The incredible shrinking IT department

An issue for many organisations is that these new technologies and partnerships must be retrofitted into existing structures and architectures.

This means savings from implementing new models may be difficult to achieve, and indeed may involve a costly period of re-engineering before benefits can be realised.

This is not the case for start-ups, however. One of the examples cited by Milroy was Jetstar, which maintains a small IT team (believed by Milroy to be just five), but which calls upon a varied list of suppliers for specific IT projects.

According to Jetstar’s CIO, Stephen Tame, this model enables the airline to keep its fixed costs low and still ramp up quickly when the business requires it to. By building a bank of suppliers, Tame says, Jetstar has ensured they remain accountable and aligned with its business outcomes.

“Our IT support model is focused on investments in central systems and applications with minimum effort required to run the peripherals,” Tame says.

“International suppliers, airports, ground handlers and engineering companies provide their own IT infrastructure, and we deliver Jetstar applications entirely over Internet points of presence in Melbourne, Singapore and Japan.”

The model has also enabled Jetstar to flex its internal staff numbers as required. For instance, during the operational launch of the airline in Japan in July the company had up to 40 IT specialists supporting the business, but that number has continued to be scaled back since the launch.

Tame says a focus on virtualisation of core systems, applications and networks has delivered a more effective and lower cost support delivery structure for Jetstar.

“The IT support model is constantly evolving through our virtualisation and cloud strategies,” Tame says.

“Jetstar’s preference is to manage cloud application services. Where this is not available, we’ve taken the traditional IT systems into virtualised servers, storage, networks and applications.”

Indeed, the cloud is enabling many newer organisations to effectively forgo a traditional IT department almost entirely. The New Zealand based accounting software maker Xero delivers its software via a cloud computing model, and as such is a heavy user of cloud services for its own business requirements.

Hence, while the company employs close to 270 staff, its internal IT team numbers just five.

That support team is unlikely to grow significantly even with Xero expecting to hire another 100 staff between now and next April.

The managing director of Xero for Australia, Chris Ridd, says that team has also had to contend with Xero’s paying customers doubling to 100,000 in the past two months. His own part of the company, which employs 42 staff, currently has no dedicated IT personnel.

“We run almost entirely on cloud-based apps,” Ridd says. “Our core customer management, billing and financial management is all home-grown Web-based applications, and we use Xero of course to manage our own finances.”

The company runs its email through a hosted Exchange service, runs marketing campaigns through Campaign Monitor and uses Learning Source for customer training and event registration.

It is also a user of Google Docs and Yammer for internal communication, and is investigating Office 365.

“All of these are cloud-based,” Ridd says. “It means we can leverage quite an efficient IT operation which is centralised out of Wellington, and they provide support globally. We don’t have any IT servers here.

“It also means that we are able to quickly establish teams in new centres around the world, so we are not worrying about setting up IT to support those functions. We can remain pretty agile and get up and running using cloud-based apps.”

Indeed, while the company has a 100 square metre computer room at its Australian headquarters in Melbourne, Ridd and his team have chosen to turn it into a music studio.

It is a model that Ridd agrees is difficult to implement for large organisations, meaning that cloud computing often proves to be a much easier proposition for smaller business.

“They can come in to work on a Monday and decide they don’t want to do ‘this’ anymore, and by the end of the week be up and running with cloud-based applications,” Ridd says.

“Every application that they require is out there, and there are multiple choices. They can get freeware and slowly move up the food chain.”

But as Fortescue proves, big businesses can play the cloud game, too. Over time Forte expects to see further maturing of external service providers, and a diminishment of the difference between internal and external service provision, at least from the perspective of the business users, with a seamless ability to move between on- and off-premises solutions.

“That makes it even more important to get your ducks in a row with the people you deal with, in terms of how you deal with them and the commercial models that suit your business.”