With the Cloud, What Happens to Outsourcing?

Originally published on the Microsoft CIO Network. Join today.

Over the years, outsourcing has been a proven strategy to lower costs, manage complexity and free IT to become more strategic in making the business more profitable. But with the emergence of cloud computing as a viable alternative to accomplishing these same goals, what happens to companies who are locked into multi-year contracts with “traditional” outsourcers? Will they be able to reap the benefits of cloud any time soon?

The question, I think, really hinges on whether the outsourcer is well versed in cloud and can offer those kinds of services in the short term. Those who are expert at managing an on-premise data center are probably not going to be able to move to the cloud quickly. After all, whole new skillsets are involved and it will take time to retrain their staff. On the other hand, outsourcers who have already migrated their customers’ assets to their own data centers and embraced virtualization are, in my opinion, well positioned. They will be able to offer cloud-based services and transition their customers more quickly.

Another point: As these outsourcers make the switch to the cloud, will customers want to renew their contracts once they are up? In a way, moving to the cloud is a loose form of outsourcing. By continuing on with an outsourcer, you are essentially two levels removed instead of one. Is this desirable in terms of control? Could it still make sense for private clouds? I spoke to several CIOs recently about this and there is a concern.

Lastly, who are most likely the main benefactors during this initial state of confusion? My guess—consultants.

It would be great to hear your opinions on this.


The opinions and views expressed in this blog are those of the author and do not necessarily state or reflect those of Microsoft.

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