I wrote an Op-Ed piece for Sandhill.com on “Cloud Powered Outsourcing” available here. The focus is to highlight how services firms can leverage the disruptive nature of cloud computing to deliver new value to their enterprise clients. Thought I shall leave here a quick synopsis.
In the fast changing world of technology and outsourcing, many forces are at play. And for the outsourcing industry, any development – be it hardware, software, service delivery or something new – will change the business significantly. Cloud computing is rapidly changing the climate of enterprise IT – and the outsourcing business along with it. The disruptive nature of the cloud model will mean outsourcers will have to adapt for success in the next era.
Two significant factors are currently creating a new wave of change in the outsourcing industry. First, enterprise software is increasingly being delivered over the cloud. This is impacting the hardware commitments that a business makes.
Second, we are now seeing a situation where high quality IT infrastructure capacity is quickly becoming a commodity. With delivery models being disrupted, IT service providers should get into a mode of investing massively in creating/provisioning an infrastructure that their outsourcing customers can leverage sooner rather than later. This translates to an investment cycle from the service provider side as IT service providers invest heavily in capacity, virtualization, globalization and automation. With these investments, service providers begin to get positioned as players that are able to offer capabilities that can transform the way organizations access and use IT services.
The advantages of employing a cloud-based model of service delivery are well established now. In certain types of computing environments, embracing clouds can provide significantly lower costs, higher reliability, assured uptime, greatly enhanced flexibility , robust availability and up-and-down scalability configurable in real-time. The contention here is that outsourcing contracts can block move to the cloud. The separation of service lines in outsourcing that forces distinct blocks of services outsourced to different service providers creates significant challenges to embracing a cloud-based service model because both application and infrastructure management services typically come together in the cloud and normally would get supported by a single service provider. Here is a case where the incumbent service provider’s interests conflict with a client trying to adopt a cloud model. Many enterprises have a range of services contractually assigned to different service providers. Today, many buyers have a range of IT services contracts spread across multiple service providers. Under such arrangements, by default, we see that contracts get optimized at the tower level and by extension, the cost and value get sub-optimized at the tower level. Conflicts between the designated service providers managing the different towers get managed by differing contractual terms and it is quite common to see such partners in a conflict.
This is a “first order challenge” – a conflict rooted in the existing models of engagement and so typically calls for a fundamental rethink on the outsourcing model per se!
Moving further, adoption issues could come in the way . However attractive the benefits, the determination as to what, how, where and when to launch a new model of cloud service is always an issue that businesses have to grapple with – like any other operational decision. Enterprise outsourcers also find the need to find a solution to the dilemma: Do they continue, modify or disband their existing outsourcing arrangements to embrace the new model and reap the benefits in terms of savings, ease of use and performance.
In a nutshell, a revised cloud/SaaS model of outsourcing through service providers can help buyers in new ways resulting in lowered costs and improved operational performance - never ending requirements in today’s business world. This calls for a majority of businesses with mature IT environments and outsourcing arrangements in place to look at recasting their existing contracts and embrace a new model of outsourcing governance. This transition won’t happen by the flip of a switch. Moving into a cloud environment for consuming IT services requires a fundamental change in the delivery mechanisms that would impact almost all the stakeholders inside business. Read the full article here.
Labels: Business Models, Cloud Computing, Emerging Models, Outsourcing