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Not surprisingly, given the buzz that surrounds the topic, many traditional IT service providers have launched cloud solutions in the past year. In March 2010, for example, IBM launched its development cloud, on which customers can test newly built applications. In January, Atos Origin launched a suite of cloud services, although it admitted at the time that much of the functionality was previously available as part of its ‘utility computing’ range.

Do these suppliers run the risk of cannibalising their existing revenues by offering cloud services? Only to a certain degree, as many customers will still demand the ability to dictate terms such as the technical specification and geographical location of the hardware that supports their outsourced systems. Indeed, in the short term at least, the adoption of cloud computing is likely to drive consultancy and systems integration business.

Craig Boundy, the UK CEO of IT services supplier Logica, was unphased by the advent of cloud when he spoke to Information Age in April 2010. “Our point of view is that people are going to move to cloud computing, but not in a huge rush,” he said. “Rather, they are going to find new services that they are going to want to integrate with their existing fixed IT operations, and so our position is to offer the advice and consultancy to do that, and to broker and integrate [cloud services].”

However, according to one analyst, cloud-based platforms may prove more disruptive in the outsourcing industry when combined with business process outsourcing.

Hybrid services

Phil Hersht, an outsourcing industry analyst and founder of Horses for Sources, believes that outsourcing providers offering BPO services such as data entry or insurance claims processing can deliver greater value to customers by basing the applications they use to support those processes on cloud platforms. Equally, he argues, IT services suppliers can differentiate their cloud offerings by embedding BPO services into them.

In a recent round-up of the outsourcing industry, Hersht cited his own research, which found that 18% of organisations are evaluating combined IT outsourcing and BPO services ‘extensively’, and 45% said they had ‘some interest’ in such offerings. Hersht argues that the best way to make these bundled offerings work is through the cloud.

“Cloud computing presents the biggest opportunity for today’s services vendors to deliver blended IT/BPO services,” he wrote. With a combination of cloud and BPO “they can not only drive down costs through labour arbitrage and the removal of IT hardware with its associated energy costs, but also improve business performance through holistic, integrated business solutions”.

This is just one of example of how IT and BPO service models are diversifying exponentially, as emerging models are recombined into hybrid offerings.

Some customers might question whether this proliferation really works in their interest. Indeed, such is the diversity of models on offer that the job of selecting, managing and coordinating outsourcing providers has itself spawned at least one outsourced service offering – Capgemini’s so-called ‘service- management-as-a-service’ (SMaaS).

But this diversification, when subjected to the Darwinian process of natural selection, could give rise to a stronger and more demonstrably valuable form of IT outsourcing. Outsourcing engagements are long, however, and this process may take many years.