Cloud Computing Takes Away Business From IT Outsourcers

Something that often gets lost in the discussion about cloud computing is what it means for traditional IT outsourcing. Many of the benefits are the same: Reduced costs, less internal development of software, reduced management of applications and hardware. So as cloud computing matures, it seems the IT outsourcing industry will have to evolve to adapt.Consider an article Tuesday in Financial Times. Infosys founder Kris Gopalakrishnan told the Times that the company is still trying to figure out how big of a deal cloud computing will be, and what its role will be in cloud computing. (Possibly as a systems integrator, the article suggested.)

I can see why Gopalakrishnan is thinking about this. For example, among its various services, Infosys is a leading provider of outsourced implementation and management services of SAP. Meanwhile, SAP is working on an enterprise strategy for software-as-a-service, part of the cloud computing genre. This plan includes some types of hosted apps in the area of, say, procurement or supplier relationship management, that tie into a customer's core SAP system.

Now, an SAP customer will choose one of these new or upcoming SaaS apps only after deciding it's a better deal than developing, customizing, implementing or managing the app inhouse. Hey, aren't those the same kind of benefits that a company such as Infosys might provide?

But in this instance SAP becomes the outsourcer. Or, maybe it doesn't. As SAP's envisioned enterprise SaaS business grows, maybe it contracts with another company-say an IBM-to host those apps in their data centers.

Meanwhile, established SaaS providers such as Salesforce.com are, in effect, already IT outsourcing companies. They develop and manage your apps. They do the updates for you. For some customizations, a tech-savvy employee isn't even required; there are plenty of non-technical personnel at Salesforce customer sites who are developing their own custom objects to automate business processes that run on Salesforce's Force.com cloud computing platform.

Another important area for Infosys and other outsourcers is infrastructure services, but how might that be impacted by the growth of things such as Amazon Web Services? And if more companies choose a hosted, multi-tenant software service, how might that impact their need to contract low-cost programmers and help desk personnel working in developing countries?

It'll be interesting, to watch how traditional IT outsourcing and cloud computing converge on the horizon. And I bet Gopalakrishnan isn't the only IT outsourcing CEO who is watching cloud computing with eyes wide open.