How Cloud Services Have Changed The Mindset Of Outsourcing

Outsourcing

The business of information technology outsourcing has been dominated by sizable companies such as IBM, CSC, ASC and others that provide a comprehensive line card of IT services.  These mammoth outsourcers were viewed as a one-stop-shop delivering IT services ranging from level-1 help desk to level-3 network engineers and even C-level executives.  This one-throat-to-choke mentality was popular with companies looking to outsource as it was thought to replace the finger pointing between multiple vendors with the hopes of a single, unified IT solution.  In some cases operational excellence was achieved and IT services improved while cost was contained.  While there were success stories, many outsourcing arrangements were a failure based on the customer’s experience.  Costs often ended up increasing during the duration of the contract while SLA’s and response times were often higher.

Single Source Dominated

So why did these single source providers dominant when there appeared to be so many disgruntled customers?  These providers were uniquely capable of building IT teams with competence ranging from help desk to CIO level skills on technologies from PCs to Mainframes.  An ability that required massive recruiting and training efforts not afforded to the smaller companies.

Secondly, these outsourcing contracts were not only diverse in technical skill requirements but also geographically challenging.   Many of the companies that chose to outsource not only had numerous locations geographically dispersed across the United States but internationally.

“While there were success stories, many outsourcing arrangements were a failure based on the customer’s experience.”

Only the large outsourcer with a global breadth of resources was able to support these complex opportunities.

Finally, most outsourcing contracts were a minimum of 5 years in duration and valued in the tens or hundreds of millions of dollars.  In order to win contracts of this size the providers needed to demonstrate financial stability and long-term viability.

As a result, companies seeking to outsource developed all encompassing requests for proposals with the goal of selecting a single provider capable of delivering a full compliment of IT services.  By its very nature, this thought process eliminated the smaller outsourcers focused on fewer technologies and services even though they were often better qualified in their areas of specialization, than their larger counterparts.

The Problem

The larger outsourcers, through no fault of their own, often fell into the category of “jack of all trades, master of none”.  Trying to be the best in everything IT is a paramount challenge very few, if any, can accomplish.  Also, in order to assure profitability, these providers implemented common computing platforms which provided benefit to the customer by introducing stability while allowing the outsourcers to move employees between customers with minimal learning curve.  The downside was these common platforms were often based on older technology thereby stifling the customer’s ability to innovate based on the newer technologies available.

The Shift in Thinking

The Cloud, as defined by NIST, “is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction”.   So what does the Cloud have to do with outsourcing? The Software as a Service (SaaS) delivery method of the Cloud Model is the catalyst to the outsourcing mind shift.

SaaS is the capability provided to the consumer to use the provider’s applications running on a cloud infrastructure.  Popular SaaS providers like SalesForce.com provide a targeted IT solution to companies delivered entirely from their managed cloud platform to any end-user with Internet connectivity and a browser.  These solutions are quickly provisioned, require minimal customer intervention and are available for a monthly fee.  As more and more customers leverage these SaaS solutions ranging from hosted Customer Relationship Management Systems, Sales Automation Systems, Accounting Systems, Email, SPAM/AntiVirus, Archiving and the countless other cloud based software solutions, it becomes apparent that the IT group’s thinking is shifting.  SaaS has even enabled a new outsourcing model called “Shadow IT” which is where lines of business directly contract for IT services without involving their internal IT departments.  IT, now often driven by Shadow IT, is open to outsourcing specific IT solutions to best of breed providers.  This is a significant change from the one-throat-to-choke mentality of the past.

These Disrupters are companies that leverage the Cloud to quickly startup a company with nothing more than an idea.  The relative low cost, flexibility and speed to provision IT services provided by the Cloud has allowed these new companies to bring a concept to market so inexpensively that business plans and the funding they are often written for are not necessary.  Market research is no longer theoretical but delivered in real time based on social media feedback.  The barriers to launch a business by these disrupters have been eliminated.  These SaaS providers often leverage the other two Cloud delivery models of Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) to build and distribute their offering.

The end result is companies of all sizes leverage the Cloud to provide best of breed solutions and these solutions are consumed by organizations based on best-of-breed service.

Benefitting The Corporations

As enterprises continue to utilize cloud services to fulfill their needs, “These Disrupters are companies that leverage the Cloud to quickly startup a company with nothing more than an idea.”

Cloud specific positions are appearing within these companies.  At this time, many of the positions are dedicated to managing an organization’s Cloud Provider partners.  Companies will get more granular with their IT outsourcing needs as these positions become more prevalent and they feel more comfortable delegating their IT functions across many Cloud Providers.

Also, these functions will not be limited to SaaS offerings.  IaaS is a general platform being offered by Cloud Providers.  IaaS provides a cost effective medium for companies to acquire compute and storage resources while providing the flexibility and scalability required to meet ever-changing business demands.  Companies want to get out of “the server hardware and storage business” and spend their time focusing on solving business issues.  Skilled IaaS providers, those with a systems integration background, are leveraging their IaaS platform to deliver turnkey, outsourced solution for a monthly fee to their customers.

Disaster recovery is a perfect example of such a turnkey solution.  Disaster Recovery as a Service (DRaaS) is a solution which replicates a customers mission critical servers to a Cloud Providers IaaS.  If the customer declares a disaster, the Cloud Providers activates the replicated servers at their location and turns them into the customer’s production site.  The Cloud provider is responsible for monitoring the replication, activating the servers to production and managing all other aspects to successfully make the replicated environment accessible by the customer.    Another example of a turnkey solutions is desktop as a Service (DaaS) where customers host their Windows desktops at a Cloud Provider or the outsourcers that leverage their IaaS offering host and manage a customer’s entire IT infrastructure.

This shift will allow smaller, more focused companies to win their share of the outsourcing business.  The customer will benefit by working with specialists in each area to fulfill their needs rather than settling for the bigger, often less skilled, single source solution.

By Marc Malizia

Scott Leatherman

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