Don't Let Your IT Outsourcing Provider Steer You Away from the Cloud

When you see TV commercials for cloud computing, you might think the cloud is a regular old commodity, like beer or cars or pharmaceuticals. And even though the cloud doesn't come with as many potential side effects as that new drug for that disease you didn't know you had, many CIOs and CxOs are taking a let's-wait-and-wait approach. This is particularly the case with chiefs at companies engaged in an IT outsourcing relationship.

Although the cloud is creating impact and value, "some people feel they aren't able to take advantage of cloud benefits," according to Scott Bils, a partner at the Everest Group who follows next-generation IT. During a web presentation today, Bils said there are three basic things holding back enterprises that outsource IT from fully adopting cloud technology.

First, they say, "We still have an IT outsourcing arrangement, and the contract constrains us."

Second, "We have faith that our IT vendor will get us there."

Third, "The cloud just isn't ready yet."

All three of these reasons are based on misperceptions, Bils said.

That first item, the hands-tying contract, doesn't really hold up. When Everest looked at actual contracts its clients have signed, they found that things like exclusivity restrictions, performance guarantees, and regulatory compliance — while critical issues — can be dealt with in a cloud environment. "When we looked at representative samples of [ITO] agreements to see how these perceptions line up with reality, we found that most agreements do not prevent the introduction of cloud solutions into an enterprise IT portfolio," said Marvin Newell, Everest partner and strategy practice leader.

As for trust that your IT provider will get you to the cloud, don't count on it, Bils warned. Many ITO vendors have no incentive to move cloudward, he said. Some take a financial hit of 30 to 40% when clients migrate to the cloud, he said. Furthermore, not all IT providers have the skills to effectively, safely implement cloud solutions. To make things worse, some providers don't seem to have a good grasp of the concept. Bils cited as an example a vendor rep who says one week "SAP cannot be delivered as a cloud service," then comes back the next week with the happy news that "Of course we can deliver SAP as a cloud service."

And then the notion that "the cloud isn't ready" is not reflected in the reality that Everest sees its clients living in. "This is what we're seeing: examples of global scale enterprise drving heavy workloads to public, private, and hybrid clouds.... we're seeing more sophisticated use cases like disaster recovery, supply chain management... and people migrating ERP to cloud-based platforms," Bils said.

The Everest analysts didn't suggest chucking the ITO vendor who says these negative things about the cloud. What they did say is that CIOs and their colleagues need to "find their own north star — a guidepost for where they want to take their environment," Bils said. "Find out where you can get the most value."

Bils and Newell did not discount the challenges and complexities and deep implications of enterprise cloud computing. But they will tell you there are a lot of benefits to be had, and that your business won't enjoy those benefits if you focus only on the negative — or if you listen only to a provider who says cloud migration is a bear you don't want to wrestle with.

We'll dig further into things that the Everest guys talked about, like roadmaps and cloud strategies, in future posts, but for now, I'll shut up in case you want to follow one of Bils's final pieces of advice: "It behooves clients to start thinking about migrating to the cloud now." As in today.