Will cloud computing become a disaster for outsourcing and consultancy?

Will cloud computing be a disaster for both subcontractors and consultants? The debate has never stopped: Grid Dynamics says the advent of cloud computing has changed many of the existing needs. Nevertheless, the IT department of the Enterprise still expects to benefit from cloud computing in implementation, support and customization.

In a previous interview, A.t.kearney's Arjun Sethi that cloud computing would eventually end the traditional IT outsourcing industry. Arjun claims that similar Xerox (XRX), Hewlett-Packard and Accenture, as well as Indian outsourcing firms such as Infosys (INFY) and TCS, are potentially dangerous.

Arjun also said the future of Google (GOOG) and Amazon will be the IT outsourcing market Occupation division.

Although this view is radical and compelling, it is merely an exaggeration. Indeed, the cloud will cause a shift in the balance of the IT outsourcing industry. However, it is impossible to drive away outsourcing as an indispensable part of the IT industry. To better understand this dynamic, it is necessary to dissect the components of the technology stack that are today covered by a broad cloud definition-infrastructure, platforms, and applications.

Subcontractor Specialization

On a purely infrastructure level, IT outsourcing vendors are making huge profits with respect to hardware maintenance and support. Industry analysts estimate that the figure averages more than 95 billion dollars a year. These services have been fiercely competitive with infrastructure on demand or cloud computing providers such as Amazon, Rackspace and Terremark. However, traditional outsourcing providers have not given up on this, instead they differentiate themselves from professional infrastructure products, such as IBM's intelligent business development and testing cloud. Even with a purely innovative infrastructure that serves as a service provider, the public infrastructure cloud is estimated to be only 150 to 20 billion dollars in market share by 2014. As a result, the 95 billion-dollar infrastructure services market does not seem to have plunged 80% in just a few years.

Along the cloud stack, from simple infrastructure to platform products, we saw Google, force.com and Microsoft's Azure fighting for a dominant position. There is only a limited intersection between traditional outsourcing providers and platform operators in this area.

Perhaps the intervention of the cloud platform poses a threat to the jobs of the traditional outsourcing industry-development and integration. About the cloud platform will eliminate the need for development and integration the debate seems to imply that outsourcing in India could lead to a total loss of jobs for American IT professionals.

In fact, the cloud platform simply abstracts out the low-end tasks that are typically used in traditional development and integration, providing a standardized, out-of-the-box solution. As a result, it is not possible to reduce the total demand for development and integrators. Instead, it creates the conditions for centralizing resources to solve higher-level problems and developing new types of applications that previously seemed impractical. The shift created opportunities for new specialized service operators such as Grid dynamics and Appirio.