While on-premise, perpetual license software certainly isn’t going away anytime soon, it’s hard to deny at this point that software as a service tools are gaining ground and will eventually overtake their on-premise counterparts.

According to a Forrester report, IT budgets for on-premise applications dropped by 13 percent between 2012 and 2013 while SaaS budgets increased by 53 percent. And this trend has only accelerated since then. The SaaS market is expected to reach $12 billion in 2016 and $55 billion by 2026. At this point, it’s not a question of if your SaaS budget will surpass on-premise, but when.

But while much of the focus thus far has been on how SaaS will improve the way you do business, less attention has been given to how your IT department must change to adapt to this new environment. CIOs are quickly learning that the skills, infrastructure, and processes that have governed their fields for the past two decades are becoming obsolete, and a shift to SaaS necessitates a radical reevaluation of how they approach their jobs.

“This is much bigger than just a technology change,” said Matt Griffiths. “There’s an entire organizational and cultural shift required to support that change.”

Griffiths spent 16 years at Dell serving in various roles that included running the automation tech behind the company’s supply chain and leading the internal IT infrastructure within the organization. More recently, he served as CIO of Biogen, a biotech company that specializes in treating autoimmune diseases. It was there that he witnessed the full potential of cloud technology and began to think through the various pain points of adopting a SaaS-based infrastructure.

“My team had to solve problems like: how do you perform integrated diagnostics? How do you share data with partners that are collecting trial data from certain new therapies? How do you accelerate your product development by leveraging cloud based capabilities?”

Griffiths identified four changes the modern IT department will need to make to adapt to a SaaS-dependent world:

Hiring different skillsets

IT has traditionally been a highly-technical field because workers are expected to heavily configure on-premise software solutions as well as manage the servers housing that software. But cloud-based technologies require less technical expertise.

“You need fewer people with computer science degrees, for example fewer java and c# skills,” said Griffiths. “And you need people who are more capable of holding business discussions, analysts who truly understand the business they are working in and know how to take a solution and apply that to business processes.”

In a SaaS dominant environment it’s as much about building your business processes based on what the technology supports whereas before there might have been a lot of customization.

Plugging more cybersecurity holes

With each new SaaS service you adopt, you’re providing one more potential entry for hackers and other malicious actors.

“It’s no longer about keeping the four walls of your organization secure,” said Griffiths. “You also have to think about partners and other parties that you’re engaging with and how they are keeping their parameters secure as well.”

An increased emphasis on integration and specialization

While two decades ago we saw adoption of “all-in-one” software solutions, with each passing year we’re witnessing more and more functionalities peeling off into their own specialized products.

“IT capabilities are becoming more vertical and focussed as they move to the cloud because there’s a SaaS solution for every subspecialty which drives fragmentation of your ecosystem” said Griffiths. This means transitioning the IT department so it’s becoming less about building custom systems but more about integration, consolidating data across disparate sources and defining the platforms and enterprise architecture necessary for those SaaS solutions to co-exist..”

Dealing with “citizen innovation”

The more niche, low-cost SaaS products on the market, the more often departments in your company will take it upon themselves to sign up for services without consulting you. Before you know it, you’re discovering one group is scheduling social media posts on Hootsuite while another is using Buffer, and at the same time they’re paying for two different Slack accounts.

“If the IT department only serves as the referee, then people will be trying to work around you and find ways that they can avoid engaging with IT because they know that IT is going to come in and put the brakes on and the controls in place,” said Griffiths.

So how does IT move beyond the role of referee?

“The IT organization needs to have such a close relationship with the business that at the point a problem is identified, IT is already helping conceive the solution,” said Griffiths. “Because if you’re being engaging by your business partner with a proposal from a vendor that they want reviewed and turned around within 24 hours, that’s too late. That means that the department has already worked with a SaaS vendor, they’ve probably already been sold on the solution, been wined and dined, and are emotionally invested with that product. The opportunity to influence the solution has already passed. Instead, the department head should say, ‘Hey we’ve got this challenge to solve and before I start Googling potential SaaS solutions I am going to engage my trusted IT organization because maybe we already have a solution internally or the IT department can engage with the SaaS vendor on my behalf.”

All of these changes stem from the same trend: IT has become an integral part of the business, one that touches every department, both internal and external facing. At its best, SaaS allows a company to increase efficiency and leverage better data, all at a lower cost, but its ROI is dependent on whether the organization adopts the cultural and structural changes need to fully embrace it.

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