IT Decision Makers Wrestle With a Basic Question: How Much Computing Should Go to the Cloud?

Virtually all businesses today have migrated or are migrating some of their IT needs to the cloud. Larger enterprises have been taking advantage of the flexibility and economy of scale that cloud-based IT services offer for a number of years now, but the trend is now encompassing small businesses as well.

You don’t have to be a genius to see the economic advantages of cloud-based IT services or recognize the value of the new flexible business model. That said, cloud computing is really just emerging from its infancy today, and much of the promise of cloud computing remains to be unlocked.

The fact is – the cloud computing race is on, and SaaS, PaaS and IaaS providers are all scrambling to find their place in tomorrow’s IT market.

Changing Tides of IT Services Market

The explosion of cloud computing in the last six or seven years has revolutionized the IT industry.  Consulting firm Gartner estimates the public cloud computing market will grow from $109 billion in 2012 to $206 billion in 2016. Businesses can now scale up their IT resources at a fraction of the cost and time they would have had to invest a decade ago, and even better, can operate on a pay-as-you-go basis without having to plunk down a lot of money upfront.

While this transition in IT to a utility services model is a great boon to businesses on many levels, IT decision-makers now face the daunting task of trying to decide just what type of IT services they really need and which providers offer these services at the best price. Given the IT services marketplace has become crowded with a myriad of companies with different offerings, and the services themselves defined by a bewildering array of acronyms, it is not easy to even determine exactly what is being offered, never mind is it what you really need.

“Cloud delivery is the next chapter in the story of outsourcing…At the end of the cloud utility model, the idea is to deliver just good enough services at the lowest possible price.”

Value to Business is the Bottom Line

Making the right decisions about what kind of cloud computing services your business really needs means really understanding the needs of your business. Like all business decisions, decisions about IT services are ultimately about value.

If you’re a small business that has been paying out the nose for licenses for apps for all of your employees when only half of them actually use them, then pay-as-you-go Software-as-a-Service (SaaS) offered by companies like Google, Oracle and salesforce.com is likely to save you money.

If you are a medium-sized business that has already invested significantly in IT infrastructure to support your application-intensive operations, but are growing rapidly, you might consider providers such as Google, Microsoft and force.com with application-oriented platform-as-a-service (PaaS) offerings or even a hybrid public-private cloud arrangement.

If you are a large enterprise, you might have already made the call to build your own private cloud or even go the hybrid route. Either way you will need to work with cloud service providers on at least an “enabler” basis, or perhaps, depending on your size and operational structure, you will decide to investigate the broader system-based offerings of the infrastructure-as-a-service (IaaS) providers like Amazon, Microsoft and Rackspace.

Cloud and the Future of Outsourcing

In her recent webinar, How Cloud Sourcing is Changing the IT Services Market, Gartner’s Linda Cohen argues the cloud is rapidly accelerating a sea change in the outsourcing of IT services. “The last four years have been leading up to a big shift in how IT services are going to be delivered in the future, in some cases obviating the old style of service delivery. And these changes are…just accelerated by the cloud.”

Cohen also points out that traditional outsourcing is already declining as businesses migrate more and more of their IT needs to the cloud as providers improve delivery models. How much more providers can improve their delivery models and reduce their prices remains to be seen, but the race to the bottom is on. Cohen sums it up, “Cloud delivery is the next chapter in the story of outsourcing…At the end of the cloud utility model, the idea is to deliver just good enough services at the lowest possible price.”

She also makes a persuasive argument that any new business functions that evolve will be conceived of as external services rather than “outsourced” functions.  Beyond that, these new services will likely be delivered by new providers, and the companies that engage with these new providers to find ways to innovate and create value will be the most successful.

BPO is also in the process of evolving into the utility model (BPU) as cloud-based business process services are becoming more common in many industries. Forward-looking companies are evaluating their IT services needs and developing strategies without sourcing providers to leverage multi-tenancy and maximize virtualization to create optimum outsourcing outcomes.

Making the Right Choices for the Future of Your Business

Having both an awareness of where you are now as well as a vision of where you want to be will enable you to build a successful future for your business. Cohen emphasizes that businesses must not get trapped into sticking with what has worked in the past. She argues it is important to “Do a lot of investigation around the cloud strategies and the investments that the traditional IT service providers are making, where is the shift? Who’s moving from the old to the new?”

In today’s rapidly changing IT industry it is critical to be ahead of the curve, and embrace, rather than resist, change.  Companies that embrace change will benefit greatly from the ongoing transitions in IT service and cloud computing, and leverage these flexible new models to greater efficiencies and innovations as they evolve into cloud enterprises. Companies that don’t will suffer from a growing competitive disadvantage.