Despite the economic recession that started in 2008, many IT service providers didn’t see the expected boon to business in 2009. Some outsourcers struggled to a degree alongside the rest of the high-tech industry, but IT services experts say they started to see a return to growth toward the end of 2009. That means 2010 could find many outsourcing providers taking advantage of hot technology trends such as cloud computing to sell their services into smaller IT shops. Mike Slavin, partner and practice leader for Global IT Advisory Services at outsourcing industry advisory and consulting firm TPI, shares his take on the coming year and the outsourcing industry with Network World Senior Editor Denise Dubie.
Which of the service providers came out on top in the midst of the outsourcing deals and consolidation that took place throughout 2009?
Actually, we really see that the heritage Indian service providers probably made the largest gains in 2009 in both ADM [applications development and maintenance] and infrastructure services. As a group, they have moved the dial in terms of not just raw capabilities, but experience and competence, which then leads to increased market share and acceptance by CIOs and IT leaders.
Buyer beware: Outsourcing not an economic panacea in 2009
What were the trends driving the sourcing industry throughout the year?
The first half of 2009 seemed to be consumed with tactical actions, renegotiations and consolidation of vendor portfolios, all in an effort to reduce the cost profile. In the second half of the year, we saw a marked increase in infrastructure sourcing which signaled a return to building a sourcing strategy past just survival of 2009.
There has been a lot of focus on cloud. What will companies and IT services providers focus on in 2010?
The focus will be on wrapping security around the public cloud offerings. Also, there will be focus on providing traditional tier 1 outsourcing services down into the small and midmarket via cloud services.
How will issues, such as security concerns, hold back the large-scale adoption of cloud computing that the industry is anticipating?
Security appears to be the single largest gating factor for clients who are making decisions about cloud computing. Until those are resolved, implementations will continue of either private clouds or smaller scale pilots.
Even though TPI does not track this space, do you expect to see a continued increase in the volume of activity for MSPs in the midmarket?
Yes, we are seeing markedly increasing interest in the midmarket for services ranging from just co-location to varying levels of managed services. Smaller IT departments are feeling the pressure to spend less time and effort on what is viewed as back office and become part of the mix to increase market share and improve competitiveness. Also, CIOs of midsize firms are not keen to spend precious time in this challenging market on the day-to-day issues related to IT.
Where will companies look to invest as it relates to outsourcing? What will be the hot areas?
Cloud computing will continue to be hot in 2010. What is great for the CIO is that cloud computing is primarily successful with standardization of software and hardware platforms, which is always the mantra of the IT team. I think we’ll continue to see smaller sourcing deal sizes as clients become more granular in their requests from the market. Areas such as service desk, provisioning of customer devices such as PCs and PDAs will continue to grow. Also, clients will struggle with how to create a ubiquitous interface between their networks and any type of device presented by employees or partners — from iPhones to BlackBerries, and PCs to netbooks.
