Cloud: Competitor or opportunity for the outsourcing business? – Part 1

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Lately, I have been working with several customers who wanted not only the benefits of a cloud environment but also the operations, management and governance that a traditional outsourcing agreement brings to the table. How can we achieve this in the enterprise market, and who is going to deliver this kind of complete deal? The way I see it, this can challenge and compete with a traditional outsourcing business, or it can become a real business opportunity. It all depends on how they address cloud adoption in their organization.

Outsourcing is in the market for a reason

The outsourcing business has grown out of a need that companies had to regain control of their IT solutions. Once upon a time, IT was run with a large amount of governance in centralized data centers. This was the golden era of centralized systems. From the 1990s on, there was a trend in using distributed systems in the industry. This opened up for IT to be run in enterprises without the centralized control of the previous era. The power of desktop computers, and later other devices, also moved IT a lot closer to the consumers, further adding to the uncontrolled environments that grew forth. Outsourcing was one of the answers to regaining control of the distributed IT environments—if you had lost control, it was easy to move to an outsourced model where the supplier had to sort out the mess and regain control through governance and processes. This solution proved very successful.

Cloud is a game changer

In the last few years, cloud has come forth as a viable and modern option for consuming IT resources on all levels. Cloud brings with it a lot of the promises that outsourcing previously delivered on, such as the following:

  • Centralized: Public, and to a large degree, private clouds are being run as centralized IT services. Experienced personnel following strict procedures operate them, and they have strong governance accompanying them. This is, in many ways, the same that is done by traditional outsourcers in order to maintain control.
  • Standardized: One of the key elements in being able to provide the services to users at a low cost regardless of the technology is standardization. Cloud has a large element of standardization in the sense that you are normally only able to choose your service from a predefined service catalogue and often in a predefined sizing.
  • Pay-as-you-go model: Cloud has a pay-as-you-go model for the consumption of IT resources. The same goes a long way when it comes to outsourcing models as well, although the model is a lot more granular for cloud. Cloud usually does not have a long-term tie-in that outsourcers have in their contracts either.

There are, however, some challenges the cloud in itself will not solve for the enterprise:

  • Organization: There is a need for an operations organization at some level (be it for all software components or for some custom components that are not available in the cloud).
  • Governance: Using an easy-to-access and consumable solution such as the cloud adds importance to the need for a good, solid governance model.
  • Security: When moving critical workloads to the cloud, one needs to be 100 percent certain of the security the cloud provides on all levels. This is especially true when moving the core business functions into the cloud environment.

As you can see, cloud offers many benefits as well as some challenges for organizations.  In part 2, we’ll compare and contrast what you get from an outsourcer versus a cloud service provider and consider how cloud could operate as an element in outsourcing.

Click here to read Part Two of this series. 

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