How exactly will Cloud impact outsourcing?
Outsourcing vendors are also getting into cloud play. The larger ones such as IBM are trying their hand at various layers of the cloud from infrastructure to apps. The smaller ones, for example, the Indian vendors who habitually shy away from spending on infrastructure, are mostly focusing on app layer, to offer platform-based solutions.
How exactly would Cloud impact outsourcing? An honest answer
would be: nobody knows! The key events are still unfolding,
critical players still shoring up their plans and customers still
largely clueless. Any conclusive sounding answer would be
A recent article in Computerworld reports on Cloud
computing’s threat to traditional IT outsourcing industry. It talks
about how the rise of Cloud computing and on-demand services are
eating into the application infrastructure maintenance of
It offers no data to quantify the threat posed by Cloud or
to know by when it would strike down the outsourcing industry. To
be fair, it is premature to seek that data. But the general drift
of the article is reflected in its headline: Cloud computing
shakes up traditional IT outsourcing.
Computerworld is not alone in anticipating this disruption. Of
course, cloud is a game changer for most segments of the IT
industry, including outsourcing. But there are many who do not take
an alarmist view of the developments. They may argue, Cloud
computing stirs up traditional IT outsourcing, would have made
a more accurate headline.
There is urgency in the outsourcing industry to respond to
cloud, but no panic. There is a consensus that cloud is on
ascendance and will deliver computing power and services in ways
that will be contrasted with traditional IT. There are also certain
cloud-based strategies which are cutting across the vendors. But
nobody is expecting a meteor to drive digital dinosaurs into
Outsourcing is tied to inefficiency in enterprise IT. You
cannot use complex software without customizing or without routine
maintenance. The more expansive your infrastructure, the bigger
team you need to keep lights on. The outsourcing business powered
by labour arbitrage co-exists with to this traditional IT
Noted Indian offshore vendor Infosys released its annual results
this week. In the last fiscal year 39% of its revenue came from
application development and maintenance, 26% from consulting and
package implementation, 7.2% from system integration and 7.2% from
The key question before vendors like Infosys is what would
happen to these revenue streams when cloud transforms the
traditional ways of setting up IT infrastructure and running
The various pieces of cloud computing are being assembled and
customers are taking baby steps towards it. But it is unlikely that
legacy IT will vanish overnight. As Computerworld article takes
note, the mainframes are far from gone.
Enterprise IT is inherently complex. Hooking up a couple
of hundred or thousand users to a system that runs from a server
will need expertise, planning, execution and maintenance. As cloud
gains momentum, consulting and integration opportunities would also
gain traction. There are outsourcing vendors who already promise to
cut the time you will need to migrate to AWS or Azure.
Outsourcing vendors are also getting into cloud play. The
larger ones such as IBM are trying their hand at various layers of
the cloud – from infrastructure to apps. The smaller ones, for
example, the Indian vendors who habitually shy away from spending
on infrastructure, are mostly focusing on app layer, to offer
They are tying up with packaged software vendors to offer their
products as SaaS, which come bundled with contact center or
business process executives to take care of management issues.
Wipro’s ‘simPlify’ solution which was launched nearly a year ago
has become an industry standard for outsourcing vendors to
simPlify, a HR solution, brings together Oracle’s PeopleSoft
software, Hewitt’s domain experience and Wipro’s business process
outsourcing capabilities. Customers in over 20 countries can
outsource their HR and payroll processing functions to this
multi-tenant cloud-based service and pay as they use.
Other outsourcing vendors have launched similar solutions. Early
feedback suggests that customers, unwilling to let go of legacy
investments are yet to bite. Despite the deafening buzz, cloud will
take time displace traditional IT fully, if it does ever
The outsourcing vendors have grown acquiring capabilities across
domains and industries. To survive in this industry you need to
offer solutions that are agile, best-of-breed, outcome oriented,
integrative and cost-effective. With these capabilities they can be
expected to do well on cloud as well.