Cloud brings sunny outlook for outsourcers. Russian IT Quarterly (#25, Oct 2010)
Oct 20, 2010
Cloud brings sunny outlook for outsourcers
The biggest event of the last quarter was the Gartner IT & Outsourcing Summit, where Reksoft represented the Russian software development industry alongside Russoft, the Russian software outsourcing providers association.The international outsourcing community gathered to pick up the latest trends and to listen to the common buzz to divine the future of outsourcing.
The main themes of the event were cloud computing, the pros and cons of traditional and emerging offshore destinations, and the best ways to evaluate offshore providers.
According to the latest Gartner research, up to 10.2% of external IT spending is going towards cloud computing - and that's just the first step. The cloud computer market is evolving rapidly and Gartner expects SaaS in particular to be the main trend over the next 5 years.
The most successful enterprises' IT departments will use cloud services to reduce the total cost of software ownership and avoid up-front investments, rather than own the assets and pay license fees.
How will this shift influence outsourcing services providers? Will it kill customised software development as enterprises enjoy easy-to-change working environments and applications available in the cloud for a small fee? Or will it cause a boost in outsourcing as most new products and services go online, skyrocketing the need for support and maintenance services?
SaaS will probably not diminish the volume of software consumption. First of all, not all enterprise needs might be satisfied with standard software and especially for those businesses that have high safety and risk requirements, such as transport and logistics, or specific business processes. And cloud software still has to be developed, with an attendant need for testing, support and maintenance of newly deployed software.
However, the working environment will certainly change for outsourcers. Some things will certainly become tougher. Information safety demands will increase and the ghost of Satyam will haunt outsourcing managers while choosing the right provider. The need to work with applications non-stop will create new and higher requirements for business consistency. But on the other hand, cloud computing will provide software development companies with more scalable development environment, diminishing project costs and increasing the flexibility in project launching. Taking all this into consideration, the software outsourcing industry's prospects look quite rosy.
This coincides with Gartner predictions that up to 30% of IT services will be industrialized by the end of 2015, and delivered through cloud. Software development services and outsourcing services will require more soft skills and a greater understanding of the client's business, with an attendant move away from time-and-material contracts to a focus on business KPIs, said Gartner analysts.