The Next Big Thing
Posts about next generation technologies and their effect on business.

Cloud vs. Outsourcing

Recently, a colleague and I were asked for our views on outsourcing versus cloud computing, and the impact of the latter on the former.

In general, different people have different notions of what outsourcing really is. At its most basic, I would define outsourcing as passing the responsibility for a specific business process to an expert third-party.  The motivations for outsourcing are many and varied.  In the current economic climate it's easy to assume that organizations outsource because of a desire to reduce costs, the rationale being that a third-party that is an expert in a particular business process can do it at a lower cost than the enterprise itself.

But, while the economics of the transaction may be a factor, it's only one of many considerations.  Other considerations include (but are not limited to) gaining access to resources or knowledge that is otherwise unavailable, lowering the risk associated with the process, being able to accomplish the process faster, allowing focus to be placed on more 'core' business processes, increasing the quality of the process, increasing the flexibility of the process and introducing innovation.

The introduction of 'innovation' is perhaps where 'cloud' services start to come into the discussion.  Cloud is clearly a hot topic these days, with many of the attributes of a fad. There is an overwhelming amount of information, some of which is conflicting, circulating around the industry. At HP, we define cloud computing as "the means by which high quality, scaleable and flexible services can be delivered and consumed - typically over the internet - through an as needed, pay-per-use model. 

Many enterprises are intrigued by the possibility of reducing IT costs by replacing existing in-house services and resources with lower cost cloud-based resources and services.  The combination of the current economic situation along with claims of raw IT services at pennies an hour is driving much of the initial interest in using the cloud as a replacement for private IT infrastructure.  What we've seen is that when enterprises inquire about "cloud computing," they are usually interested the associated benefits that cloud promises and may not realize the alternatives available to deliver similar results.

There are some very extreme differences in the level of management, security and support when comparing cloud services versus traditional outsourcing.  Organizations should carefully evaluate the true requirements for each business function and application, to choose the most effective delivery option for each.  And, while the notion of "pay-per-use" is attractive at face value, it has more benefit and value in environments where there is a high variance in resource demands.  Systems that have a relatively stable and predictable demand pattern, are usually more effectively run in a dedicated environment, whether it is a private datacenter or an outsourced facility.


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About the Author(s)
  • Steve Simske is an HP Fellow and Director in the Printing and Content Delivery Lab in Hewlett-Packard Labs, and is the Director and Chief Technologist for the HP Labs Security Printing and Imaging program.
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