Companies May See Outsourcing in New Light, Thanks to Cloud

Ann All

At its heart, cloud computing is a variant of outsourcing. Whether you outsource development resources (middleware-as-a-service), a full-fledged development platform (platform-as-a-service or PaaS) and/or enterprise applications (software-as-a-service or SaaS), you are offloading some of your technology functions to a third party.


I mentioned this in April, noting that companies sometimes neglect due diligence and ongoing relationship management with their cloud computing partners, maybe because they just don't view these relationships in the same way as their more traditional outsourcing relationships.


So naturally I was quite taken with Dion Hinchcliffe's inclusion of an outsourcing-related item in his ZDNet post called Eight Ways That Cloud Computing Will Change Business. (As usual, it includes one of his colorful diagrams to help illustrate his major themes.) We're already seeing all eight things Hinchcliffe mentions happening, though some are occurring far more quickly than others.


Item two on his list: Cloud computing will help create what he calls "a new lightweight form of real-time partnerships and outsourcing with IT suppliers." These relationships will offer companies more control and flexibility than traditional outsourcing arrangements, writes Hinchcliffe, largely because it will be easier to switch suppliers if you are dissatisfied.


This is largely true, though it won't be completely seamless to switch. Forrester Research analyst James Staten, one of the sources I interviewed for a recent story on cloud computing, pointed out that vendor lock-in can be an issue with PaaS because of its proprietary nature. He told me:

Right now, if you design applications on a certain cloud platform, it's the only place they'll run. You'll have to change the code to port it over to another PaaS.

Even with SaaS, it's important to keep mission-critical apps up and running. So any switches obviously need to be carefully orchestrated.


Among Hinchcliffe's other seven items: the rise of new industry leaders and IT vendors. This is mostly a good thing, though occasionally it can present problems since not all new vendors remain viable, as I wrote earlier this year. Just last week, IT Business Edge blogger Dennis Byron wrote about SaaS provider Flowgram shuttering its operations.


A couple of Hinchcliffe's other items:


  • The cloud facilitates creation of new products and services. The possibilities are virtually endless, writes Hinchcliffe.
  • The cloud creates greater awareness of the Internet and especially of Web 2.0 technologies. This may prompt companies to update their perspectives and skill sets in ways that will help them benefit from these technologies.
  • The business will become less reliant on direct IT involvement. Again, this is a good thing or a not-so-good thing, depending on how one looks at it, as I wrote last week. In that post, I shared some ideas from LucidEra founder Ken Rudin on which roles IT can play in helping the broader business create strategies based on leveraging cloud-based resources.


Hinchcliffe's other two points? Read his fine post (and dig that diagram).bus

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Add Comment      Leave a comment on this blog post
Jun 16, 2009 7:31 PM Sonal Maheshwari Sonal Maheshwari  says:


I completely agree to your view, that is what even i was feeling from some time. Cloud computing is the way to go.

Sonal Maheshwari


Jun 18, 2009 7:15 PM Chris Howard Chris Howard  says:

Cloud Computing is certainly catching lots of buzz in the market. It is an old idea utilizing the new technologies to innovate!

Firms like ours are looking for ways to leverage this to drive value for our clients.

Last year Capgemini launched a Cloud Computing Center of Excellence, focused on cloud computing and Amazon Web Services.  In my opinion, Cloud is very much in a hype cycle from the Enterprise standpoint.  But Capgemini is working hard to figure out how to turn that hype into a deliverable business and technology model.  We're currently working with clients to prove in a couple of models, specifically, when volumes are very volatile and when capacity is needed quickly and temporarily.  As the author mentions IT as a service is fundamentally outsourcing.  Working with an experienced ITO organization to understand what should be put in the cloud, and how best to manage this alternative delivery model will increase the ROI on a project. Cloud is a hot topic in our business and it could be a game changer-for ITO vendors and for enterprises. No Innovators Dilemma allowed!

Jun 22, 2009 6:41 PM Srinivas Vadlamani Srinivas Vadlamani  says: in response to Dean Stathos

I believe the key to success around cloud would be not only technology but also 2 important business concerns - SecurityData Ownership, and a business model that would convince business process owners to consider the option of cloud. What I am trying to convery is that the applications should be easy to use, quick to implement and the cost of ownership should and must be lower than the existing implementation. The challenge would be to prove TCO, that is lower than an exiting solution that has been amortised over the years.

Jun 22, 2009 7:36 PM Dean Stathos Dean Stathos  says:

The purpose of cloud computing is to assist a business in providing IT services that is dependable, consistent, and malleable--all at a consumable price. 

The outcome of this is that more and more businesses will have their information/applications/servers run on class "a" data centers providing failover and failback where they didn't have it before.  They could also tear down IT environments at an ad-hoc basis to follow the tactics of the business.

Outsourcing is not changed as a result of cloud computing--only that smaller to mid-sized IT-hosting companies will have more opportunities in the future.

This article is yet another article that hypes up cloud computing in a way that it isn't.

No, relationships will not change, they will just grow as more SMBs move their IT infrastructure to these "clouds"--that is if they ever do.

I agree with the lightweight partnerships, but, not in reference to IT and outsourcing agencies.  The lightweight partnerships will be between two businesses as using the malleability of a cloud allows a business to move in the direction that business goes--forcing to remove relationships somewhere to add it somewhere else.  At least the IT component to it will be much easier.

No, the products and services willfor the most partstay the same. So long as the front end doesn't change (Web, Outlook, etc.) it should seem transparent to the customer--if it doesn't it's not a cloud.

As for IT being in direct involvement, I believe there will be more.  As their data center is moved to a third party, then the company will be forced to have a relationship with their 3rd party.  You will see that the IT organization will have more involvment in the cloud environment than they do today.  Today, executives worry about downtime, tomorrow, in a cloud, they will worry about how much more revenue can I squeeze out of the cloud.


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