Gartner Tells IT Providers to Buckle Up

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Apart from traditional business models, Gartner tells IT service providers that the use of cloud strategy is essential to compete with multinational suppliers.

Ian Marriott, a Gartner analyst reported, “The initial resistance to public cloud has begun to subside and customers are beginning to realize its efficiencies as the solutions mature.”

The Outsourcing Numbers

Gartner has expected that sales in the public cloud service sector will reach $131 billion in 2013 and $180 billion by 2015. In comparison to 2012, the sales have increased by 18% according to research by Gartner.

Indian IT service firms have witnessed an increase in the global share market by 13% while multinational companies have seen a 7% decline. These numbers are made available through research over the last decade by ISG.

This growth was however not sustained and the IT services industry is currently facing a snail’s pace growth. The track of steep growth braked when India’s top ten IT firms reported a growth of 21.8% in 2011 and a growth of 12.7% in 2012. Between 2005 and 2008, Indian IT providers reported a growth of 32% while western based service providers reported a minimal growth of only 7%.

After the infamous recession of 2008, the western providers reported an annual growth of 0.4% and Indian IT providers reported an annual growth of only 16% which is half of the growth rate of 2007.

Combating the hard times for Offshore Suppliers

Gartner has advised offshore suppliers to induct cloud based services into traditional delivery approaches. The horizontal and vertically based cloud services have the means to create efficiency and set the services on par with the global offerings.

Ian Marriott in his report also said, “Cloud-based services will not replace offshore services, but will complement them. In addition, cloud services will not ’make or break’ all offshore providers. There will always be a need for ‘pure-play’ providers that operate a labor-intensive delivery approach. But, for broad-based offshore providers that operate in multiple geographies, industries and service lines, and who seek to compete for significant ‘wallet-share’ in major accounts, strategic investments in cloud-based services are mandatory.”

Gartner has stressed the importance of imbibing cloud services as a means to stay afloat. The only solution for companies that do not update is to sell-out or get acquired.

Gartner also talked about IT buyers regularly keeping tabs on how effectively their service providers are utilizing the cloud technologies. Despite the regular tabs, most service providers are guilty of not integrating the cloud technologies and relying instead on the traditional low-cost labor.

Despite the doubts cast on the Indian IT service providers by Gartner, a large number of companies including Value Leadership Group believe that the service providers are not given enough credit for evolving with the changing times. The company CEO, Peter Schumacher also believed that the European and American counterparts have been complacent and held onto the more traditional methods of delivery.

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