The End of Traditional IT Outsourcing: How It Impacts Customers

The traditional IT outsourcing industry will be dead in five years, A.T. Kearney's Arjun Sethi predicted in a recent interview with CIO.com. The culprit? Cloud computing services. Sethi's vision of the future of the IT services industry is quite clear, but he's unsure of the specific implications this industry transformation poses to traditional IT outsourcing customers.


To determine the buy-side effects of "the end of IT outsourcing as we know it," CIO.com talked to Kevin Campbell, group chief executive of technology for Accenture and former head of its outsourcing group. According to Campbell, the cloud-based future state holds great promise for outsourcing customers in all sectors—seamless customer connections for retailers, electronic health records that follow you everywhere, low-cost government-provided IT services—if only IT departments can meet the not insignificant challenge of integrating services in the new "cloud-sourced" environment.

Kevin Campbell: The cloud is still emerging and all its related implications haven't been thought through. Organizations are still trying to understand what the cloud is. There is much discussion about how the cloud will affect sourcing, and while there are plenty of schools [of thought], all outsourcers are looking at what their role in the cloud might be, how it will change their relationship with customers and what opportunities it will present.

In your opinion, will the market rapidly develop cloud services capable of displacing traditional outsourcing? 
 
It's already happening. The question is about delivering services at scale. Everyone we're talking to has cloud as part of their IT strategy, and many organizations are already piloting solutions and thinking about next steps. We expect the cloud to have a significant effect on the market within the next three to five years.

Who are the true early adopters—those already using cloud services for mission-critical applications or infrastructure? 

We're not seeing Global 2000 companies running their financial or ERP systems in the cloud. This doesn't mean that what's out there in terms of cloud services isn't important. But for critical applications—applications that can't go down—it's about having the ability to work around system outage issues.
We are seeing especially strong interest in the pharmaceutical, financial services, high-tech and telecommunications sectors, and demand for the entire cloud services lifecycle across all our geographies.


What are the risks of early cloud adoption? 

The risk most often discussed is security. The bad guys keep getting more sophisticated and creative. The potential exposures and the implications to the rest of the infrastructure are also becoming better understood.
However, many of the innovators in the cloud space are not accustomed to dealing with enterprise [needs]. They either come from the commercial world or start-up worlds, and they don't have a strong understanding of enterprise requirements such as service levels or uptime demands. But the market's understanding of the enterprise will mature over time.

Cost reduction and capital outlay avoidance are driving cloud adoption. Are customers of cloud computing services reaping those benefits yet? 

Accenture defines cloud services as those that cost at least 40 percent less than current services, have minimal up-front costs, are paid for as you use them, and are ready when you need them.
There are a lot of cloud-like solutions and things with cloud-like characteristics in the market. In fact, outsourcers have worked for years to try to provide utility-like services. But the real key is delivering one-to-many usage and a standardized approach. If you can deliver that, clients are realizing significant benefits.

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The new wave in cloud computing (from the Hindu newspaper, India)

CHENNAI: Cloud computing is the latest buzzword. But small-time business operators are wondering if it will be useful and affordable. For them, the answer is a “software as a service” (SaaS) delivery model built into cloud computing.

It is a relatively new model of software deployment. Typically, here an application is hosted as a service provided to customers across the Internet. This model eliminates the need for installing and running the application in the customer’s own computer, and also the burden of maintaining software, operations and support.

While the first revolution of the Internet saw the three-tier model emerge as a general architecture, virtualisation in clouds has created a new set of layers such as applications, services and infrastructure. These layers do not just encapsulate on-demand resources, they also define a new application development model.
There are three layers — SaaS; the middle layer, known as platform as a service (PaaS); and the lowest layer, infrastructure as a service (IaaS).

www.salesforce.com is a good example of SaaS. There are many others, including Google Apps, offering basic business services such as e-mail. While cloud computing is considered a boon to large and mid-sized players, the neighbourhood pop and mom stores are waiting for a technology or solution that can help in cost-effective and efficient business. Business Intelligence (BI) software is making inroads into the small business area, and new technologies like SaaS appear perfect for smaller firms.

