Suppliers must adapt in order to match cloud providers' outsourcing service offerings, says expert

IT law specialist Iain Monaghan of Pinsent Masons, the law firm behind Out-Law.com, made the comments after a white paper (5-page / 1.59MB PDF) by technology advisory company Information Services Group (ISG) detailed governance issues in the delivery of IT services through the cloud.

Cloud computing can offer 'infrastructure as a service' (IaaS) that provides for "computing and storage resources," the paper said. Cloud computing can also offer 'platform as a service' (PaaS) to allow developers the chance to be "free" from infrastructure "concerns", whilst 'software as a service' (Saas) cloud providers allow businesses to "rapidly configure software to match requirements, rather than waiting months or years for IT to deliver a solution".

The paper highlighted that "most traditional outsourcing firms" are not ready to provide services as speedily as the cloud environment allows. However, organisations have less control of IT service delivery when it happens through the cloud, with "accountability gaps around key areas like demand management, information security and cost oversight," it said.

"In a traditional service delivery environment, moreover, a customer pays essentially a flat monthly rate for infrastructure and software, making budgeting and planning relatively straightforward," the report said. "In a self-provisioned, on-demand cloud delivery model, meanwhile, variations in usage raise the spectre of dramatic spikes and valleys in monthly spend."

The paper's author Stanton Jones, an emerging technology analyst at ISG, said that the company was "seeing more and more companies incorporate infrastructure as a service into their IT outsourcing deals," according to a report by Forbes. Jones also said that "the SaaS model is only going to accelerate and blow up the way we think about IT internally, and how we're going to manage it."

Iain Monaghan of Pinsent Masons said that the services offered by cloud providers themselves provided a risk of "potential disruption" to the traditional suppliers in the IT outsourcing (ITO) market.

"When cloud is bundled into conventional outsourcing contracts it is still often charged for in an inflexible manner," Monaghan said. "Unless the big outsourcing suppliers can match the pricing flexibility of the independent cloud suppliers. which are increasingly adding wrap-around services to their basic offerings, a customer's chief information officer might decide that buying IaaS direct, and managing integration in-house, offers a better value-to-risk equation than buying an integrated package from an ITO supplier."

"That would be disruptive to the ITO market because a large proportion of the revenue generated by big ITO contracts often relates to the supply and management of infrastructure," he added.