Information Technology (IT) leaders today are under fire by competing forces. The rate of customer requests is increasing. Budgets are being slashed. And the time expected to deliver is being reduced. On top of it all, IT organizations are increasingly being expected to align themselves with the business. Does this sound familiar?

For the past 20 years, IT organizations have not changed enough. Organizations scaled to meet the increase in demand. Horizontal functions were added to improve the interface between IT and the business organizations they served. Unfortunately, the traditional way of managing IT organizations does not scale well to meet these changes. The IT profession needs a new paradigm.

The challenges for the IT organization are not new. They have only intensified over time. However, the profession now has a new weapon and the potential to create the evolutionary change needed. Enter cloud computing.

Cloud computing is a very popular topic in IT these days. Everybody from vendors to consultants to customers is interested in it. Today, if you’re a vendor of products or services and not “in the cloud”, you’re viewed as traditional or old fashioned. Every IT organization needs a cloud computing strategy. But what exactly is cloud computing and what does it mean for the IT organization?

Cloud computing is a relatively new term to the industry. McKinsey and Company recently conducted a study to determine how individuals defined cloud computing. In 22 responses, they received 22 different definitions. In essence, cloud computing is a services-based approach to providing shared services. It leverages economies of scale by pooling resources. Clouds provide virtually unlimited resources allowing scaling up and down. Consumers of cloud-based services pay-as-you-go and do not need to enter long-term contracts.

Today, many cloud providers use terms and methods that (1) address IT challenges through heavily-biased solutions (i.e.: all or nothing approaches), (2) lack a common comprehensive framework in which to define, discuss and identify cloud computing opportunities and (3) miss both the immediate value and longer-term strategic value for the IT organization. Cloud computing includes three core tiers that are very inter-related: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS).

Cloud computing is not a re-branding of grid computing, utility computing, or outsourcing. Cloud computing contains components of each plus more to provide a superset of opportunities for the IT organization. For example, grid and utility computing tended to target high performance computing demand. Cloud provides solutions that include common use servers such as Windows and Linux. Cloud also provides common solutions for services like storage and email. Cloud differs from outsourcing in that cloud is an on-demand, pay-as-you-go methodology and allows services to scale up and down dynamically. Many outsourcing arrangements require multi-year contracts with a minimum contract value and minimum commitment.

The foundation for cloud computing rests on the organizational, technological and process changes to providing services. Cloud computing does require a change in the traditional IT thinking.

Cloud computing provides a game-changing opportunity to evolve the IT organization from a technology-driven organization to a business-organization. This has been the Holy Grail for IT organizations for 10-15+ years. Many will tout the cost benefits. But there are much larger benefits beyond just costs improvements. Those benefits are the “killer apps” for cloud computing and include data archiving, e-discovery, business continuity to name just a few.

So what are the next steps? Organizations need to perform an assessment of their service portfolio, organizational structure, and strategic value to the organization they serve. Which services are strategic to the organization? Which can leverage a cloud-based model? How do the changes affect the strategic focus for the IT organization?

For example, a data center is not strategic to an organization. Yes, a facility to house systems and applications is needed. But is the data center unique to the organization and can IT operate it more effectively than others? With very, very few exceptions, the answer is no. That is a provocative statement, but requires a change in paradigm. Many today, using traditional thoughts, would not consider not running their own data centers.

This paradigm shift is not new. We experienced the same thing with the power industry back in the late 1800’s going into the early 1900’s. In the late 1800’s, companies built and operated their own power generation plants. By the early 1900’s, companies were leveraging shared resources. Today, you would be crazy to try to build your own power plant. The same is coming true with data centers. There is a movement leveraging cloud computing that moves demand away from corporate data centers to commercial data centers. This is one of many examples of the change in though required.

This is an exciting time for the IT profession. The profession is embarking on an evolutionary process that will forever change the value IT brings to business organizations. Cloud computing is the enabler that allows such a significant change. And the time to start planning for cloud computing is now.

Tim Crawford  is Vice President of Strategy and CIO for Vivo, Inc., and a nationally-renowned thought leader in the areas of Cloud Computing and IT Optimization Strategies. He works with organizations ranging from startups to global entities to best leverage technology solutions that meet business objectives. Tim’s public appearances have included leading sessions at CIO forums and global industry conferences.  Prior to his consulting career, Tim spent 20-years as an IT practitioner and held senior IT leadership roles with global organizations such as Stanford University, Knight-Ridder, Philips Electronics, and National Semiconductor. He serves on a number of boards including the Society for Information Management (SIM) San Francisco Bay Area Chapter, the Golden Gate University Alumni Association, and Data Center Pulse. Tim received an MBA in International Business with Honors and a Bachelor of Science degree in Computer Information Systems, both from Golden Gate University. He can be reached at 650.804.1300. http://blog.timcrawford.org/