technology Consulting in Financial Services | EY Switzerland

How EY can help

So, why is this happening? We observe a lot of enthusiasm for cloud technology – paired with a narrow view of the IT organization. In other words, in the rush to embrace the cloud, organizations often invest only a limited amount of effort to think where and how it will enhance their current and future business. They also neglect to adjust the IT operating model (ITOM) accordingly. In our experience, it’s vital to enhance the ITOM capabilities first so you can reap the full benefits of moving to the cloud. This process includes careful selection of where and how cloud technology will add value.

In most organizations, the ITOM – and IT organization – have evolved over many years, and at a time where technology is advancing rapidly. These established structures need to be examined and transformed to create an overall ITOM that is fit for the future and includes cloud components where it makes sense and adds value. Wherever you stand on your cloud journey, we propose a four-dimensional approach to further your ambitions by focusing on the ITOM:

  1. Service strategy
  2. Service design and build/obtain
  3. Service management and IT operations
  4. Service costs and profitability

1. Service strategy

This is where you adjust the underlying IT structure for cloud component integration.

While IT organizations acknowledge the need to redefine existing structures in their ITOM, many still take a functional, tech-led view. This is why so many cloud investments end up not delivering the anticipated value. Instead, a service-oriented approach should be adopted to increase alignment with business and enable the implementation of value streams.

One key action to achieve this is the definition of end-to-end services. Then, the organization should realign accountability for each service – and its team, budget and governance. This also involves nominating a service owner with full responsible for the delivery and further development of the service.

To support this process, organizations should also adopt agile, by setting priorities based on digital business demand, underlying technology and vendor dependency. Leveraging the new-found service orientation can help shape the tribes.

 

2. Service design and build/obtain

This is where you enhance the service development lifecycle for cloud.

Considering the established market offering for new technology-related services, IT organizations should reassess their capabilities and decide on further outsourcing potential. This is part of the wider decision-making process on sourcing where services will shift from internal to shared (IaaS, PaaS, etc.) or external services (SaaS, BPaaS, etc.). Hereby the integration and management of cloud components is going to be decisive.

The transition of service development lifecycle (SDLC) to DevSecops

The service development lifecycle (SDLC) requires significant change to enable the realization of of cloud benefits. There will be three types of services – depending on the type of the integrated cloud component – each with different needs in terms SDLC. For shared services, SDLC will shift to DevSecOps with dedicated teams taking over the development and parts of the transition activities while for external services, most activities will be taken over by the cloud provider in the context of managed services. Enabling this flexibility in service build is important in bringing the ITOM to the next level.

3. Service management and IT operations

This is where you strengthen service integration capabilities while distributing IT operations responsibilities.

Integrating cloud components significantly impacts the service management and IT operations-related processes. Depending on the level of integration, the processes will require different degrees of adaptation, ranging from automating selected single processes to ensuring seamless continuity in processes between IT organization and cloud provider. It is imperial for IT organizations to strengthen their service monitoring and reporting capabilities and always ensure an up-to-date, complete, and accurate service catalogue.

In the new setup, the responsibilities owned traditionally by IT operations will shift to the DevSecOps team, the cloud provider or both, with the exact split depending on the integrated cloud component and the DevSecOps model in place.

IT organizations will need to decide what split of responsibilities makes most sense for their specific setup. In any scenario, effective change management and clear communication with the internal teams will be a key success factor.

4. Service costs and profitability

This is where you get a firm grip on service costs and profitability.

Many IT organizations struggle to fully understand the value of their services mostly due to lack of transparency in costs. This is partly due to the functional and silo-oriented structures we still so often see. It can also be difficult to clearly distribute aggregated costs to specific services.

Budget overrun
Percentage of IT leaders saying they had already used up the annual cloud budget

At the same time, cost management is a significant challenge for IT leaders, with 57% stating that they have surpassed their cloud budget for the year.

Managing costs starts with understanding in detail where they occur. This is true of traditional on-premise setups as well as hybrid or cloud setups. Establishing total cost of ownership (TCO) and understanding the cost and value of services is vital. But establishing proper control and management takes time, demands tried-and-tested approaches and often involves a certain degree of cultural change. FinOps can help create transparency over cloud usage and spend by focusing holistically on five areas: usage and visibility, incentives, regular negotiations, usage optimization, and cultural change.

Adopting FinOps is a sound investment in managing costs arising from cloud usage, which in turn is a central factor in any cloud project’s overall success.

Discover more

To learn more about these four dimensions, read EY’s whitepaper on transforming the IT operating model:

Download brochure
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Summary

To translate the promise of cloud transformation into tangible benefits, significant adjustments to the ITOM are required. The primary focus of this transformation should be on adjusting the underlying IT structure for cloud component integration and enhancing the software development lifecycle, including the service management and IT operations capabilities.

The ultimate goal is to increase the market-product fit and speed-to-market by use of agile and DevOps as well as to improve costs efficiency and profitability through FinOps methods and total cost of ownership view.

About this article

Authors

  • Philippe Oertli
    Director, Technology Consulting in Financial Services | EY Switzerland
  • Simona Pistalu-Patrut
    Senior Manager, Technology Consulting in Financial Services | EY Switzerland
  • Erik Norell
    Director, Technology Consulting, Financial Services | EY Switzerland
Related topics
Consulting
Financial services

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    EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Limited, each of which is a separate legal entity. Ernst & Young Limited is a Swiss company with registered seats in Switzerland providing services to clients in Switzerland.