IT Systems going the SaaS way!

Since most IT systems have been designed as closed systems with a few controlled links to the outside world, CIOs will have to shift their thinking about architecture to a hybrid model of closed and open systems. In a review of which systems should be wholly internal and which should be leased as a service or completely outsourced, the business must consider not only data security but also the pace at which different applications are evolving. This hybrid nature of business applications, which will increasingly look out as well as in, will also affect decisions on middleware. A comprehensive redesign of a company’s IT architecture must take this factor into account to help the company avoid creating a new system that is as complex or unstructured as the legacy system being replaced.
Second, the move to software as a service is frequently justified not only by the lower cost to own but also, and more important, by its promise to deliver better service than licensed software can with a maintenance contract. In order to get the full benefit of that improved service, IT organizations need to be able to match these service-level guarantees and link them with internal commitments to business users and end customers. For example, if a software-as-a-service vendor guarantees a service level on invoice-processing speed, the IT department must ensure the availability of the purchasing department’s infrastructure system that supports this function. If the vendor cannot match its competition’s level of service, then it will fail to realize the full benefits from the switch.
Third, IT managers will need to work closely with their business colleagues to refine IT governance mechanisms to capture the best business value from online delivery. Departmental charge backs, for example, will require some redesign as software moves from large capital expenditures to smaller but ongoing operating expenses (specifically, the recurring subscription fees). Decision rights will also have to be modified. Explicit mechanisms, for example, will be needed to determine who decides the level of customization of software and who pays for it when two departments want to use the software but only one requires modifications. Customers and vendors will need to identify who should control the intellectual-property rights on modified software.
Taken together, all of these changes signal that IT leaders will need to do more than simply plug in new hosted applications; they must revisit the foundations of the IT organization in order to ensure a smooth and fruitful transition to the new model.