When Jim Honerkamp was hired as CIO of Steel Technologies last summer, he immediately identified a major problem on the company's IT org chart. Of the 34 technology professionals employed by the $1.6 billion processor of flat-rolled steel, nearly half were working in IT infrastructure. The anemic business-analysis group had a staff of three.
"Infrastructure does not differentiate us in any way, shape or form in the marketplace," says Honerkamp. "To be a strategic IT organization, you have to be delivering value in technology tools, either to strengthen customer relationships or to be used as weapons against the competition. All the IT value-add is on the business-analysis side."
One way to flip those staffing numbers was to move to an infrastructure-as-a-service (IaaS) model. And it was the perfect time to consider divestiture. Steel Technologies' hardware assets were housed in two converted offices with slightly better security and air conditioning than Honerkamp's own office. "If someone hit a telephone pole on Shelbyville Road," says Honerkamp, referring to the Louisville, Ky., street where the company is headquartered, "they could take the whole company down." A $900,000 investment in servers, storage, cooling and power supplies was on the table.
Instead, Honerkamp opted to hand off the infrastructure and its management to ERP Suites, a provider of private cloud services. "They own the data center. They own the hardware. They own the applications and operating systems [to manage the infrastructure]. And they provide the managed service that takes care of it all," he says. While disaster recovery and business continuity played a key role in the company's decision to transition to a cloud service, the move also enabled it to convert seven infrastructure positions into business-analyst roles.
The shift to IaaS, however, has meant major changes in some remaining roles, which could present challenges for Honerkamp's team. For example, the job description for his technical services manager is morphing into something altogether different. "He was managing people who were server jockeys," says Honerkamp. "He still has the responsibility for the infrastructure, but he is managing a relationship at a much higher level."
Such shifts are required when moving from an in-house or colocated data center to an IaaS model. "The IT team's role changes from managing and supporting technology to managing services," says David Rutchik, a partner at outsourcing advisory firm Pace Harmon. And it's not just the provider that needs to be supervised. "Business relationship managers are critical in interfacing with the different internal business units to ensure that the business understands not only the benefits that may come from an as-a-service model, but also the limitations," Rutchik says.
"There's no course you can take that teaches relationship management," says Honerkamp. "In a lot of midsize companies, you find a lot of people who think of themselves as 'working managers,' doing the same work as the people that report to them. But a manager needs to be more strategic."
Rutchik adds that IT must also have solid financial-analysis capability, since a move to IaaS can have major budget ramifications as costs move from capital to operating expenses. Honerkamp, a veteran turnaround CIO, has those skills himself. Meanwhile, he's filling the new business-analyst roles with tech-savvy recruits from operations, finance and procurement.
As for the old computer rooms, they'll fill a new role as well: much-needed office space for the growing company.
Stephanie Overby is a freelance writer based in Massachusetts.
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