Outsourcing and utility computing predictions for 2005

SearchCIO.com expert, Jeff Kaplan, offers up his predictions for what he thinks 2005 holds for outsourcing deals, on-demand and utility computing.

Jeff Kaplan
What does 2005 hold for outsourcing, utlity computing and managed services? We asked our outsourcing expert, Jeff Kaplan, to weigh in with his opinions.


On-demand, utility computing will become mainstream
  • The growing array of utility computing enabling -- including blade technology, grid computing, Web services and other virtualization tools -- technologies will become more mature, permitting more enterprises to pursue on-demand computing initiatives.
  • However, the process of migrating from legacy to utility computing architectures will be too complex, time-consuming and labor-intensive for enterprises to do themselves.
  • Therefore, most enterprises will pursue on-demand, utility computing strategies via broad-based outsourcing agreements or narrowly focused managed services.
Utility computing, managed services and outsourcing
  • Economic and competitive pressures will continue to intensify, driving a larger proportion of enterprises to outsource a greater amount of their IT/network operations.
  • Rather than face the significant risks associated with traditional, mega-outsourcing arrangements, enterprise interest and demand for managed application, network, security, storage, hosting and other services will dramatically increase as a greater proportion of enterprises decide to offload, or 'out-task,' various aspects of their IT/telecom requirements incrementally.
  • In response, an expanding array of vendors, carriers, resellers, integrators and specialized service providers (xSPs) will enter the managed services market, creating price competition and confusion.
  • CIOs and their direct reports will need to thoroughly evaluate the service delivery capabilities and corporate viability of the solution providers to ensure they can truly satisfy the enterprise's needs and will not be adversely affected by the competitive pressures of the industry.
Relationship vs. technology management
  • As a result of the shift in sourcing strategies from product/technology acquisition to contracting for outsourcing/managed services, CIOs and their direct reports will need to restructure their operations to manage third-party service providers rather than manage internal technologies.
  • This will require relationship management and process skills rather than traditional technology management skills, along with greater focus on Service Level and Business Service Management best practice skills.
Jeff Kaplan founded THINKstrategies, to help IT solutions companies, IT executives, and IT venture capital firms re-think their IT strategies and redeploy their limited resources to meet their corporate objectives. Jeff is a frequent speaker at industry conferences and contributing columnist on topics ranging from utility computing, network out-tasking versus outsourcing strategies and more.

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