The Role of Enterprise Architecture, IT Service Management, and IT Financial Management in the Age of Multi-Cloud.
My previous article, Beyond the Enterprise, described the alignment between legacy-based Enterprise-n, which defines a business, and the emerging concepts of Enterprise-a, which represents business capabilities and technology solutions that could transcend business boundaries. Strategy for digital transformation needs to determine a proper balance and alignment between Enterprise-a and Enterprise-n capabilities. This article responds to questions and comments from my colleagues and clients about capabilities and platforms that various vendors could supply, helping to facilitate the alignment between Enterprise-a and Enterprise-n.
In this article, I share my experience working with these vendors and their platforms under different conditions and constraints. The paper presents my point of view, which is based on my technology experience. No vendor or company provided sponsorship for this article.
Previously, I explored the relationship between two concepts, Enterprise-a and Enterprise-n, and explored their alignment within the context of digital transformation. Enterprise-n (“n” as a noun) describes the whole business or unit of the organization. Enterprise-a (“a” as an adjective) refers to multiple domains such as Enterprise Architecture, Enterprise Technology Roadmap, Enterprise Partner, or Enterprise Strategy. Enterprise-n and Enterprise-a draw on different concepts from different disciplines, such as organizational theory, strategic management, systems, and complexity thinking, etc.
In this article, I will focus on domains of Enterprise Architecture, IT Service Management (ITSM), and IT Financial Management (ITFM), which includes Financial Operations (FinOps). I will not discuss legacy modernization, technical debt reduction, or innovation management. The scope of this article doesn’t include augmented intelligence (AI) and machine learning (ML) and the application of OpenAI + ChatGPT to these domains.
Let’s begin with two definitions, ITIL and ITSM. ITSM provides a set of best practices and guidelines for managing and delivering IT services to meet the business’s goals (as in Enterprise-n) and its customers’ and partners’ needs (beyond Enterprise-n). ITIL is a widely known framework for adopting and implementing ITSM.
ITIL and ITSM were broadly adopted with varying degrees of maturity across many industries and market segments before the virtualization of IT services and cloud computing started to take center stage. These highly divergent degrees of ITSM maturity persisted despite close alignment and integration between ITSM and other IT frameworks and standards, such as COBIT, ISO/IEC 20000, ISO/IEC 27001, and IT4IT framework developed and promoted by The Open Group. We should also highlight and consider that the IT4IT framework provided a reference architecture for implementing ITSM with a specific focus on the value chain in IT service delivery. ITSM and IT4IT focus on creating value for the business through the well-defined catalog of IT services, practical use, and efficient delivery of cataloged IT services to the Enterprise-n.
While the concept of a value chain has been used in various industries for many years, the IT4IT Reference Architecture was one of the first frameworks to precisely apply the value chain concept to the delivery of enterprise IT services. The IT4IT Reference Architecture defines the IT value chain as a series of interconnected and integrated value streams that deliver IT services and make modern technologies available to the business across all business units and business lines. Despite the close alignment and focus of these frameworks, standards, and reference architectures on service management, process orientation, and value creation, the implementation maturity of ITSM continues to vary widely. The 2020 report by the HDI (https://www.thinkhdi.com/ ) suggested that only 29% of the organizations reported that they fully implemented ITSM.
The variance in maturity can also be the most notable between different areas (domains) defined by the ITSM (the implementation of IT Catalog, Support, Ticketing, Portfolio Management, Demand Planning, forecasting, etc.). For example, most companies have an incomplete and fragmented IT service catalog, only sufficient to maintain Support and Ticketing functions but giving less attention to Portfolio management and Demand planning and forecasting. The low level of ITSM maturity, broad adoption of private and public cloud, and multi-cloud service delivery rapidly grew into a technology debt and liability for many companies. According to market and industry research, a multi-cloud provider strategy is the most prevalent, accounting for 85%-95% of all companies.
Many companies now consume a rapidly growing number of IaaS, SaaS, PaaS, BPaaS, and other services sourced from Application and Data-Exchange marketplaces hosted by multiple (3–6) cloud providers. At the same time, many companies retain a number of IT services managed and hosted within the private cloud or data center environments. Some clients call this model a “ground-to-cloud and cloud-to-ground” ecosystem. This ecosystem must integrate into an “all-inclusive” ITSM-defined catalog to be appropriately accounted for, managed, and planned for future growth and demand.
These dynamics, combined with the fragile state of the overall ITSM maturity, present a substantial challenge for IT managers and executives responsible for defining and executing the technology strategy and identifying and selecting the right vendor platform. This challenge can be summarized in three specific areas:
1 — How to extend the existing {legacy} ITSM platform and governance to include, manage and account for virtualized IT services, data, and business functions (capabilities) consumed from the multiple cloud environments. Until now, the primary focus of legacy ITSM platforms was on support, management, and accounting for on-premise IT services. This challenge is complicated because Enterprise Architecture lags in designing, planning, and implementing an organization’s cloud-based and virtualized information technology, business processes, data, and systems.
