And now time for the long-awaited second part of our interview with our francophonic snowboarding services stud Sebastien Ruest, IDC's Veep for Global services research. (Vous pouvez accéder à la première partie ici). And ladies, please no more emails asking me whether he's single…
Phil Fersht: Sebastien, let’s talk about Cloud, where you’ve been particularly involved. In a nutshell, can you help us separate the hype from reality, and explain to our readers whether this is just the next buzz-phrase in the IT business, or a genuine way we’re going to access services in the future? Do we have any optimistic IDC projections with cloud-based services?
Sebastien Ruest: In the last few months, I have had the chance to speak with many CIOs and one thing I learned is that the idea of Cloud, this new model of IT and broadly speaking of Business and Consumer delivery through the cloud is of very high interest, to business execs, CIOs in the market right now. But, as you can imagine, Cloud Computing means different things to different people. The cynics will say that it is nothing more than "ASPs on Steroids".
It is very clear that we are approaching a time where we need to not just stay at a high level but we have to get ground level thinking about the cloud and answer some pretty important questions, some very concrete questions: What are they? Why are they important? How Are Enterprises Going to Benefit from the Cloud? And, How much money is going to be spent on this delivery model in the near term and midterm? I don't want to spend too much time on definitional debate but to me this is the simplest, non-techie way to look at them: Cloud Services are really about Consumer and Business services, products and solutions delivered and consumed in real-time over the Internet. The fundamental concept of a cloud services offering is that 1) the services are shared Services (little customization), 2) they are virtualized, at least the management of it, can be scaled up, scaled down and and you can charge per usage, pay as you go.
There are plenty of examples of Cloud Computing already out there: Of course, the easiest, we are seeing in applications, CRM On Demand, Cloud Application Deployment platforms and we are seeing Infrastructure; Server Capacity, in real time, on demand and, the ability to manage IT Assets in the cloud.
But for the time being, the growth is modest. Why is the growth so modest? In my opinion, there are many factors that drive the diffusion of technology into a marketplace and, for whatever reason; there are three that are preventing the adoption of Cloud Computing: 1) Companies are still "Technophobes", They have a high legacy investment in traditional Licence & maintenance 2) There are not been any different market distribution and 3) there has been a lower Sales & Marketing Focus from Cloud Computing Companies. For some strange reason, other than SalesForce.com, no one wants to be "First to Market" with the Cloud Computing phenomenon ?
Phil Fersht: And how do you see Cloud computing impacting the outsourcing industry? Will it drive more cross-specialization mergers between software and services providers?
Sebastien Ruest: I think Cloud computing will force the Services models to change. If you remember the first generation outsourcing deals, were “relationship models where rather than working with a number of specialist firms, you had this "One Stop Shop", “the single point of contact” and the arguments was that although you were not necessarily getting the best solution in every area, there was a more integrated solutions and less finger pointing between the specialist firms. My belief is that ultimately, we are moving to this “Techno-MacGyver model; Where using perhaps Cloud computing, cusotmers will be setting up Services platforms that make it easy for them to access the myriad of services they want from and pay for them in a Utility like model or pay as you go?
As we have seen in the last 12 months, the need for growth will reshape the Services industry into several trends: One is the emergence of a new services model, based on the integration of software and services, and the breaking –up of formerly monolithic business processes into components that can be delivered over the Web. This is what IDC calls "Smartsourcing" which is simply the evolution of services delivery from the Tactical Outsourcing world of Mega Deals that used the static procurement model where the Service Provider played the role of Infrastructure Aggregator. The Service model was static because Assets and People were transferred and contracts were customized for each engagement. At the end of the spectrum Services Delivery model is moving to the world of Smartsourcing where customers seek mega-flexibility through a Dynamic "long tail" model of services delivery where customers look to optimize their assets or rationalize their portfolio without transferring assets or people and by trying to minimize the customization that traditional outsourcing typically require. Service provider will be forced to play the role of Aggregators of Services by connecting different delivery agents. (SaaS or Managed Services as two examples of alternative models that will be impacting the way people "source" services). They are models of Smartsourcing that are occurring, but that can be a topic of a next discussion. ;P
Phil Fersht: And finally, how do you see the global landscape playing out over the next few years? Will the Chinese continue to outplace the rest of the developing world, or do you see other emerging regions such as Latin America and Russia getting a strong share of sourcing work? Do you see more work coming back to the US?
Sebastien Ruest: Tough Question. Again, there is a dichotomy between 1) the need to control and contain costs, and the appeal of many of these so-called "low cost locals" and 2) the growing protectionism movement in North America and Europe. Companies are looking at the tradeoff between risk and cost and locations like Latin America, which has spent the last decade cleaning up its economy, its trade policies and its educational system, become very appealing as Nearshore alternatives in time of conservatism and protectionism. However, let's not kid ourselves, global sourcing of IT work is not just a passing fad. It is well established and integrated in most deals. And not only IT jobs can be moved offshore. Any knowledge-based function that does not require direct personal interaction is a candidate. Also, not only routine jobs are being relocated.
Although, China may not be at the same level in terms of English language capabilities, there are 227M students, in China alone, with half of them still in primary schools, which will become available in the next 10 years. So this shift will continue to intensify.
Sebastien, thanks for your time today.
Sebastien Ruest (pictured) is responsible for leading IDC's global research in the Services & Technology marketplace. He also heads IDC's IT service benchmark practice and works with vendors and IT users to measure the efficiencies and cost-effectiveness of service delivery. Prior to joining IDC, Mr. Ruest had close to 10 years experience in corporate strategy, sales & marketing and research at IBM.