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Feb 06, 2010

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Hi Phil,
Nice getting in touch after a while.

Like I said back in one of our discussions in 2008 IT/BPO bundled deals are the answer to achieve 'enterprise agility' in this drastically changed corporate world. ERPs and SOA middleware which can faciliate BPO are the order of the day. SOA architectures facilitate creating and changing your business processes quickly as the need arises. Having a SOA based SaaS framework which provides an ability to easily span these "internal" processes beyond your organizational boundary to support BPO arrangements can become a strong competitive advantage for a firm today and in to the future.

EDS (now HP Enterprise Services) and more recently Dell/Perot is a clear indication of where we're headed. Although I might not like it from the branding perspective (being a die-hard fan of EDS brand) there must be a reason why HP has given away such a valuable brand name, and has converged the offering and positioned themselves as a bundled 'enterprise platform/outsourcing service provider'.

What this approach results in providing is what I call 'Agile Outsourcing'. Agile Outsourcing - ITO/BPO bundling has definite advantages over the conventional ITO alone and BPO alone models, coz the very nature of conventional models encourage (or at least unintentionally result in) disintegrated blame-game silos with mostly conflicting agenda items on each vendor’s list. Agile Outsourcing results in a more agile enterprise which is better suited to meet today's challenges.

Technologies that can blend BPO models in the SOA based SaaS architectures will provide a solid platform for ITO/BPO bundled service offerings. I strongly believe that we’re bound to see some strong convergence between ITO/BPO moving forward. There definitely are some exciting times ahead and solid opportunities for vendors who realize this trend early!

Phil - One of the paramount reason cloud computing will see increased customers adoption is the increased benefits they will derive from bundled IT+BPO offering as the new outsourcing mandate is to look beyond traditional labor arbitrage, lift & shift and ensure sustainable transformational savings which can only be achieved by letting service provider taking end-to-end ownership of both process & technology, thus aligning customer business structure to continuous changing eco system. However this also warrants service providers to gear up an increased competency & knowledge level in both process & technology domain and service customers through a private cloud beyond the traditional SaaS model.

Cloud represents a threat to the Indian providers, as the move to more standardized solutions accelerates. Customers will want to deal with vendors that are hosting their data in secure onshore datacenters, not offshore. If Infosys, TCS and co are smart, they'll look to buy-up onshore US and European IT services vendors with datacenter Cloud capabilities,

Gaurav

Phil,

Most of the infrastructure people currently only view Cloud as a way of scaling hosted data services "on demand". While this adds a new level of efficiency to an organization, your points about blending the scalability of Cloud with BPO is spot-on. Cloud + SaaS is too rigid for many firms, whereas Cloud + SaaS + BPO in a holistic integrated model with the capability to tailor the customer requirements is exactly where this is headed,

John

Another aspect in all of this is the potential of cloud merged with platform as a service (PaaS). This fusion can propel an organization's IT environment forward with a quantum leap without upfront investment and reduced deployment times, especially as it applies to ERP and modernizing venerable legacy systems. The expertise and economy of scale are strong business propositions for providers. Why reinvent the wheel?

Great post. IMHO it is your best. As with many new offerings, many organizations are like kids at a public swimming pool pondering the high dive; many are interested but nobody wants to go first. Many prefer to be a hamster, not a guinea pig.

Cloud does facilitate IT duct tape to deal with perceived changes in keeping up with the Jonses. Specifically, it is a quick fix for Web 2.0 and the great influx in customer facing IT with the barrage of blogs and customer centric forums. These functions are not major concerns regarding security issues (a major apprehension in the consideration of cloud) and cloud enables rapid storage space availability without requiring investment in infrastructure.

What I tend to think may be an issue is at what point does the buyer see the risk of tying into a provider further with increased commitment. To compare it to dating, is there a perception that moving from a comfortable friends with benefits relationship to a more significant linkage looks like an engagement ring is involved? We'll see.

Another related dimension of possible concern to organizations regards fall out from the recession and market forces of outsourcing, M & As. In this environment, many providers are dinner for diners. If a corporation is happy with their provider, who is to say that they will be happy with the firm that acquires their provider?

This results in a convergence of technological advances and economic reality and there is risk in that combination. Allegorically, who an organization went out with in the evening and who they woke up next to in the morning could be quite different.

I recall an old saying about putting all of your eggs in one basket. Perhaps the new SLAs need to be like a prenup as a form of CYA to provide flexibility if the changes in this dynamic market are not satisfactory to the client.

Fools rush in where wise men fear to tread could be a prophecy for some.

Phil,

You've done the best synopsis yet of bridging the value propositions of BPO and ITO under the single blended delivery solution. You're argument that Cloud services will provide that blended delivery is very compelling,

Stephen

@Tony: I predict Cloud won't become fully-formed for another 3-5 years, but we are in agreement that the seeds are being sewn this year, and the data supports that.

It's going to take some sizeable investment from the service providers and a cultural shift for some to become more business services-focused. My theory about Cloud separating the "men from the boys" is largely down to the appetite and investment levels needed to raise the value proposition and get out of standard operation work with clients.

While some vendors are raking in the dough on standard techincal services work, they won't have the appetite to get out of their comfort zone and invest in datacenter delivery and business process acumen to deliver real cloud services.

Others will see a more gradual play to augment their current offerings to be more "solutionized / standardized"

A few will really grasp this and go for fully-integrated Cloud offerings.

Will be interesting to see whether the strong infra-services outsourcers (i.e. HP/CSC/IBM and to some extent Dell, Fujitsu and a few others) step up to layer their BPO services effectively on Cloud.

PF

Phil another very relevant question specially for outsourcing industry, my simple understanding of cloud computing is that it will eliminate need for desktops and centralized storage will ease ramp up of processes, reduce software license requirement and management, reduce risk of data theft, help in DRP and creating backups, reduced power expenses as cooling requirement will be reduced on the floors.

So the advantages to service providers are plenty from cost reduction, speed of execution, security and flexibility. and if the technology, which is still at nascent stage, get fully developed will increase competition many fold - as start up cost of new players will be far less then existing companies sitting with big inventory, system, process and teams to manage current clutter.

The problem will be customers will look this as one more opportunity to squeeze costs. I want customers to focus more on enhancing capabilities and effectiveness and enhance their revenue/cost ratio by enhancing revenue and customer satisfaction. Cloud computing should be visualized as tool to enhance end to end business capability and effectiveness and eliminate the business clutter completely for customers, shareholders and employees.

I still need to come across a successfully implemented cloud service for a complex environment so it seems a lot of hype before execution.

Ashok

And you doubted my prediction that 2010 was the year for cloud computing to impact the industry? :) Of course, we'll all believe it when we see it...

This is the springboard year. Customers, with no labor arbitrage opportunities that have probably forgotten to plan post-transition infrastructure investments need to find cloud computing. Its just not clear how these customers are willing to share this infrastructure with others....

What is clear, not all vendors are positioned to make the investment. Good planning, great customer communication, and careful investments are needed.

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