One of the most attractive things about cloud computing from the perspective of business people is that it provides an effective means to outsource IT. After all, IT all too often isn't critical to the business, so instead of investing huge amounts of capital in IT equipment and the salaries of the people needed to manage it, they reason that the business will be better off relying on cloud computing services.
In as much as that make sense for any individual business, the thing many business people might want to start thinking about is what happens when cloud computing becomes pervasive. We've already seen a trend where companies not only outsource their IT services; they also outsource entire business processes. Once cloud computing becomes pervasive, thanks to commodity level pricing, it will become a whole lot easier to outsource an entire business process. And when you look across the spectrum of business processes, there is no shortage of processes that could be delivered as a shared service versus hiring a dedicated staff to perform those functions.
A good simple example of such a process comes from David Gee, vice president of marketing for Hewlett-Packard's Enterprise Services Group, which is celebrating inceased sales of services thanks to a larger customer base at the one-year anniversary of acquiring EDS. All 50 states have processes associated with the incarceration of inmates. Do we really need 50 different ways to do that, or could each state lower its cost by making use of a shared service delivered via the cloud? When you look across health care, financial services and the public sector, there is no end in sight of repeatable business processes that could probably be delivered more effectively as a shared service. This is why, for example, most companies outsource payroll management.
Ultimately, cloud computing will drive the next major wave of business process outsourcing. So don't be surprised when you see companies such as HP, IBM and every other provider of a cloud computing service starting to acquire companies that deliver a business process as a shared service. HP's acquisition of EDS is only the beginning of the building of a cloud computing franchise intended to compete with the business process outsourcing franchise that IBM has been steadily acquiring for years.
Business process outsourcing (BPO) is only in its infancy stages. Cloud computing creates a framework that, when coupled with virtualization and higher levels of IT process automation, will make it a whole lot easier to not only dynamically move application workloads, but entire business processes to drive what some will surely dub BPO 2.0. So while every business executive out there is currently enamored with cloud computing, they should also remember that, like any sharp instrument, cloud computing will cut both ways.