Lean IT Transformation

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Organizations have made huge investments in IT infrastructure and are continuously spending on maintenance, upgrades and related administration and management. Lean IT Transformation is an approach for creating new cost-effective, agile and flexible IT service models by switching from company-owned IT hardware, software and services to per-use based models. It leverages the latest trends in cloud computing technology and next-generation SaaS business models. This approach will help organizations to significantly reduce total cost of ownership, help achieve desired business agility and guarantee quality-of-service through new IT service models. We will illustrate the cost-benefit analysis of lean IT transformation approach in Enterprise Collaboration scenario.



Overview

The traditional IT has multiple fixed and variable cost components involved. Organizations have invested a large fixed amount for initial infrastructure setup and continue to spend variably for management, monitoring, support for these IT systems to sustain day-to-day business operations.

Figure 1: Traditional IT Cost Dimensions

We all have experienced that despite heavy investments by organizations in IT, there is always a huge gap between what businesses expects from IT and what IT can deliver-back to the business. The issue becomes severe when it comes to reducing the time-to-market new products & services or facilitating quick changes in critical business functions related to partners, suppliers or customers.

On the other hand, IT has justified limitations in terms of complexity and heterogeneity of existing IT environment, inflexible legacy though business critical IT systems, software, hardware & vendor lock-in and so on.

The following summarizes the key business expectations, key challenges faced by IT and how the business gets impacted in terms of growth, operations efficiency, customer satisfaction and competitive edge:

Lean IT Transformation

Lean IT Transformation is an attempt to resolve the above problem cost-effectively by creating new IT service models and switching from company-owned IT hardware, software and services to per-use based models. It focuses on reducing the IT infrastructure and related liabilities to reduce total cost of ownership. It focuses on changes in IT services and payment models to achieve desired business agility and flexibility without any software, hardware and vendor lock-in. It also focuses on achieving guaranteed quality-of-services from various service providers. All these themes are realized by leveraging latest trends in cloud computing technology and next generation SaaS IT service models.

The lean IT transformation approach leverages the following key strategies that results in significant business benefits:

In the next section, we will illustrate the cost-benefit analysis to of adopting lean IT transformation in Enterprise Collaboration scenario.

Enterprise Collaboration Scenario: Lean IT Transformation

We understand that collaboration is a very wide concept and it goes much beyond emails, messengers and collaboration portals. However, for the purpose of this article, we would limit the definition of enterprise collaboration platform to the following components, which are most widely used in organizations of all sizes:

  • Email Exchange
  • Collaboration Portal
  • Messenger or Communicator
  • Office Applications like Word, Excel, PowerPoint, etc.
  • Other tools like whiteboards, live meeting, voice conferencing, etc.

For the purpose of cost-benefit analysis, we would limit our analysis to an Email solution in this scenario. The following is derived from the latest report published by Forrester:


# cost per user per month

We learned that Google-hosted email service offers cost of approx $8 per user per month for organizations of any size. It makes the on-premise Email solution completely uneconomical for the organizations with less than 15,000 people. We also noted that the Googleehosted solution has only web interface and does not have offline mail client software, which might be required by most organizations.

We also found that Microsoft Hosted Exchange solution provided significantly lower costs of approx $20 per user per month for the organizations with less than 30,000 people. In brief, the MS Online offers hosted Exchange, hosted SharePoint and Communicator services on Microsoft cloud platform.

We suggest readers refer to the online cost calculators provided by MS Online and Google Apps offering to develop a complete business case for the complete enterprise collaboration scenario. We also suggest deriving the y-o-y savings and related cost-benefit analysis for final decision making.

The business benefits for the above scenario sound attractive, but there are multiple challenges in real-life implementation of such solutions. For e.g.:

  • maturity of existing cloud platforms
  • maturity of SaaS business models
  • maturity of service providers
  • level of customization available with software packages
  • data security and ownership challenges
  • back-end enterprise integration challenges and so on

Roadmap

We identified the key criteria that can help organizations to prioritize the transformation of existing IT infrastructure and applications on to the cloud-based platform. These criteria include business value of the application, size and complexity of the application, equivalent cloud based offering availability, integration constraints in application migration, data security and ownership constraints, overall usability experience and so on.

Figure 2: Lean IT Transformation Roadmap

We suggest organizations who are considering cloud-based solutions as their next-generation IT to undertake lean IT transformation in an iterative manner, by moving the simple and non-business critical applications first to the cloud followed by more complex and business-critical applications with a careful, systematic and detailed evaluation of all service providers and their service offerings.

Conclusion

Lean IT Transformation is a high level approach for next generation IT services suitable for organizations of any size. It promises significant cost savings, desired business agility and guarantees quality-of-service. The current IT trends and various leading analyst reports are showing that organizations have started thinking about moving towards lean IT in-parts. There are multiple challenges to realize all the benefits of it and also manage seamless and smooth transition; however for several mature scenarios it is worth taking the risk.

About the Author

Bhavin Raichura and Vijay Rao are associated with Infosys Technologies Ltd (NASDAQ:INFY) in Manufacturing vertical. Infosys is a global leader in the "next generation" of IT and consulting with revenues of over US$ 4 billion. Infosys defines, designs and delivers technology-enabled business solutions that help Global 2000 companies win in a Flat World. Raichura and Rao are closely working with clients, for conceptualization, definition & business-case preparation for technology-oriented business-focused solutions; aligned with latest industry trends.

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About Infosys Technologies

Infosys Technologies Ltd. (NASDAQ: INFY) provides consulting and IT services to clients globally as partners to conceptualize and realize technology driven business transformation initiatives. With over 25,000 employees worldwide, we use a low-risk Global Delivery Model (GDM) to accelerate schedules with a high degree of time and cost predictability.

We provide solutions for a dynamic environment where business and technology strategies converge. Our approach focuses on new ways of business combining IT innovation and adoption while also leveraging an organization's current IT assets. We work with large global corporations and new generation technology companies - to build new products or services and to implement prudent business and technology strategies in today's dynamic digital environment.