EquaTerra Survey Reveals Steady Growth of Cloud Computing Outsourcing in 2011

Growth of Cloud Computing

Cloud computing will dominate IT outsourcing market while demand for outsourcing and third-party services is expected to grow moderately in 2011, the fourth quarter 2010 Pulse survey by EquaTerra revealed. The survey reflects business and IT service market activity during fourth quarter of last year, and those polled include global business and IT service providers like ACS, a Xerox company, Atos Origin, Caliber Point, Capgemini, Ceridian, Cognizant, CSC, HCL Technologies, HP, IBM, ICG Commerce, Mercer, Outsource Partners International, Steria, Syntel, TCS, and Wipro.

The Pulse surveys focus on using outsourcing and other third-party services to support the following functional areas: customer care/call center, finance & accounting (F&A), human resources (HR), information technology (IT), knowledge process outsourcing (KPO), procurement/ source-to-pay, and vertical industry business services.

Overall, BPO (business process outsourcing) and ITO market demand in the last quarter followed the same trend of slow pace of growth reported previous quarters in 2010, the survey showed. The use of cloud computing as a means to enable outsourcing or in lieu of outsourcing in some cases continues to become more prevalent, EquaTerra analysts concluded. The survey also showed that it is quite improbable to witness new mega-outsourcing deals in foreseeable future due to a more pragmatic, realistic and cautious approach in using third-party services.

Vertical industry services as well as functional and process ares are more likely to report significant outsourcing growth since these areas did not enjoy such massive outsourcing in the past. The challenge ahead of buyers will be their ability to manage multiple outsourcing engagements and growing number of relationships with service providers, the survey said.

Those polled cite the following main challenges:

  • Retained organization, relationship management and outsourcing governance
  • – Inadequate executive and management support
  • – Change management concerns
  • Internal political pressure

The top trends that will dominate the IT sector and IT service market in 2011 include the following:

  • Cloud computing overall
  • Cloud computing in lieu of outsourcing
  • Global sourcing/globalization
  • Poor economic conditions, debt crisis, etc. driving MORE outsourcing
  • Social media/networks used for business purposes

Adoption of Cloud Computing will dominate the market in 2011 while buyers will switch their efforts to aspects of Cloud Computing like business case development and validation, pricing and pricing model assessment, legacy systems migration plans and time-line development, the survey showed.

Cloud computing uptake in 2011 will cover the following top expected areas of care:

  • SaaS (software as a service) desktop applications (e.g., email, collaboration, messaging). EquaTerra advisers ranked this aspect first while service provided voted it third
  • Infrastructure (e.g., data center services, storage,back-up, development/testing – IaaS (infrastructure as a service)/PaaS (platform as a service)): service providers acknowledge it is as the top aspect while EquaTerra advisers rank it second
  • SaaS customer relationship management (e.g., CRM, such as Salesforce.com)
  • Business process as a service (BPaaS) or cloud-based “platform BPO”

Overall, IT sector will witness further globalization of business and IT services in 2011, which is not unexpected, and buyers will diversify even more the locations of outsourcing services. Broader range of services will go offshore while the growth of global sourcing will keep its faster pace of growth challenging buyers’ abilities to manage these growing complex efforts, the report concluded.  Thus, potential benefits could be jeopardized and failed efforts would be observed.

By Kiril Kirilov

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