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Cloud is Disrupting the Outsourcing Industry

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Cloud is starting to disrupt the outsourcing industry, in a very profound way. That’s the conclusion of a new study from Information Services Group (ISG), which closely tracks and provides advice to the outsourcing industry. The question is: will organizations begin to prefer more granular, cloud-delivered services over larger outsourcing arrangements?

The percentage of ISG’s advised contracts with cloud in scope has grown steadily, the firm reports — from 9% in 2010 to 20% in 2011 to almost 27% so far this year.  The number of purely cloud-related contracts also grew over the past year, rising from 109 to 223, for an escalation of 120%.

Half of the outsourcing service providers studied claimed that one-fourth of their pipeline of opportunities now included cloud,-based services ISG adds. The service providers  also expect cloud services to grow faster than traditional IT outsourcing, especially in the US market.

“We’re seeing more and more company incorporate infrastructure as a service into their IT outsourcing deals,” says Stanton Jones, emerging technology analyst at ISG. He adds that IT outsourcing (ITO) and business process outsourcing (BPO) are seeing two distinct types of cloud engagements – and two levels of disruption. ITO is being driven by Infrastructure as a Service engagements, in which companies look to providers for computing processing capacity, storage, or middleware. BPO, on the other hand, is being driven by Software as a Service offerings. And it’s with BPO where the most intense disruptions are likely, he adds.

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