2 — While all cloud suppliers provide their specific cloud computing cost and benefits to account for the consumption and cost of their cloud services, the discipline of multi-cloud FinOps pioneered by Google and now managed by www.finops.org continues to evolve and mature. ITFM and FinOps are related concepts that share some similarities but are distinct in their focus and approach.
ITFM is a domain within ITSM that focuses on managing the financial aspects of IT services. ITFM focuses on budgeting, forecasting, cost allocation, chargeback, financial reporting, and vendor management. ITFM aims to optimize IT resources, control costs, and ensure that IT services align with the overall technology strategy, business goals, and priorities. ITFM must also be aligned with comprehensive Financial Planning and Analysis (FP&A). The ITFM, as a specialized branch of financial management, focuses on managing the financial resources of an IT organization, integrating with FP&A, which includes all aspects of financial planning and analysis, including forecasting, budgeting, financial reporting, risk management, and performance analysis.
FinOps involves cost allocation, tagging, optimization, and governance for cloud-based services. FinOps focuses on achieving cost transparency, optimizing cloud spending, and improving the overall value of cloud and multi-cloud services.
Selecting the right platform that could support and facilitate the alignment between ITFM and FinOps and integrate with the corporate xP&A process and tools could be our second challenge.
3 — Our third challenge is the overcrowded, competitive, and highly polarized marketplace of platforms, tools, and vendors combined with scarcity of modeling and solution rationalization (EA) capabilities.
On one side of the spectrum, vendors like RightScale/Flexera, Apptio/Claudability, and Morpheus focus on tracking cost and optimizing the consumption of cloud and multi-cloud-based services. On the other side of the spectrum, platform-of-platforms solutions such as ServiceNow and Planview promise to deliver end-to-end capabilities for both on-premise IT and multi-cloud management and accounting. In the middle are the companies and platforms like Zenoss and LeanIX that promise to bring visibility to service management and accounting and help rationalize the entire “ground-to-cloud and cloud-to-ground” technology landscape. These “in the middle” vendors offer the opportunity and flexibility to harmonize ITSM and ITFM management in this highly polarized marketplace.
An additional challenge stems from the fact that many vendors offer an overlapping set of capabilities. For example, ServiceNow offers cloud connectors, competing with RightScale, Apptio, and Morpheus in the domain of Cloud service management and optimization. Planview competes with ServiceNow within Project and Portfolio Management (PPM) domain.
( https://www.planview.com/lp/planview-vs-servicenow/). All vendors focus on the evolution from Project-to-Product-to-Service-to-Business-Capability to Value Chain management to help organizations to improve the overall value of technology investments by achieving higher cost transparency, optimizing technology investment, and reducing spending for cloud services.
While various approaches are appropriate to different situations, I conceptualize them into the major four. They are cloud–first (cloud-native); financially–oriented (“ground to cloud approach”); hybrid (best in class or fit-for-purpose) approach; and RFP winner (“We trust the selected vendor”) approach.
1. The cloud-native (cloud-first) enterprises often align with cloud service management and FinOps optimization companies such as RightScale/Flexera, Apptio, or Morpheus. The enterprises adopting this approach must consider integrating cloud service management and accounting with ITFM to determine the optimum way of aligning ITFM and FinOps to support long-term demand planning, forecasting, and optimization. These organizations must also address the areas of cloud-based service monitoring, governance, services design, and compliance.
2. Companies that have ITFM-specific goals, such as improvements in IT budgeting, forecasting, cost allocation, chargebacks, financial reporting, the optimization of IT resources, cost controls, and vendor management, often already consume services from vendors like ServiceNow or Planview. The clients of these vendors are challenged by selecting the appropriate set of services that avoid duplication of capabilities. These clients must also decide which “platform of platforms” should be chosen based on clients’ priorities and objectives. Furthermore, the availability of vendor features and the maturity of the service available within a particular platform must also be considered. Vendor-specific Capability Map(s) and go-to-market commitments must be aligned with the company’s tactical and strategic priorities, technology investment capabilities, and demand deadline to build a specific roadmap. The roadmap should leverage different capabilities from other platform providers to accommodate company-specific timelines, tactical and strategic demands, and budget constraints.
3. The ‘theoretical’ hybrid approach is illustrated in the attached diagram. While it does not reflect specific client-based projects, it depicts how different tools can be aligned based on possible integrations and best-of-class or based-of-breed platform capabilities.
4. When structuring the RFP and evaluating the RFP response, companies should consider that many ITSM and ITFM capabilities can now be procured as PaaS or BPaaS services. Companies should also consider that the desired ITSM and ITFM capabilities can be achieved by a mix-and-match approach that integrates multiple vendors’ capabilities. These integrations of multi-vendor capabilities can help you achieve companies’ objectives in a shorter time. Company RFP should outline a clear roadmap, priorities addressing the dependencies, and alignment between ITSM, ITFM, FinOps, and the timeline. The company should clearly define these options in the RFP document and consider them as part of the RFP response and vendor evaluation process.
