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IT organizations are facing real competition. Business users are deploying sophisticated SaaS applications on their own. Developers are looking first to public cloud IaaS and PaaS platforms to build new applications, reducing the need for internal infrastructure. With every new third-party cloud service, more IT budget dollars go outside the door. So what's a CIO to do?

CIOs are coming to the realization that their organizations need to become true IT-as-a-service providers (or ITaaS, for yet another clunky addition to the XaaS lexicon). Instead of organizing around traditional technology silos, the vision is to become a modern service provider that offers and orchestrates both internal and external IT services. Under this model, corporate IT offers a menu of SaaS, PaaS and IaaS options for business users via a centralized service catalog. Business users are free to pick and choose cloud services that corporate IT has vetted or provides itself.

One example is the internal, private cloud IaaS and PaaS environments IT organizations are deploying to capture the hearts and minds of developers. To compete with Amazon Web Services and Rackspace, some enterprises are rolling out private cloud environments that meet self-serve provisioning requirements and include reusable components and common services. Their goal is to provide environments that are "good enough" to keep developers in-house, not best-in-class IaaS capabilities.

IT organizations must address a set of obvious technology issues to support this model, including integration, identity management and security. But to compete as a service provider, they're finding they also need unfamiliar business skills and capabilities.