There are signs that the spread of operational choices the cloud now presents top business users is making a confusing contribution to that important business equation: “what do we do now?”
According to sourcing advisors, EquaTerra, the demand for outsourcing and third-party services has dipped slightly as businesses explore the growing range of alternatives. The company reports that during the second quarter of this year, dynamic models such as SaaS, BPaaS and other cloud services have stall company review cycles.
Organizational spending on third-party services continues to be dogged by uncertainties resulting in a persistent hesitancy to invest and slowed deal flow, according to the company’s 2Q10 Advisor and Business/IT Service Provider Pulse Survey. Faced with modest demand and a questionable financial system, organizations remain focused on avoiding risks and conserving capital. Buyer interest continues to trend toward internal transformation efforts, shared services and, increasingly, pay-for-use cloud-based services.
While the economy continues to be a major issue, one of the other inhibitors is the growing range of choices facing companies. According to EquaTerra there is still significant interest in conventional outsourcing, but a growing number of buyers are also exploring options like virtual IT infrastructure and SaaS.
The Survey shows that traditional outsourcing demand has slipped 9% quarter on quarter and that, while the weak economy is still driving outsourcing interest, this is shifting toward
new service delivery models. A growing number of service providers (38 percent) cite the economy is now slowing/disrupting conventional deals, while interest in cloud-based services such as SaaS is gaining traction.
The survey also points to how industry watchers expect the prolonged recession to speed the adoption of cloud services as thrifty buyers look for ways to increase capacity and capabilities without large upfront investments in infrastructure, software or complex implementation efforts. The survey covered observations on buyer adoption rates for cloud-based services.
For SaaS, there was consensus that it is garnering the most activity and investment. Both service providers (53%) and advisors (19%) reported SaaS deployments were already underway with other projects scheduled to launch within the next 12 months.
The company also tried to gauge the impact of cloud services on enterprise software vendors and traditional outsourcing service providers and models. According to Stan Lepeak, the company’s managing director of Global Research, “Cloud technology in itself is evolutionary but its economics make it revolutionary. The big hurdle is defining and implementing a strategy for adopting and managing these new service delivery options. Uncoordinated and uncontrolled adoption is a recipe for longer term problems that could undercut the benefits gained from cloud computing.”
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