India has a market share of $60 billion in outsourcing industry but Indian outsourcing industry has shown a decline in the recent period. However the total contract value for the global broader market for IT outsourcing and Business Process Outsourcing, together, has dropped 18 per cent to $16.4 billion in the April to June 2011 over the same quarter in 2010 whereas the cloud market is growing between 20 per cent to 35 per cent year-over-year.
Outsourcing market is stabilized and has been growing at a steady pace whereas cloud-sourcing is a niche market and growing at a fast pace but it is in immature stage. Cloud-sourcing has the capabilities and opportunities to tap the market. Below are few differences between both the markets:
Type | Cloud-sourcing | Outsourcing |
Software services | GOOD | POOR |
Quick Procurement of Services | GOOD | FAIR |
Retention of SMEs | GOOD | FAIR |
Vendor Lock In Avoidance | GOOD | FAIR |
Legal and Data Compliance | POOR | GOOD |
Modernization of applications | FAIR | POOR |
Thought Leadership in the Domain | GOOD | FAIR |
Minor Enhancements | POOR | GOOD |
Table 1: Differences between Cloud-sourcing and Outsourcing
Cloud-sourcing has an advantage over the outsourcing business models in many ways. Earlier has pay-to-use model whereas latter has pay-before-use model. However Cloud-sourcing has some disadvantages over the outsourcing model. Data is present in the cloud which is a big risk to any organization.
Graph 1: Cloud-sourcing Pyramid
Cloud-computing enable the freedom to choose the services customers want to run and pay only what is used by the customers. Clouds can be used as Infrastructure-as-a-service, Platform-as-a-service, and Application-as-a-service. A recent survey completed by IT consulting firm Avanade shown that 74 per cent of enterprises are using some form of cloud services. Market share of cloud-sourcing has been increased by 25 per over last survey. Many existing companies such as Cisco, HP, etc. expanding their vertical to Cloud computing data centre providers. Start-up companies are looking to start their business using Cloud Computing model with minimal capital expenses. This strategy is driven by the Cloud Computing model which is faster and cheaper than outsourcing.
Graph 2: Cloud computing layers, leaders, and benefits.
A recent datamation survey of enterprise IT customers shows that 60% of enterprises are using one or more cloud applications today and even more importantly, 90% plan to in the next few years.
Graph 3: Path to outsourcing
According to Datamonitor, IT services is the largest segment of the global software & services industry, accounting for 47.5% of the industry's total value. The industry has a CAGR of 7.5% for the period of 2006-10 with total revenue of $2,351.1 billion in 2010. According to Datamonitor, the global data processing & outsourced services market grew by 4% in 2009 to reach a value of $583.3 billion. A recent research done by APPIRIO, graph 3, Cloud-sourcing will account for more than 20 per cent starting three years from now which may increase up to 80%. It is undoubtedly evident that Cloud computing will be here to stay. Given the fact that IT Outsourcing (ITO) is the largest segment of the global data processing & outsourced services market, accounting for 49.7% of the market's total value. It is very important for Cloud-outsourcing to grow and sustain at the same time.
