The first rule of running any business is “understand your customer”… so what’s up with I.T.?

Featured article By Steve Peskin, Managing Director at Virtual Clarity

Understand thy customer! It’s not just a business rule, it’s a commandment. From the very first fruit stand to the most sophisticated tech company, the customer relationship has been, and always shall be, the single greatest success factor. Anyone who thinks otherwise is probably busy writing their own business obituary. Which brings us to an important point. What’s up with I.T.?

Since the term was first coined by Harold J. Leavitt and Thomas L. Whisler in Harvard Business Review in 1958, “I.T.” has connoted a department that exists within its own universe with its own laws of physics, with a mandate to apply the simulation of higher-order thinking through computer programs. This is OK in academia, but for the world of business it misses the “why” of it all—without the customer, there’s no company, no I.T. and no point to said “higher-order thinking.”

A brief history of mediocrity

By the turn of the century, I.T. had become a significant cost drain for most organizations. But when the global financial crisis of 2007 to 2010 ended the party, the pressure was on for I.T. to reduce expenses. However, when you read between the lines, you see that the mandate was really not much different than before: I.T. would continue to suck resources…just less of them. The resulting flawed approach entailed achieving short-term savings at the expense of flexibility—companies were locked into long-term contracts and rigid, pre-allocated budgets. Rather than enabling the company to better understand and serve the customer, I.T. placed restrictions on how departments could do so. Fast forward to 2015, I.T. departments are still for the most part operating as if it was 2010, spinning a hamster wheel that struggles to squeeze more out of less, while locked into stifling deals.

They can’t keep it up much longer. Erratic economics and increasing regulatory burdens mean that the old approach is too expensive, slow and inflexible. I.T. must reinvent itself for a new set of demands, which can be understood in terms of two kinds of “customers”: the departments that I.T. serves, and the customers that are in turn served by those departments.

Understanding the “inside” customer: the departments

At it’s core, I.T.-as-a-Service means running I.T. like a business. Whereas I.T. may have been in years past viewed as a cost center—a necessary evil—I.T. in tomorrow’s successful companies will be viewed as a revenue center that delivers the right services at the right price in line with consumption. To do this, I.T. needs to intimately understand its “customer”—the various departments that use technology.

There’s no easy formula for this, and it will undoubtedly require a shift in both mindset and modus operandi. I.T. must rethink its entire role within the organization and drop its current “outside in” focus on supply in favor of an “inside out” focus on demand. Ultimately, it must create a nimble environment where new services are introduced and scaled to demand—I.T. must not only spend less, but spend transparently in line with value and need, avoiding inflexible contracts and fully leveraging the benefits of cloud-based infrastructure. Under this model, each undertaking delivers a clear and measurable outcome for a fixed price, and businesses are able to try new strategies and iterate according to an evolving view of the customer, with minimal investment loss when those strategies don’t pan out.

Understanding the “outside” customer

In the age of social media, the customer relationship is more important than ever, because customers are more powerful than ever. I.T. is in a position to help companies understand the customer by delivering marketing, sales, customer service and other departments the tools they need, when they need them. In today’s business climate, if marketing needs a certain set of capabilities in order to meet customer demand, that means that they need it now. By the time you get done with the next big implementation, the chance for competitive advantage is over. Moreover, the fact that they need a particular capability today doesn’t mean they’ll need it a year from now. You’ve got to be able to swap out old technology for new in very short order.

Just as important, I.T. is in a position to connect the various departments in a way that they are able to share information that is critical to understanding, in real time, the ever changing mind of the customer. Theoretically, cloud computing can accomplish all of this, but only under the right model—and old school I.T., with its rigid contracts and slow time to action, just won’t cut it. However, through an ITaaS model that manages a supply chain of services that is finely tuned to the ebbs and flows of the business, we can give the departments the right tools at the right time to deliver a unique customer view, and do so in a way that matches service elasticity with demand and cost constraints.

The good news is that there are positive signs that many I.T. leaders are beginning to get it—a recent survey by VMWare and EMC indicates that 43 percent of I.T. leaders view better customer service as a top benefit of moving to ITaaS. As well they should! After all, is it any coincidence that Salesforce, the first cloud-based mega-success, is a CRM platform? We don’t think so.

Steve Peskin, Managing Director at Virtual Clarity, an experienced tech entrepreneur, has successfully founded and sold category leading Enterprise focused IT companies, ranging from Hardware VARs through software companies to high-end advisory businesses. Harnessing the dynamics of an IT industry that sells its wares to the Enterprise and, often conversely, what the Enterprise needs to do to with IT in order to thrive, is the challenge of the next decade–of which he is thrilled to be part of trying to solve. Following his mantra of “making complex things simple,” he applies his broad, deep industry experience to change the game. He is grateful to be able to work with great people, do meaningful things and have fun in the process.