So there was a bit of Phil-bashing going on when I dared to talk about "Cloud blowing up the traditional outsourcing model".
I'll agree that "blowing up" may have been a little strong of an adjective (but, hey, it made you all read the damned thing), and "shaking up" probably more appropriate. However, this doesn't disguise the fact that too many technical folks fail to view the bigger picture when it comes to Cloud.
At a tactical level, when you look solely at Cloud as a hardware-capacity solution, it's hard to see beyond how it can impact businesses beyond creaking ITO-only deals. However, you really need to look at the convergence of BPO, SaaS and Cloud in a broader outsourcing context to start to visualize how these three pillars of business delivery can - and are - coming together in a blended outsourcing model. Yes, it will take time (and I have called out a two-year time frame to see some real progress here), but it has to happen, and our recent "state of the industry" survey data supports this.
BPO provides labor arbitrage and the ability to personalize "standardized" solutions, SaaS provides the one-to-many process templates that underpin the BPO, and Cloud the delivery engine. Moreover, the virtualization that Cloud provides also adds a whole new dimension of cost-arbitrage for clients - the arbitrage of inefficient hardware infrastructure, the ludicrous wastage of energy costs (not to mention the impact on the environment), and the labor costs to maintain and support infrastructure that provides zero competitive advantage for organizations. The one anti-Cloud argument that keeps getting thrown out there is centered on data-security, but how this is really any different from those security issues surrounding the externalization of data in today's outsourcing engagements, is beyond me.
I completely agree that this "blowing up of the traditional outsourcing model" is far more easily said than done, and we are seeing a huge resistance to this movement from many IT professionals threatened by these trends, but the bigger picture doesn't lie: company leaders are constantly seeking new avenues of cost-elimination and Cloud - combined in an outsourcing context - can provide that for many companies willing to embrace it.
One other factor to consider is the push we're seeing from the vendor-side. Yes, there's tons of hype and fluff right now (that's how the tech industry works), but the service providers, in particular, need to keep moving the needle to keep their margins high, and their clients' productivity levels on a constant upswing. This relentless pursuit of cost-elimination is driving our world today, and the speed at which service providers need to keep sourcing new ways to help their clients find new thresholds of business effectiveness has never been stronger. Some providers will always remain content picking off low-end body-shopping work, but many are eyeing the bigger pie and will strive to make this outsourcing convergence a reality.