Can cloud computing replace traditional IT outsourcing?

Recently there was a report by the research firm Gartner estimating global spending on IT outsourcing to reach $251 billion in 2012 which is up by 2.1% when compared to previous year. Further the report states that cloud computing segment will be the fastest growing segment under IT outsourcing which is expected to reach $5 billion this year. This statistics gives a clear picture of how the market is shaping up for established traditional IT outsourcing companies.

Cloud computing source: berytech

Traditionally IT outsourcing was about offering tangible services like providing servers, data centers, networks etc but the rise of cloud service adoption is changing all these tangible services to asset free IT services. Cloud computing in the form of Infrastructure-as-a-service (IaaS) is a boon to many IT enterprises as they move away from the need of hefty investment in IT infrastructure. In short, cloud is playing a very important role in traditional IT service industry.

According to Gartner, cloud computing will make the delivery of traditional IT services more effective and efficient. It is said that the time has reached for the traditional IT service companies to invest in cloud computing to marginalize the risk posed by cloud services in the outsourcing market.

The enterprises have been waiting for something better for a long time in terms of services and they are no longer satisfied with the traditional IT services provided to them. The demand for better, faster and cheaper service drive the growth of cloud services in the IT outsourcing market. However, many IT outsourcing companies have started introducing cloud services in their service portfolios to keep in pace with the changing demand of the clients. Companies like IBM, Wipro Technologies and HP are already taking the advantage of the opportunity and have positioned themselves as cloud service providers. The outsourcing companies who are yet to develop cloud computing expertise in-house are partnering with other firms that provide cloud options.

According to latest reports, growing concern of the clients on the confidentiality of the information shared will lead to a large number of mergers between cloud services providers and BPO companies in the near future.  This is because many of the clients trust established BPO vendors rather than their partners.

It seems like the growth of cloud services will require the IT outsourcing companies to bring in more flexibility and adopt new management styles to incorporate the changes in the business model.  According to Gartner, the biggest opportunity of cloud computing exists for new members in the IT outsourcing industry. However, all is not lost for traditional IT outsourcing industry as many organizations are evaluating the option of buying the services of IT outsourcing companies to manage their public/private cloud services.

Although the growing trend of cloud computing showcase some threat to traditional IT outsourcing companies, in long term it will prove to be fruitful for them if they include this service in their business portfolio.

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