One of the biggest lessons from the April 23 Wikibon Peer Incite Meeting on the impact of cloud services on the ITO is that IT needs to become a services-led organization like the competition to survive. This means much more than just creating a menu of IT business services figure out what each costs per seat, although that is a good start. As I write in my latest Wikibon Professional Alert, ITOs need to completely reorganize around those services. This means breaking down the traditional technical silos and retraining — or where necessary replacing — IT staff to handle a new, more business-oriented set of challenges. The good news is that IT has time — probably the rest of the decade. The bad news is that this is much more than a technological change, it is a complete revolution in how the ITO operates, how it is organized and what it does. And CIOs need to kick the process into action now — waiting is a recipe for extinction.

One major piece of good news is that a variety of parallel forces are freeing ITOs from many of the complex, incredibly detailed tasks and issues that enforced those silos and technical specialization in the first place. The hardware itself is becoming more powerful, more automated, and more reliable. Virtualization, a.k.a. software-led infrastructure, promises management of entire infrastructures — storage, server, and network — from a single pane of glass, eliminating the need for writing scripts and running around optimizing settings on network switches. And colocation services like Switch Communications and IaaS providers like Amazon AWS provide the option of moving some major applications out of the data center entirely, eliminating increasingly large portions of that hardware infrastructure.

That provides ITOs with the opportunity to start making this huge transition. The larger the ITO the more difficult it will be, but ITOs have no choice. Today already many small organizations have no  reason to maintain any IT above the desktop at all, and with VDI services that can deliver standard desktops to mobile devices as well as traditional laptop computers, even those end-user devices can be simplified to a level that requires no attention.

The ITO of the future will be focused on managing a stable of cloud service providers, making business-based decisions on which services make the best sense for specific business needs, and how to get maximum business value out of new kinds of applications that never were in the data center. These are essentially business rather than IT technical activities.

IT professionals should not take a “this can’t happen here” attitude. It already has: In 1989 Kodak outsourced its entire data center to IBM, shocking the entire industry. Today with the variety of cloud based services on top of traditional outsourcing, it can happen, and in companies where the ITO does not make a successful transition to a service provider organization, it will.