Does cloud computing make outsourcing obsolete?

The new cloud environment requires varying degrees of service, which will allow the outsourcing industry to shuffle, and many vendors will offer different value propositions to customers based on different price criteria. What would happen if an enterprise could access information technology and business services as easily as home electricity?

This is the future of cloud computing. Cloud computing is a utility model for enterprises to acquire computing power, software and business functions. This pattern redefined the way businesses operate and provide services to customers, and it redefined the role of service providers and outsourced businesses.

This raises an important question: Does cloud computing make outsourcing obsolete? Imagine that a business can get powerful computing power in just a few minutes by providing a credit card number to the cloud's IT provider. They can contact a software vendor to gain cloud computing capabilities in sales, customer relationship management, and finance. With such a rapid response capability, does the CEO or CIO need a traditional outsourced service provider for service integration?

The answer can be affirmative or negative. Cloud computing does simplify some aspects of it and business services, and many services become as simple as lights. But it also makes some aspects more complicated, because customer demand is often not limited to power supply. For example, the power company's services do not include advising users on what type of home appliances to use, or how to use new appliances.

User preferences vary, so the new cloud environment requires varying degrees of service, which will enable the outsourcing industry to shuffle, many vendors will be based on different price standards to provide customers with different value proposition.

Complex IT environment

From an IT perspective, the implementation of cloud computing means that the CIO must manage a more complex mix of environments: externally provided

Cloud services, an internal approach to cloud management, plus traditional applications. From a business process perspective, organizations need to manage the consolidation of different functions and processes in a prudent (commercial manner), because utilities cloud computing service providers are most likely unable to fully understand the customer's business objectives-not to mention the customer's needs.

Outsourcing vendors will continue to play an important role in consolidation, given the other challenges that companies face in cloud services, primarily in terms of security, data consolidation, and service utilization. In fact, outsourcing can lead to a new era, as contractors are able to provide advice on business model design for businesses based on services provided by different service providers, and help enterprises to interact with service providers to generate innovative activities.

Behind the Hype

The hype over the introduction of new information technologies is one reason why the industry cannot correctly understand the impact of cloud computing on the outsourcing industry. Behind the hype is the complexity of the changes, as well as the current buyer and the interests of the service side of the neglect.

It is not possible for multinationals to simply give up the IT solution that favours current popular technology development. At the same time, it and business process outsourcing providers are well aware of the implications of cloud services and are actively developing and improving their capabilities. And, through existing customer relationships, they can take advantage of cloud technology development.

But behind the hype, many aspects of cloud technology and business services do have revolutionary implications.

First, the cloud computing model greatly reduces barriers to entry for new businesses and competition restrictions on small businesses. Small businesses now do not need to set up their own data centers to address the problem of the application of large numbers of e-mails, nor do they have to retain a large labour force for irregular recruitment and training. This utility model extends the outsourcing advantage-the so-called external supply of basic services-to a wider group of businesses. Now, enterprises can more quickly and easily access to affordable basic services, which in turn enhances the competitiveness of enterprises.

Second, in terms of financial considerations, the cloud model will produce astonishing results. Compared with the enterprise's own application scheme, the cost of software service program implementation and maintenance is relatively low. Because the supplier cloud the customer to provide the software, under the market competition, they will continuously improve the software, ensure to provide the new additional function to the customer.

There are plenty of false assumptions about cloud computing, and if you work on those assumptions, companies will get into trouble. For example, many commentators believe that the cloud is a business and IT service self-service model. They take it for granted that cloud services do not require any improvement or adjustment based on customer needs. Big businesses rarely do that, except for relatively small, decentralized processes that do not require too much cooperation in the company, and are less affected.

Others believe that the cloud model will simplify the service process. Even in terms of acquiring basic primitive computing power, this argument is debatable. Yes, businesses can easily store data and applications by renting servers. However, from a corporate perspective, this means that IT managers must manage the internal IT environment of the external cloud service providers, as well as traditional services and cloud services, while also balancing the traditional systems that do not use cloud computing.

