Is Outsourcing a Better Way Forward?

The industry is awash with discussions over cloud and its impact on companies and how they source their IT. New products, services, and entrants into the market all compete with the existing vendors, service providers, and established sourcing channels creating noise around the benefits of cloud. The lack of agreed taxonomy and terminology means that anyone can claim their latest product is a cloud productwe call this cloud washing.

Through all of this, there are 2 underlying questions. First, what does the arrival of cloud mean for companies? Second, from whom are these services going to be bought and delivered?

The Effect of Cloud

Rapid elasticity and measured service implies that a customer can increase or decrease their demand for service and pay only for their actual consumption; therefore it is believed that cloud will revolutionize the way IT products and services are delivered, as for the first time companies can tie their IT cost directly to their business cost.

In doing so, they can shed the old model of managing fixed assets and allocating those costs across their business transactions. They can begin to optimize their costs in a way theyve never been able to before by varying their IT costs in accordance with their business cost. This move from fixed indirect cost to variable direct cost in an age where technology is becoming more and more embedded in the business process itself and enables an unprecedented transformation of how companies manage their IT.

In case of a single service, this can be counted as part of their direct business costs. However in previous technology iterations, decreased costs and increased economy of scale drives IT solutions more broadly in their business. In the cloud-world, this means that business managers using cloud services will continue to need help in integrating and managing the various cloud services needed to drive their business.

In many companies, the CIO and the IT organization are embracing cloud and its power to deliver new apps and services instantly. Theyre already working out how to reconcile cloud-world with legacy-world and achieve a structure that combines the data security and top-down control of existing IT with the new characteristics of the cloud.

For companies and organizations that are not prepared for the effect of cloud services on their business, they will need to turn to outside resources for help. This is the traditional role for outsourcers. However in the cloud-world, their role will shift from being an integrator and manager of technology to being an integrator and provider of cloud services.

What is the Impact on Outsourcers?

Make no mistake, outsourcers will have to undergo as big a change as the customers will in adapting to the new cloud models.

Paradoxically, this will actually force us to be even more customer-focused with renewed attentiveness on understanding their business needs as that will become our key differentiator in this changing market. In this new paradigm, it will be the business owners themselves that we will sell to and the basis of their sourcing decisions will be the value we add to their business and not the value we add to IT.

Cloud will undoubtedly bring change to our industry, and all IT-service providers will have to adapt.

To navigate their way through the confusion of different cloud services, products, infrastructure, etc, theyre going to need 3 key strategies to succeed:

• How theyre going to source those services
• How theyre going to govern the different suppliers in their sourcing strategy
• How the different services are going to integrate and interoperate

In tomorrows cloud-world, although the components may be services instead of IT building blocks, the best of the outsourcing service providers will still be helping their clients. However there are a few key points where they will need to adapt and here are a few questions to ask your outsourcer.

• Do you have the expertise and innovation to interact with LOBs so as to add value to business?
• Can you offer full support across the range of my needsinfrastructure, applications, business process, and strategic consulting?
• What are you doing to prepare for the coming cloud services?
• Are you building cloud services yourself and where do you see them fitting into your portfolio?
• Are you willing to interact with other cloud providers and support me during the integration of these services?
• Are you willing to act as my service integrator even if I dont buy your cloud services?
• How are you going to charge me for your services?

The outsourcers who have convincing answers are the ones that are in the best position to provide cloud services. n