| By Stephanie Overby, CIO | | | | consultancy Horses for Sources. "However, if you're |
| For all the vagaries of IT services, traditional IT | | | | going to have your data and applications hosted |
| outsourcing has always been quite tangible—servers, | | | | externally in the cloud, do you really need to manage |
| data centers, networks, specifications, man-hours, lines | | | | them yourself anymore? Do you really gain a |
| of code. The rise of cloud computing, however, is | | | | competitive edge with the way you process your |
| changing all of that with flexible, asset-free IT services | | | | insurance claims, or isn't it time to find a services |
| available on an as-needed basis for more aspects of | | | | vendor that will host the app, the associated |
| enterprise technology. | | | | infrastructure and even process the transactions for |
| Cloud services are a boon for many IT departments | | | | you?" |
| willing to forego customization: They help IT | | | | Fersht calls cloud services the foundation for |
| organizations chip away at hefty capital expenditures | | | | next-generation enterprise sourcing solutions. He |
| from back-end infrastructure to customer-facing | | | | believes cloud services will make traditional delivery of |
| software and everything in between. Consequently, | | | | IT services more efficient and cost-effective. "They |
| the cloud is turning the traditional IT services industry on | | | | also help create a delivery mechanism for true |
| its head. | | | | business process services," he adds. "This new class |
| "Cloud computing represents a fundamental shift in | | | | of [outsourcing] has the potential to unlock tremendous |
| how companies pay for and access IT services," says | | | | value for customers." |
| Susan Tan, IT services and sourcing research director | | | | Cloud Computing's Threat to Traditional IT Outsourcing |
| for Gartner. | | | | Traditional, asset-heavy IT outsourcing deals won't go |
| In fact, Gartner predicts that by 2012, 20 percent of | | | | extinct overnight. (Remember the predicted death of |
| businesses will own virtually no IT assets. That will be a | | | | the mainframe? Big iron is still humming along.) But the |
| game changer—for better or worse—for | | | | clock is ticking. |
| outsourcing vendors of all stripes, from traditional | | | | "While adoption of cloud services is still low, |
| onshore and offshore IT service providers and | | | | outsourcers need to adapt to this change. The days of |
| consultants to system integrators and new, niche | | | | dedicated data centers are probably limited," says Tan. |
| vendors. | | | | "A lot of outsourcing hinges on having external |
| "If [the] cloud was only about gutting the clunky, | | | | providers manage assets—both infrastructure and |
| expensive and environmentally-unfriendly infrastructure, | | | | applications—owned by IT departments. This part of |
| and having Amazon and company deliver the | | | | the market will decrease. Outsourcers need to invest |
| computing power, then it's really just an infrastructure | | | | in cloud services and cloud-based offerings or risk |
| utility offering," says Phil Fersht, founder of outsourcing | | | | being marginalized. |