Finally, and most importantly: server consolidation is not meaningless. As service providers grow, server consolidation becomes more complex. This consolidation is not yet in the business model of most utility cloud services providers at this stage. It is very important to fully understand the different ways of integration under the traditional outsourcing mode and cloud environment. Now, consolidation means that service providers with different systems and functions must work together to manage basic services. If there is a problem with an application scenario, the company that provides the desktop application needs to work with the application solution service provider to solve the problem.

But companies that outsource business processes and it processes to cloud service providers will have greater integration challenges in terms of continuously consolidating data across services and understanding end-to-end business processes, so that businesses can ensure that their employees and users get the services they need.

Take the general financial process of receiving and processing as an example. In a cloud or software service environment, the end-to-end capabilities of an enterprise may require five different cloud services. But from an enterprise perspective, business managers do need to know when they will get the services they need, and how they can achieve the desired service speed, efficiency and cost. At this point, how to monitor and manage the consolidation process-bearing in mind the ultimate goal of service-is a challenge for most cloud service providers.

Three different types of service modes

The role of outsourcing is changing significantly, and the role of outsourcing will continue to change as enterprise IT processes and business processes increasingly use cloud computing services. In fact, we will enter a new phase, the cloud model will accelerate the emergence of different outsourcing services and suppliers. There may be at least three different types of service.

Category I: Utility service Providers

As a provider of IT capability or basic business process capabilities, the value proposition of a utility service provider will focus on efficiency and cost.

For example, we worked with a logistics company that shipped up to hundreds of millions of items a year, each with a unique barcode that represents the gigabytes of data that the company needs to manage every month. As part of the quality control process, the company wants to identify which items are assigned the same barcode. The analysis of barcodes means that companies face considerable challenges in their ability to store and compute data. The company needs 150 servers to implement cloud solutions, costing a total of $131,000 a year. And if you build the same cloud computing capabilities in your IT department, you'll need to buy high-end servers worth 4 million of dollars. In addition, the cloud solution is surprisingly capable of handling the company's one-month data volume in 4.3 minutes. Success factor: For utility cloud service providers, the CIO of the user is primarily concerned with the availability of services: Do I always get IT services when I need them?

IT managers believe that the gold standard for determining utilization and performance is that of the so-called "59" standard--99.999% time. Cloud service providers have almost reached this requirement through the development of industrial capabilities. A small percentage point makes a big change in the company's performance over the whole year. If the network utilization is as high as 99.999% (the telecommunications industry is often able to achieve this utilization), the expiration time of one year is only 5 minutes. A 99.9% utilization rate means that the application will fail 9 hours a year. Failure of procedures will result in lower productivity, missed sales opportunities and decreased customer service quality. For business-intensive applications such as the financial services industry, system failure will result in a loss of USD millions of per minute.

Other success factors for utility service providers include recoverability-how long can the server recover if a program is paralyzed? Security is of course also to be considered.

At present, data security and integrity are fundamental to the cloud business model. It is important to define the responsibility of risk management and risk avoidance in the cloud ecosystem.

Category II: Business function Supplier

The second type of cloud service or outsourcing enterprise is a niche service provider with professional experience in some areas such as sales, human resources and customer support, so the service price is higher. If the first category is electronics companies, then the second category is to provide refrigerators, dishwashers, home theater and audio equipment, such as home appliances companies. For business function providers, the value proposition is to meet the business needs of the service company, that is, not just a traditional refrigerator, but a refrigerator that fits the size of the kitchen and places enough food.

Taking a multinational risk management and insurance brokerage firm For example, the company uses a variety of risk management tools in different regions, so it is time-consuming and laborious to make global connections and forecasts. Because of the lack of transparent channels, sales management has been unable to obtain the information needed to make effective decisions, thus making it impossible to obtain the necessary resources and waste many opportunities.

