How is cloud changing IT outsoursing?

One area of confusion concerning Cloud computing is its relationship with outsourcing: ultimately IT service delivery from the Cloud is outsourcing because it is the delivery of shared, multi-tenanted IT services by external parties for the consumption of organisations of all sizes in any geography. However, for those organisations already outsourcing aspects of their IT, the Cloud delivery model raises operational questions about how best to transition to this lower cost capability and which areas offer the most appropriate point from which to begin the migration. And what indeed should the CIO expect from an outsource agreement as this delivery model becomes more mainstream?

An area we explored in “ Cloud Computing – A step-change for IT services”, and that is now coming more sharply into focus, is the role of the service integrator. This is the ability of the service provider to assist with the integration of SaaS solutions and on-premise software implementations to create mixed model services for your organisation. This type of integrator can also offer pre-integrated business service brokerages pulling together hybrid (cloud-to-cloud) components. Service providers are honing their application service skills in preparation for strong growth in demand for this type of requirement. But which types of supplier are likely to make the best business service brokers in this service integrator world?

One thing is clear: there is a division of opinion as to how the commoditisation of IT infrastructure by Cloud delivery should be managed within an outsourcing agreement. Should the buyer select a provider with end-to-end ownership of its own hardware, software and services, or would the buyer be better served by having the ability to swap commodity technology in and out during a contract from whichever provider is offering the best deal? In other words, is it preferable to opt for an IBM or HP, or for a more technology agnostic provider? Furthermore, what role might the outsourcer’s supplier ecosystem play in creating a more attractive sourcing agreement for you and how might you like to access that resource during a contract?

Meanwhile your most vocal critics (your end-users) are demanding devices and solutions as good as the ones they use in their personal lives and can see might well help them be more productive at work. Can your outsourcer use Cloud workplace services to help you address this challenge and provide governance structures for digital allowances?

The disruption Cloud services pose to classic outsourcing agreements are manifold, but the opportunities they promise will ensure that we change the way we contract. After all, the point of these services is to enable your organisation to become more agile and innovative. Cloud helps shift the focus to delivery of business services rather than delivery of IT solutions. But how does that happen if you outsource IT services in silo’d technology towers to different providers? Does this kind of tech tower multi-sourcing make sense as we move towards Cloud delivery? Exactly how do you use Cloud services to drive down IT costs within outsourcing while keeping your eye on the business outcomes the IT is supposed to be supporting?

These are all questions our research will be addressing as we consider how to make the IT service provider governance model part of the way your organisation underwrites business change. We will be contacting members of our CIO Research Forum on this topic shortly. And we look forward to sharing our findings with you in the summer.