CIOs must take more steps to manage risk

Research firm Gartner expects that over the next few years market dynamics will determine whether cloud-enabled outsourcing will be the demise of traditional outsourcing.

Gartner classes cloud-driven business and IT services as all types of solution that are developed, bundled and packaged as outsourcing service offerings for which the business or IT service provider uses one or more cloud computing technologies within the solution's overall architecture.

"Cloud service sourcing is immature and fraught with potential hazards. The hype around cloud computing services has increased interest, as well as caution, for CIOs trying to determine where, when and if cloud services can provide valuable outcomes for their businesses," said Frank Ridder, research vice president at Gartner.

"Cloud computing is driving discontinuity that introduces exciting opportunities and costly challenges. Organisations need to understand these changes and develop realistic cloud sourcing strategies and contracts that can reduce risk."

Ridder said that traditional IT services often find organisations locked in, fighting with rigid delivery or hesitation to change when engaged in traditional IT services deals.

"The life cycle is a critical area to plan and manage, regardless of whether organisations source their IT services through internal or external resources. Our forecasts indicate that organisations spend 53 percent of their IT services budget on external services, and that spending is growing 3.9 percent per year, while new categories of services are experiencing double-digit growth," said Mr. Ridder. "Organisations can use Gartner's extensive analysis of changes in delivery, pricing, investment and cost to more effectively develop their cloud sourcing strategies, negotiate their cloud services contracts and manage the performance of their providers."

You can find the Gartner Special Report on Cloud Sourcing here.