The company works with software service provider Salesfore.com to provide an effective way of contacting and forecasting. Although the initial need for a lot of work, involving 1200 users, but the company took only 4 months to complete the work. The company now has a more in-depth understanding of sales channels, improve the efficiency of resource utilization, which in turn helps the company achieve customer growth, improve customer penetration. By reducing the sales management application scenario, the company has also significantly reduced the cost of maintaining the application program.

Success factors: Category II Suppliers ' classification objectives-a professional group with rich industry and functional knowledge-will design applicable applications and services on a large scale, tailored to the customer's special circumstances, specific requirements, and business objectives. These service providers will continue to provide value to customers because the cost of working with software service providers is much lower than the cost of purchasing and maintaining these features.

These service providers can provide users with the latest software products, which is a major advantage. However, organizations need to continually improve their service offerings and design more comprehensive business applications that integrate their solutions.

Category III: System integrators and value-added service design service providers

In addition to the integration and integration of important services, the third category of outsourced service providers also need to provide advice on business design. In other words, such companies will help customers become "cloud enterprises"-they are relatively flexible because they can adjust their business design plans. To have this kind of business capability, outsourced suppliers need to develop more sophisticated applications, integrate themselves and other services, and achieve seamless management of services.

For example, new business design consulting services generated in a cloud environment are relatively complex. A multinational financial services company has implemented a new strategy aimed at expanding customer base, increasing customer penetration and achieving efficient allocation of scarce resources. The strategy is implemented in a very flexible manner, based on a core programme, and quickly configures more complex solutions in different regions, typically within eight weeks. As a result, the company has achieved the goal of large-scale transformation in a short period of time.

Success factor: In the new cloud environment, the service of the integrator will play an extremely important role in achieving the outstanding performance of the enterprise, and will not eliminate the outsourcing service providers and the Integration services provider. However, the role of the integrated service provider will change.

Importantly, it needs to manage a more complex mix of environments. Such an integrated service provider should have a more comprehensive understanding of the enterprise's IT and business services and help the enterprise to avoid risks and improve service quality by implementing End-to-end management of some or all services. This means that a successful integrated service provider needs a wealth of experience in key business processes and technology solutions.

Because cloud computing is not mature enough, there is no unified standard, if the business process outsourced to different service providers, to achieve seamless integration of services is more difficult, especially when the enterprise ultimately requires service providers to improve performance or reduce costs, this problem is particularly prominent. Consolidating service providers should be better managed, coordinated, and ensured that customers use the cloud computing and process resources they provide.

The integration service provider also needs to provide the so-called "frictionless design scheme". With the help of two major outsourced service providers, utility service providers and business functional service providers, the integrated service provider will work with customers to assemble and reorganize the different components of a complete it and business solution. This reduces the friction between the functions in the old mode or the new functionality that is not fully integrated into the business process. A business can get a service, use it when it needs it, and eliminate it when it's not needed.

Finally, in the cloud era, an important feature of a successful outsourced service provider is its ability to bring innovation to its customers. Future outsourcing will be the service provider and customer cooperation for innovation, which is also a new type of integration service provider of another major task.

New games, new rules

Obviously, this new cloud outsourcing environment still has a lot of unknown problems. Can utility service providers evolve from so-called "consumer-level" services to sound enterprise-class services? Can a software company develop into a real service provider? Can consolidation service providers respond to new and complex environments, encourage trust relationships with customers, and enable users to help them design or redesign business processes? To be sure, this is a new game and the old rules no longer apply. This is another major revolutionary change in the value of the industry. Innovative products have gone through the commercialization process and introduced another era of innovation to companies that want to continue to participate in the game.

Businesses that want to compete effectively in new games need to start changing their IT and business models. They need to deal with the future environment; they need to carefully assess the risks of using new technologies, and they should also have a deeper understanding of the capabilities of suppliers and service providers and the right choice of integrated service providers. Perhaps the most important thing is to begin to understand what it means to operate in a multiple-source environment. Under such an environment, different components need to be integrated-long term integration, not caprice.

This article is reproduced from China Internet industry social media-speed network: http://www.sootoo.com/content/254495.shtml

(Responsible editor: Liu Fen)