Low-cost cloud services to cannibalise outsourcing

According to Gartner estimates, by 2015, low-cost cloud services would cannibalise up to 15 per cent of the revenue of top outsourcing players. "Industrialised low-cost IT services (ILCS) is an emerging market force that would alter the common perceptions of pricing and value of IT services. In the next three to five years, this new model would reset the value proposition of IT. Low-cost cloud services would cause the cannibalisation of current and potential outsourcing revenue," Gartner said.

Garter analysts Claudio Da Rold and Sandra Notardonato said, "Low-cost cloud services would cause the cannibalisation of current and potential outsourcing revenue through two different effects --- direct (like substitution of services that would have been delivered in-house or through traditional outsourcing) and indirect (like the reduction of the price at which traditional outsourcing services are renewed, renegotiated or outsourced for the first time)." Gartner estimates ILCS may touch two per cent of the $1-trillion IT service market in 2015, representing a $20-billion market. This is still a relatively small size, compared with cloud services (20 per cent of non-advertising-based services) and the IT outsourcing market.

Gartner believes it would be up to vendors to invest in and adopt a new cloud-based, industrialised services strategy, either directly or indirectly, internally or externally. The projected $1-trillion IT services market is at the beginning of a phase of further disruption, similar to the one low-cost airlines had introduced in the transportation industry. "The continued trends toward consumerisation and cloud computing highlight the movement of certain former IT responsibilities into the hands of others," said Daryl Plummer, managing vice-president and fellow, Gartner.

The analysts also said in 2012, there would be an increase in information available to organisations, though it would be a challenge for them to understand it. No regulatory help is likely soon, leaving each business to decide how to handle the introduction of huge data. According to analysts, by 2016, at least 50 per cent of enterprise email users would primarily rely on browsers, tablets and mobile clients instead of desktop clients. "While the rise in the popularity of mobile devices and the growing comfort with browsers' use of enterprise applications preordains a richer mix of email clients and access mechanisms, the pace of change over the next four years would be breathtaking," said the analysts. There would be increased pressure on suppliers to accommodate an increasing portfolio of collaboration services, including instant messaging, web conferencing, social networking and shared workspaces.