The cloud emerges as a serious contender for companies interested in IT outsourcing.
Cloud computing presents some exciting new options for IT outsourcing, but it's not a panacea, and it's not for everyone. Look at the buyer landscape in terms of a dartboard, with cloud viability strongest in the center. The bullseye - the ideal - is the smaller company that's facing big investments in computing and communications infrastructure. For this company, the option to buy services on a cloud is very financially compelling.
The outer ring - the opposite end of the spectrum - represents the large companies that either can't get their arms around their applications or they have many subsidiaries that would all need to buy into the cloud for it to work. For these sprawling organizations, cloud computing would be an expensive, multiyear transition.
In the middle ring, meanwhile, are the large business-to-consumer organizations like banks, retailers and health insurers. These companies are likely to have well-defined applications that can be rewritten for the cloud, and they probably know their cost per transaction so they can quickly calculate the benefits of cloud computing. One North American health insurer, for example, recently considered buying claims processing as a service in a cloud versus managing a huge in-house portfolio of claims applications.
In conclusion, the outsourcing marketplace is clearly getting ready for cloud computing. IBM is upgrading its on-demand computing centers and linking them in a global cloud infrastructure; HP is deploying its adaptive cloud infrastructure for the U.S. Department of Defense; and CSC continues to invest in its grid computing technology.
Beyond these big three, the marketplace has a wildcard in providers like Amazon, Google and Yahoo. These companies have significantly less experience in providing IT services to corporate clients, but they nonetheless have invested billions in cloud capability. And the very notion that IT managers could use a credit card to buy computing capacity whenever they need it could potentially change the way IT operations are planned and delivered.
Against this landscape of cloud preparations, organizations are wise to consider cloud services in their ITO deals. Companies should keep cloud computing on their radar screen, think about how it could change their business, and start assessing the cloud potential of their critical applications. The clouds on this horizon could serve them well.
Jack Singh is a client executive and Charles Arnold is managing director, IT advisory at outsourcing advisory firm EquaTerra.