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The Role of Cloud in Shaping Up IT Outsourcing

The Role of Cloud in Shaping Up IT Outsourcing
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by Sanjeev Kapoor 28 Dec 2014

Technology is not just about adopting modern innovations. It is also an important factor on which the very existence of IT outsourcing depends. Infrastructure management and software services are a couple of forms of outsourcing services which are dominant. However the recent years have ushered in multiple and distinct trends that have impacted the relationship between companies and managed service providers. This primarily includes an increase in the number of cloud-based projects that are outsourced. Currently, about 10% of IT outsourcing contracts consists of cloud-based elements but this figure is only expected to increase.

Cloud services have seen an increasing demand from clients. As a result, outsourcing firms have started preparing their own cloud computing packages or they have begun to recommend particular ones as per the requirements of the clients. Software platforms are easily available at the service level and providers offer these services frequently. Traditional IT outsourcing has taken a backseat and cloud services are gaining popularity and cost competitiveness.

Cloud computing holds a large share in shaping IT outsourcing. According to Microsoft, most companies spend 11 percent of their IT budget in developing new applications and the rest is spent on maintenance and infrastructure. Just a fraction of the 11 percent is used to secure employee access to resources irrespective of their location, device or software. Using cloud-based collaborators for IT outsourcing not only helps in reducing the need for a huge in-house IT department but it also saves money in the long term. Due to an effective cost cutting and an easier way of outsourcing, cloud-based models are becoming extremely popular.

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Why choose cloud service?

1. Emphasize flexibility in current outsourcing commitments
Existing outsourcing contracts are rather hindrances than enablers for cloud-based services. Therefore, it is advisable to keep contract lengths on the shorter side. It is not the time to make long term traditional outsourcing contracts that create barriers to future change of plans. Cloud services on the other hand are more flexible when it comes to change of plans in outsourcing commitments.

2. Review your approach to cost recovery system
Cloud services make a lot of new data available about consumption patterns easily. They can be highly beneficial when it comes to enabling cost recovery systems on high granularity. This becomes an important factor as cloud services are prone to rapid and unpredictable growth in the consumption levels. It is feasible to emphasise on this.

3. Keeping an eye on vital eco system partners
The cloud ecosystem is rather volatile due to frequent acquisitions and it is thus important to keep an eye on important ecosystem players. It also has a potential for shifts in seller alliances. It becomes important to maintain visibility in the choices of your suppliers and evaluate their dependence on infrastructure and software partners delicately.

4. Considering multi-sourcing aspects of cloud services
When outsourcing and cloud services are merged, they create a multi-provider environment. This guarantees chances in contracting options. Now packaged cloud offerings allow customers to contact service providers or the primary outsourcing partners. This has greatly begun to change the way IT outsourcing has usually taken place.

5. Trading customer commitments for favourable concessions
Even though buying standardised cloud services are unquestioningly fixed, outsourcing suppliers are not too harsh on the pricing. They are open to favourable pricing or concessions for customers. The securing of advantages in pricing and concessions depend on your company’s willingness to commit a certain quantifiable measure of resource unit volumes or reserved capacity.

What Challenges does Cloud Service face and how to resolve them?
One of the major concerns of cloud service is its security. Security policies may have less transparency, creating problems with enterprises’ information. Security policies need to explicitly meet compliance requirements. Cloud services may also demand fees for the data that they own. Another major concern is the disaster recovery in case of loss of data. As data collected by cloud services can be vast and be from many geographical areas, it becomes increasingly difficult to track particular data from a specific point of time.

Cloud services have numerous advantages and every new technology presents itself with a couple of challenges. Yet, cloud computing has rooted itself thanks to its cost effectiveness and it is definitely changing and shaping up traditional IT outsourcing.

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