How Cloud Changes the Market: Two Trends to Watch For

Well there’s no way I can top that April Fool’s day joke. Well done Softtek. And no, I didn’t fall for it :) 

In my last post we talked about how the advent of cloud computing is creating a shift in the way global services are delivered. Today we’ll discuss two major trends that will be observed as part of that shift. I’ll be using the insights of David Gee, VP of Worldwide Marketing for HP Enterprise Services, as featured in this article. While almost everyone realizes that cloud computing will have a profound impact on the offshore services industry, Gee thinks it will revolutionize it. Here’s how:

1) SME competition 

The problem that small or medium sized companies have always had is scalability. Unlike larger multinationals, their reach is usually confined to one or two countries at best, and they often have very limited access to capital to expand their operations. So when it comes to tech sourcing, they are unable to hire armies of programmers and IT workers, or invest in expensive equipment and infrastructure to support their operations. 

But the use of cloud places these smaller companies on a much more even footing with their larger rivals, and actually allows them to compete effectively. As Gee says, because of cloud “the barriers to entry in any given business sector will be substantially less because the cost of the IT investment needed to support that business is going to drop sharply.” And since that cost will decrease, there will be many more startup companies entering the market, and many more medium sized firms expanding their business substantially. 

2) Globalized services 

Although we live in the age of global sourcing, if we’re honest with ourselves, it’s incredibly difficult to run a competent, consolidated and efficient international outsourcing portfolio. Large clients usually have two or three providers or captive centers in the various geographies, and don’t make it more complex than that. 

Through cloud however, providers everywhere will find it much easier to offer their services beyond their physical footprint, or their home country’s borders. In other words, cloud gives vendors in emerging markets a huge leg up. IT providers in places like Latin America will suddenly find themselves able to compete directly with the big players, simply by working through the cloud. 

Mike Vizard from IT Business Edge puts it well - “In the same way that many countries skipped building out expensive telecommunication infrastructure in favor of relying on wireless services, many businesses in those countries will skip making capital investments in expensive IT infrastructure in favor of using established cloud computing services.”