According to Niraj Jaipuria, founder of BI Retail Ltd, these management software solutions help retail outlets, providing information and data on bill collection, customer trends, inventory management, product display and sales patterns.

New technologies such as SaaS help small firms save money by having a ‘host’ somewhere in cyberspace rather than being present in the physical firm. The inherent ability of SaaS to reduce price points to fractions is what is working to its advantage.

The use of SaaS can also reduce the upfront expenses on software purchase, through less costly on-demand pricing. End-users may thus reduce their investments in servers and other hardware, says Mr. Jaipuria.

HR solutions Human resource solutions created by Adrenalin eSystems Ltd are also marketed through the SaaS delivery model in cloud computing. According to its chief executive officer and managing director, the HR department in every company is expected to take on the role of process owner on behalf of the leader and facilitate this across the organisation. The HR department is also tied down to mundane administrative activities. Thus, there is a key challenge faced by the HR head — to use human resource solutions to help the organisation do the needful.

Such a solution for a small and medium enterprise (SME) could prove expensive. But implementing it through the SaaS delivery model could be cost-effective. Today, most of the mid and large-sized companies are using HR solutions through SaaS, says Mr. Ganesh.

Original Article - http://www.hindu.com/2009/09/27/stories/2009092756151400.htm

Five Reason to Choose a Private Cloud

The number of solutions in both the public and private cloud spaces are increasing every day

As enterprise interest in cloud computing offerings and concepts continues to increase, the number of solutions in both the public and private cloud spaces increases as well. There's been much debate over public versus private cloud, even to the point of debating whether there can be such a thing as a private cloud. I'm not here to debate the latter (in my opinion the location of the service has nothing to do with whether or not it is a cloud), but rather I want to take a look into why consumers would choose private clouds over their public counterparts.

During the last several months, Ive been lucky enough to chat with numerous enterprise users about their thoughts on cloud computing. Quite a few of these users are already utilizing the cloud on some level, and they are doing this by leveraging both public and private clouds. In my experience, enterprises have been more comfortable leveraging the private cloud initially and using that as a stepping stone to jump into the public realm when and where it makes sense.

For enterprise users that have chosen the private cloud approach, I always try to understand their reasoning behind such an approach. Over time, it has become pretty clear to me that there is a common set of requirements and reasons users choose a private cloud. Here are the top five most common reasons I hear for implementing private clouds:

1. Security and privacy: This is probably the most obvious and prevalent reason regardless of the argument that public clouds can be more secure than on-premise data centers. Perception is reality and sometimes users are very wary of putting their confidential data and applications in a cloud they dont necessarily control.
2. Customization: Users who require highly tailored, customized environments are likely to go the private cloud route simply because customizations are easier to achieve. Often times, public cloud solutions focus on offering the most common services. While good for a large majority of the users, that approach doesnt suit all needs.
3. Tight operational control: Some enterprise users desire complete control over the behavior of their cloud-based services. For instance, public cloud providers may not guarantee the necessary of level of performance for the network, infrastructure, and application services they provide.
4. Governance: In my observations, the perception of many public cloud offerings is that they sometimes lack in providing capabilities that enable proper governance. Users expect to be able to apply many of the same governance concepts in SOA to their use of cloud. In some cases, this desire is strong enough to shun public clouds in favor of implementing a governance model around their own private cloud.
5. Existing investment: In some situations it comes down to the very simple fact that a company has significant existing investment in their IT infrastructure. If a relatively inexpensive solution can be implemented to help them better leverage this infrastructure via a private cloud, they are more likely to embrace that than turn their back on the investment in favor of an entirely new approach via the public cloud.

I think there's definitely a time and place for both public and private clouds. In my opinion it is unwise to dismiss private clouds out of hand, and I think it equally unwise to think enterprises cannot make use of public clouds. I'd like to hear what you think too. If you are leveraging cloud services are they public or private and why did you choose that particular approach?

Original Article - http://cloudcomputing.sys-con.com/node/1108054