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    Is the cloud driving IT outsourcing or dazzling the outlook?


    The cloud computing is an increasingly significant segment of the Information Technology outsourcing sector, however it has a tipping point that really been reached or they are one huge data breach away from an about turn? The cloud currently represents only a fraction of the Information Technology sector and a minuscule slice of the overall business process and Information Technology services market. Base to Gartner’s latest figure for the year 2012 will be the fastest growing segment in a global market worth over $250bn.

    For $5bn the cloud computing outsourcing is relatively insignificant compared to the application outsourcing market of $40.7bn and data center outsourcing sales worth about $87bn. However, the cloud outsourcing market grew 48% compared to application outsourcing which increased 2% and data center outsourcing spending that declined 1%.

    Base to Gartner, spending on overall Information Technology outsourcing in Western Europe is expected to fall 1.9%as economic turmoil continues to blight the region. The research in the mid 2012 carried out by the Information Services Group revealed that spending was down 26% compared with last year. The amount spent on outsourcing in the UK was down 12% to €5.7bn.

    The removal of upfront capital payments in favor of subscriptions or true utility services will mean the figures will fall. According to TechMarketView, this is true the analyst firm predicts that the UK Information Technology industry will decline in real terms until at least 2016 and there is a real risk of the sector reaching a decade of downturn.

    The TMV stated that the take-up of technologies designed to reduce costs including the cloud computing as well as the continued economic slowdown are combining to reduce market growth in terms of revenue.They said that it’s not just the financial crisis which is constraining growth. It is also the inexorable march of disruptive technology trends including the consumerization of enterprise Information Technology, social media, mobile internet, big data, cloud computing and offshoring. They key characteristic that they have in common is they are all designed to reduce the cost of computing in other words they are all deflationary.

    The Director of sourcing broker Burnt-Oak Partners, Robert Morgan said that the important customer or supplier relationship is broken with the cloud. If the people are prepared to go through the pain and energy of going onto the cloud, they can  switch suppliers easily. He said that the process of moving to the cloud whether public or private will usually require support from an Information Technology service firm because the skills to do have been outsourced.

    Robert Morgan also said that the cloud computing is proving very successful in corporate Information Technology departments for things like testing and storage but believes the more commoditized service found in the public cloud are unlikely to have a major impact on the outsourcing industry.