The Future of IT Outsourcing and Cloud Computing

Cloud computing. Do we have to go there again? Isn't it already common knowledge that the traditional data center is an endangered species? Don't most business executives have their fingers hovering over the cloud computing button? Aren't CIOs joining the cloud computing party now that the hype and confusion over co-mingled public and private cloud computing is starting to dissipate and they can engage by moving to private clouds? For all the hype about cloud computing there is very little survey data on the extent enterprises are planning for and adopting cloud computing as a replacement for traditional data center infrastructure technologies and management processes.

And then there are the traditional IT outsourcing (ITO) service providers sitting in the cross hairs of this trend, who are about to see their business models and customer value propositions disrupted. Service providers in the ITO space have, after all, profited handsomely by taking on their customers' highly complex, one-off collections of IT assets and finding ways to manage them more efficiently than their customers are able to. But the essence of cloud computing is a move towards highly standardized racks of commodity servers and a software environment that together make for a highly efficient use of resources. Where's the ITO opportunity in that?

"We have seen major technology shifts in the data center in the past," observes David Stuckey, PwC's US leader of its data center infrastructure practice. "These shifts in reality have just added to the mix in the data center, increasing complexity and cost. Cloud computing, when done right, has the potential to actually replace, and not just augment, legacy environments while adding value by reducing costs and increasing agility."

Do enterprises see it that way? Are they making plans? Who do they take advice from? What business advantages are they anticipating?

PwC surveyed 489 business executives to find answers to these and other questions about the state of data center infrastructure management. Individual interviews with vendors offering traditional ITO and new cloud-based offerings, including infrastructure as a service (IaaS), complemented the survey. We sought to understand the real state of data center management today, how fast business executives expect to move to cloud infrastructures in the future, and who they will turn to -- traditional ITO providers, new cloud-oriented providers, or internal staff -- to make the shift. Finally, what is the bigger goal, a shift to public cloud offerings or a transition to private clouds? This series of articles and graphics examines and interprets these trends.

Project methodology

In the spring of 2011 Pricewaterhouse Coopers' Center for Innovation and Technology commissioned Bloomberg Businessweek Research Services to conduct a global survey of its readers' views and practices concerning certain information technology (IT) services, specifically outsourcing and cloud computing.

Three waves of email surveys to select members of the Bloomberg Businessweek Market Advisory Board and other lists of business leaders were conducted in April, May and June. The survey panel was restricted to senior executives and middle managers who were involved in IT outsourcing and cloud computing, including management, vendor selection or needs assessment.

The demographic data of the 489 qualified respondents is as follows:

Demographics—489 respondents

Demographics—489 respondents

The respondent sample was divided into two groups of roughly equal size—those that use a third party to run their traditional data center (labeled IT outsourcers) and those that internally managed their data centers:

Demographics—261 ITO respondents

Demographics—261 ITO respondents

The statistical significance of the data points posted in these articles, expressed as the margin of error, is typically a bit more than four percentage points for the overall respondent group. The margin of error for the IT outsourcing or non-IT outsourcing subgroups is about six percentage points.

 

Here are some other characteristics of the survey population:

Demographics—228 non-ITO respondents

Demographics—228 non-ITO respondents

In addition to analyzing the data, PwC engaged researchers from Triangle Publishing Services Co. Inc. to interview leading executives of the IT outsourcing industry, as well as providers of infrastructure-as-a-service about the data and to offer their perspectives. Here is a list of the executives and companies involved:

ITO executives
Luc Barbier, Senior Vice President, Group Strategy at Atos
Vishnu Bhat, Vice President and Global Head, Cloud, Infosys Ltd.
Robert Boles, Senior Vice President and Head of Global IT Infrastructure Services, Cognizant Technology Solutions
Jérôme Brun, Vice President, Head of Cloud Services, Atos
Siki Giunta, Global Vice President, Computer Sciences Corp. (CSC)
Venguswamy Ramaswamy, Global Head, iON, Tata Consultancy Services Ltd.
Ali Shadman, Chief Technologist, Hewlett-Packard Co .
IaaS executives
Mark Bilger, CTO, Dell, Inc.
Steve Caniano, Vice President of Hosting Services, AT&T
John Engates, CTO, Rackspace Hosting
John Keagy, Executive Chairman and Founder, GoGrid
Jody Little, Vice President of Cloud Portfolio, Fujitsu America