We often see frustration between IT and business partners because the partners don’t have the means to understand clearly the cost drivers of the IT services they use and therefore find it difficult to influence their infrastructure expenditure. As a result, some organizations struggle to manage demand for IT infrastructure, which includes all the hardware, software, and operational support required to provide application hosting, network, and end-user services.

To save costs and prepare for adoption of next-generation infrastructure technology and hybrid-cloud models, leading organizations are adopting commercial-style demand and service management that has two key characteristics. The first is a standard services catalog with clearly priced offerings that can be consumed on a price-times-quantity basis. Such a catalog requires creating bottom-up unit costs for each service based on a detailed bill of materials. This means that unit costs should be an aggregation of all the components making up the service and not an arbitrarily stipulated cost mostly based on averages and allocations. The second characteristic they share is that roles have been established for IT to interact with business partners in a more commercial way—including roles for product managers who can define standard offerings and solutions and architects who can help developers combine the right mixture of them to meet a business need.

These changes are tough to make. But if an organization can introduce a new model for demand and service management, it can usually realize 10 to 20 percent cost savings. While these changes are well aligned with deployment of next-generation infrastructure technologies such as private-cloud platforms, several of the efficiency benefits, including shorter provisioning time, can be achieved with legacy infrastructure as well. The savings come, for example, from reduced tension between IT and business partners, leading to less costly service-level agreements (SLAs), as well as from steering demand toward lower-cost standard platforms and simplifying IT procurement.