In the world of Information Technology, IT must move from a system-based organization to a service-based organization. Explain?

I think it means that systems choice is no longer the core decision in IT decision making. Yet, satisfying the user’s needs must be the main driver of IT investment.If you apply this principle as an organization, you no longer need to build your own system. Instead, you can present your need to the market and integrate the solutions presented by one or more suppliers.That way, you no longer have to maintain a proprietary system. Instead, you focus on optimizing the value of the solutions implemented in your company by choosing the set of vendors that offer the best value for money.

Yes I will agree with you, about this tranformation, this tranformation would definately help MSME industries and organistaion. The trend has already begun

System and service both are integrated in the world of I.T. The purpose of any I.T System is to provide service to Users.  I.T is already service oriented.

But you cant forget the challenges that you will face:

1. First challenge is the cost against ROI.

2. Second is the stability and avialability of the hosted services.

3. Connectivity is a big challende, if you need to stay connected24/7 to you service hosted out side and you need a high speed connections it will cost more and (depend where?) it may be unstable which will cause problems in data integrity.

Till now, i think we still need to inplement systems locally. 

System Based Organisation is nothing but the old traditional domain client module exist in on organisation. where all the hardware and softwares is setup in owned Data center of an organisation.

Service Based Organisation is a hot topic in todays IT world where most of the organisations moving the data centers through virtualization, cloud computing & mobility. these metioned things comes under third platform technology. where every one in future is going to implement wantedly or unwantedly. due to flexibility, centralized, and most important cost saving. 

Because , IT should not be seen as a cost center instead a Profit Center. IT should offer services to its internal customer focusing their need, using innovation and R&D to build , Market and sales its product internally and give cost effective, reliable solutions in form of services which if organization want to buy from outside there may be more Risk and cost involved. Further desired quality level and maintenance will also difficult to manage.

It means that we don't go for our own setup and opt for service providers.  Like we do not want to have our Infrastructure but go for IaaS, don't like to have software but opt for SaaS, so the Platform as a service (PaaS).

But it has to be very vividly planned, ROI worked out, all stake holders are taking into confidence of etc. etc. 

This means that when you move to an office and as you simply connect to power sources (electricity which is a service) and communications (such as land telephone lines and mobile communication networks which are services), you should be able to plug in you computer to a socket and use bussiness applications (finance, production, BI, etc.). This trend started with providing SaaS software deployment method and reached now to the cloud software deployment method.

Now, whether this is a MUST or not, I belive that it isn't. I also believe that the industry powers will drive everybody to that end sooner or later. We need to get ready.

Very good questions.. And i agree IT should move as separate service based component..

Reasons:

1. we can save precious time and effort on un-necessary customizations. 

2. business teams can focus on business requirements. And IT teams on How to get them implemented. We see, they put their feet into multiple things creating confusions and disputes. 

3. if moved as separate component, then we can design Standards, Center of excellence teams, etc.

4. IT service can be looked up to as a de-attached unit, providing services to various business needs of the company.