Fresh Outlook: Cloud Services Expected to Double

IT outsourcing in Boston
is on the rise, with services such as cloud computing expected to grow up to $5 billion from $3.4 billion. Infrastructure as a Service (IaaS) is a major contributor to this growth as its outsourcing grows from 8% last year to 38%. Gartner’s most recent forecast on IT outsourcing shows that IT services are on the increase globally and spending in this sector is set to increase by 2.1% in 2012. This means that spending may surpass $251 billion this year.

Brian Britz, Research Director at Gartner, says that the increase in spending is actually up by 4.1% if the changes in currency are adjusted. This is almost on the same growth trend experienced last year. Britz explained that the changes are reflective of the difficult market for services such as outsourcing data center providers, saying, “Traditional models of outsourcing are experiencing a cloud substitution.” This can be seen as outsourcing data center services which stood at 34.5% in 2011 are already on the decline to 1% this year. Gartner is predicting that this number is set to slip further to 28% as managed services such as standard application infrastructure and utility hosting go up to 10% of the overall market. IaaS is also set to reach 6% of the market.

IT outsourcing leaders are now thinking of strategy to sustain the sale of these vital services. Should spending be fragmented on the various services such data backup and network monitoring, or is the solution in bundled services? Well, Brian Britz says that there is evidence indicating that both solutions are approachable in the current market. He however cautions that the support for cloud archiving and other cloud services may increase spending and take some sting off the tradition IT service outsourcers. More and more organizations are choosing to re-evaluate and select managed services. 

Outsourcing for applications is also set to grow to 2% and reach $40.7 billion in 2012. Gartner says that this rise is largely driven by off the shelf implementations on package and legacy application support.

Leaders in IT are straining with limited budgets and therefore moving onto software as a service. The IT enterprise is also moving away from hiring staff to fully outsourcing with outcome based level agreement services. This is expected to remain all the way through 2016. The current headcount for enterprise outsourcing stands at approximately 20%; this number is set to increase further as businesses reduce full time employment.

As said by Gartner, 58% of leaders in the corporate world say that employment in the U.S will go steady or even lower as opposed to 2011 when they expected it to grow. This report however does not tell which percentage of the IT outsourcing market is going to be delivered from locations which are both offshore and nearshore. According to Britz, it does not make sense to deliver them now - offshore features are still in models which deliver IT services.

These delivery models are covered by most IT outsourcing providers for both infrastructure and applications. "More than one third of outsourced infrastructure and application deals deliver using labor from offshore and nearshore services," says Britz.

According to Gartner’s IT outsourcing report, expect to see a decrease in:

  1. Data center services

  2. Full time staff

And an increase in:

  1. Infrastructure as a service (IaaS),

  2. Software as a service (SaaS)

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