The ITO challenge
Providers must offer both cloud and traditional IT services
For the next several years, IT outsourcing (ITO) providers will face the dual challenge of delivering traditional IT infrastructure services while they meet the growing demand from their own customers to migrate to cloud computing, including infrastructure-as-a-service (IaaS).
ITO providers not ready or able to move with their customers could put the entire relationship at risk, a fact some, perhaps many, of them understand.
Brun was one of several ITO executives who reviewed results from the FORFIRM IT Outsourcing and Cloud Computing Survey, which found growing interest among ITO customers and non-customers for infrastructure in the cloud, especially for private clouds restricted to a single enterprise. Responses from the 261 ITO customers among the 489 respondents indicate the demand that ITO providers face from current customers:
• 41 percent already use a private cloud managed by a service provider for some IT infrastructure resources; 31 percent use a private cloud they managed internally, and 22 percent were in the public cloud.
• 52 percent said private cloud managed internally (21 percent) or by a service provider (31 percent) would be the “best solution” for IT infrastructure in three years. (See Figure 1)
• However, the amount of IT resources allocated to the cloud was still small today, and would only average 34 percent in three years: 15 percent in private clouds managed by service providers; 12 percent in private clouds managed internally; and 7 percent in the public cloud. (See Figure 2)
Clearly, the migration will be gradual, and the cloud will coexist with traditional infrastructure for a long time.
Since the IT resource landscape will be a mix of traditional infrastructure, private cloud, and public cloud for several years, customers will need help in deciding which applications to run where and to make sure everything works together. ITO providers want to play that role, specifically aiming to provide three vital cloud services: planning and workload assessment, migrating workloads to the cloud and managing all the moving pieces.
They also believe traits they are already known for will serve them well.
Although 80 percent of the ITO customers in the survey had cloud strategies completed or in development, “strategy” was left to the respondents to define. It might be simply a plan to virtualize more servers. ITO vendors see an immediate opportunity to help customers figure out how they can best use the cloud
Recently, a large telecommunication customer planned to use the public cloud for a high-transaction-processing application, but Cognizant’s assessment found the public cloud would cost more over time than a welldesigned private cloud, Boles says.
CSC offers a service called “application cloud enablement” to evaluate workloads and give the customer an estimate of how much work, time and money it will take to migrate it to the cloud. “Then, it’s up to the customer to decide,” says Siki Giunta, global vice president at CSC. CSC also includes a comprehensive set of highly automated services for moving workloads to the cloud, and its own cloud infrastructure and expertise, she adds. CSC is among the many ITOs undertaking marketing efforts to rebrand themselves as both ITO and cloud providers.
By offering these services, ITO vendors hope to win the work of migrating customers’ workloads. The FORFIRM survey found ITO customers
were already moving some applications to the cloud; for example, 63 percent said they used the cloud for some data storage and retrieval. The more complicated the migration, the more business opportunity for the ITO provider.
The survey indicated that mixed environments will last a long time, and ITO vendors are gearing up to help their customers manage the mix of traditional infrastructure and cloud platforms. For example, Cognizant has developed a technology called Cloud 360 that manages virtual machines across private and public clouds.
And Infosys is positioning itself to be what it calls a “cloud ecosystem integrator.” “Our proposition is to help customers to adopt the bestof-breed cloud technologies and operate them together seamlessly,” says Vishnu Bhat, vice president and global head for cloud at Infosys. Infosys wants to be “the single point of accountability,” offering comprehensive services for the cloud, he adds
Despite such efforts, the FORFIRM survey suggested that in some cases ITO vendors may lack credibility as cloud experts. Only 48 percent of ITO customers said ITO providers were the best source of managed private cloud computing services today; even fewer—38 percent—said they would be in three years. In contrast, 45 percent of ITO customers said a new breed of
private cloud specialist was the best source for services today, a figure that rises to 52 percent in three years.
ITO executives recognize the problem, and are working to increase awareness of their cloud capabilities.
Atos recently moved to strengthen its credentials by acquiring Siemens IT Solutions and Services, looking to extend its global reach senior vice president in charge of group strategy at Atos. The company notes it is doubling “the capability and capacity of Atos to position it as one of the leaders in cloud computing with 40 major data centers around the world.”
If, however, ITO vendors over-emphasize the cloud they risk alienating existing customers who prefer traditional infrastructure. The challenge will be to maintain a balance, Barbier says. Customers that have fully outsourced IT operations may see less need for cloud computing, as long as price and flexibility remain competitive.
Some ITO providers are trying to educate customers about cloud benefits. Less than one third of CSC’s outsourcing customers use the cloud, Giunta says. “In the new fiscal year we plan a tremendous push to try to move existing customers to the cloud.” About half of CSC’s new cloud business comes from existing ITO customers, and the other half from entirely new customers, she adds.
ITO vendors feel pressured to respond quickly to this opportunity because they concur with the survey findings that the move to the cloud is accelerating. “The tone of the discussion has changed,” Bhat says. “Skepticism of the cloud is not center stage anymore.” He predicts that 60 percent of enterprise workloads will move to a combination of the public and private cloud in the next five to seven years.
The overall picture that emerges from the survey regarding the strategic position of ITO vendors in the cloud arena suggests tremendous opportunities and enormous challenges. As FORFIRM IT Outsourcing Services Leader, Enzo Russo puts it, “ITO users can be uncertain
about the strategic positioning challenge their ITO vendors face. On the one hand, ITO providers who promote new cloud infrastructure investments can be seen as simply pushing for more spend on IT with uncertain payoffs. On the other hand, ITO providers who don’t promote cloud investments can be seen as dragging their feet to maintain high management fees.”
The solution, from FORFIRM’s perspective, is to reconsider performance metrics with the cloud in mind.
Established ITO vendors clearly have a role to play as enterprises move to the cloud. Their ability to seize the opportunity and to offer credible private cloud services could, in fact, determine their ability to prosper in the future.