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Cloud May Be The New Outsourcing, But The Same Due Diligence Must Apply

Posted on October 23, 2014

In times gone by, when enterprises sought to shave costs off non-core processes, or add capabilities not immediately available in their organizations, they turned to third-party providers.  Now, they’re more likely to first look at cloud services before bringing aboard live partners. But this doesn’t mean it’s okay to sit back and let automation take over. Cloud is simply outsourcing in a new form.

This is not lost on the outsourcing industry itself, which is shifting its business model to cloud delivery.  The cloud and outsourcing world have merged into one. (Jimmy Harris and Gavin Michael of Accenture pointed this out in an article a couple of years back.)  Many outsourcing providers now offer strong cloud or SaaS offerings. ADP, for example, offers many key services such as payroll over the cloud. Tata Group’s Tata Communications division offers an infrastructure-as-a-service (IaaS)cloud computing service for IT shops.  Accenture offers its cloud platform to clients. Infosys recently announced it has signed a partnership agreement with China’s Huawei Technologies Co Ltd to offer customers more cloud services, on the heels of recently expanding partnerships with Microsoft Corp and Hitachi Ltd. to expand its cloud offerings. HP’s services arm (incorporating the former EDS) offers HP Helion, a portfolio of cloud products and services that enable organizations to build, manage and consume workloads in hybrid IT environments.

Yes, it has become significantly easier and faster to sign on new services (literally with the swipe of a credit card) in the cloud era, versus the previous era when potential suppliers had to be sought through word of mouth, professional directories, and endless phone calls. Cloud services can be small-scale tactical resources meant to fill a small piece of a process. But the immediate accessibility of cloud services doesn’t mean organizations should be less careful about the reliability, security and after-sales service associated with cloud services they procure. The IBM Center for Applied Insights just published a brief study on the movement from traditional IT outsourcing arrangements to cloud-based interactions. What’s noteworthy is that aside from a few tweaks, the same due diligence applied to traditional outsourcing engagements should be applied to cloud engagements as well.

As the IBM study’s authors, Marsha Trant and Romala Ravi put it, there are five rules of the road worth keeping in mind:

1) Know your traveling partners well
2) Protect your passengers
3) Keep everyone on course
4) Chart the itinerary together
5) Plan for arrival

It sounds very much like the best practices learned in the IT and business processing outsourcing worlds. A company with experience in the outsourcing world should apply the same principles to cloud partners as well. For companies with little outsourcing experience, there are lessons that can be learned. Cloud engagements are, for all intents and purposes, electronic outsourcing.

CIOs I have spoken to who have satisfactory arrangements with cloud service providers take pains to get to know their partners, in terms of financial stability, staff members they will be dealing with, and future roadmaps. Some have even taken things a step further and have gotten involved with user councils or boards, to help move their cloud vendor in the direction they want to see.  These are all the best practices essential for outsourcing arrangements, or for major software acquisitions. Cloud does not diminish or change any of these requirements — if anything, it makes them more essential. Not only do cloud partners need to be responsive with service calls or requests, but they also need to maintain 24×7 uptime and availability via their data centers.

If anything, Trant and Ravi point out, the move from traditional outsourcing to cloud means paying attention to more aspects of the arrangement. For starters, there is an abundance of choice in the cloud world. “Be prepared to invest more time and effort evaluating an ever-expanding roster of cloud providers and point solutions. Find out about potential providers – their platforms, development roadmaps, contingency plans and more. Talk to current vendors and pure cloud players, as well as to their clients.” Remember too that the cloud vendor engagement may not be limited to just one department. “Cloud providers are now courting the whole enterprise,” the study points out. This means IT leaders need to play a highly proactive role in serving as advisor and partner to various business units looking to adopt cloud services.

Be proactive about security as well — don’t rely on cloud vendors to deliver assurances. “Require audit reports and security assessments; confirm that security protocols are in place,” Trant and Ravi advise. “And leaving nothing to chance, set up ad hoc checkpoints.”