Leading IT enterprises are migrating to all sorts of service-based digital business technologies, such as cloud, social media, Internet of Things (IoT), mobile, and xaaS. For many organizations there are financial unknowns and risks in migrating to the use of these types of digital business services.
As IT is becoming a services broker (rather than asset owner), we are seeing a large gap in managing digital business service risk — a lack of risk identification, assessment, and management. What is needed is a new risk approach that extends typical IT risk management from considering IT-owned assets to including IT services.
We see that digital business service risks are different that traditional IT project risks:
The new approach to risk management is aligned with the IT portfolio and project financial management shift to a total cost of service (TCS) concept rather total cost of ownership (TCO). We call this new approach to IT service broker risk management: the total cost of service–risk management (TCS-R). The TCS-R is the identification, assessment, visualization, and management of an organization’s service-based systems and project portfolio.
As an IT services broker, what risks should you be looking at? Across IT service portfolios we see three major categories: business risk, enterprise risk, and IT service (delivery and support) risk. Many of these risks, particularly business and enterprise risks, are new for CIOs and others expanded from their traditional scope. The following are types of IT-as-a-service-broker — TCS — risks:
cyber and network security
material business impact
From a financial perspective, the result is that digital business services risks cannot simply be managed by the traditional expected value approach of creating one number that is the sum of the outcome expected costs and benefits times their probabilities. A new approach — the TCS-R — is needed.
The next blog post in this risk series will describe TCS-R in more detail.
Peter Brooks has over 20 years of successfully providing business and IT solutions to clients, quantifying the business value of technology products and solutions, identifying competitive advantage, and developing product strategies. Peter has worked as a consultant in large companies such as IBM, PWC and Wipro, in startups and at his own consultancy.
Peter provides industry thought leadership. He is a co-author of several Harvard Business School Working Papers, co-author of Data Warehousing: Practical Advice From the Experts, and is a certified project manager (PMP). He was a Contributing Editor to DBMS / Intelligent Enterprise magazine, has authored numerous articles, and has been quoted in industry publications.
The opinions expressed in this blog are those of Peter Brooks and do not necessarily represent those of IDG Communications, Inc., its parent, subsidiary or affiliated companies.