Cloud Redefines IT Outsourcing Requirements

Feature Story

Cloud Redefines IT Outsourcing Requirements

By Erin Harrison, Executive Editor, Cloud Computing  |  August 03, 2012

While the cloud is simplifying some aspects of IT, it’s making others that much more complicated, including outsourcing models and redefining the role of service providers. Amid all the hype surrounding cloud computing, it’s still unknown to the extent enterprises are planning for and adopting cloud computing as a replacement for traditional data center infrastructure technologies and management processes. But there has been enough traction among enterprises that IT outsourcing (ITO) is being transformed by the shift to cloud.

Automation and self-service cut out many of the middlemen that used to provide outsourcing solutions and provides opportunity to shorten time to solution, have more flexibility to change solutions quickly, and achieve economies, according to Gilad Parann-Nissany, founder and CEO of Porticor Cloud Security.

“At the same time, to keep trust and security tools are necessary that harness the power of cloud computing while leaving control in the hands of the customer. Customers universally want to outsource the complexity of a solution to the cloud, while keeping control and confidentiality of data to themselves,” explains says Parann-Nissany. “New approaches are needed with the changing dynamics of cloud outsourcing.”

As an example, a new breed of cloud-enabled solutions is emerging to enable this shift.

“We are seeing technology for managing cloud infrastructure at scale, such as automation APIs, management consoles, and operational scripting environments,” Parann-Nissany continues. “Tools are emerging for controlling cloud costs and bidding for the most effective solution, such as cloud brokerage. Technology and best practices are emerging for controlling data and ensuring data confidentiality, such as split-key encryption or homomorphic key encryption.”

As with previous IT revolutions, as the needed skill set changes, there is a need to get educated and trained. But since cloud is a revolution in operations and in management of trust, it is not about just technology skills, according to Parann-Nissany.

“The biggest challenge is in understanding how to keep trust only to yourself, yet enjoy the benefits of outsourcing. You should be looking for technologies and processes that make control easy,” he explains. “For example, if you have correctly deployed a security solution, you should be controlling many data objects (files, disks, records) and many keys to these objects, through a handful of master keys that are easy to manage and secure. Such approaches involve both technology and new processes.”

Within the enterprise, the cloud can enable IT teams to react more quickly to changing demands. However, the ability to support the cloud business model requires new roles within the IT organization, according to Colleen Smith, vice president, software as a service (SaaS (News - Alert)) at Progress Software.

“The need for relationship management and service level management is increased and that is an area that has not been a key focus in IT organizations in the past,” explains Smith.

As the vice president of SaaS, Smith is responsible for developing the company’s SaaS/cloud strategy, marketing initiatives, and assisting the firm’s application partners in the execution of their SaaS business in the cloud.

Smith says one of the biggest cloud challenges facing IT management is cost control.

“With easy access to cloud resources – often a simple registration and credit card are all that is required – managing costs and projects without the typical approval process can lead to some confusion and conflict,” she told Cloud Computing. “Budgets can also become impacted due to the “unknown” nature of the expected costs associated with the on-demand nature of cloud resources. Visibility is also a key part of this because if the IT organization is not monitoring usage the ‘spend can get way out of control.”

The key question companies must answer is what to outsource and how to go about executing certain functions, according to Dan Klaussen, product manager of mobile, at software development company Three Pillar Global.

“It’s easy to be allured by the benefits of the cloud, but sometimes those advantages are offset by the loss of control. For some functions, relinquishing that control has little or no impact, and the cloud offers pure upside,” Klaussen explains. “For business-critical functions, outsourcing to a third-party service provider requires the utmost analysis and care. The trick is finding service providers that deliver a full suite of capabilities, allowing enterprises to pick-and-choose the right combination of functions to outsource with varying operating modes.”

While cloud is changing the dynamics of traditional outsourcing models, the flexibility of cloud is also giving rise to the cost-savings benefits companies can achieve.

“The beauty of the cloud is that flexibility comes in a number of flavors. Pricing can be volume-based or connection-based, for example. In addition to being able to pay by the drink, software solutions may be priced by functional component, enabling companies to use only those modules that are relevant to them,” says Klaussen. “By opting for an outsourced approach, businesses can address all of their functional and volume requirements without having to invest in a full-blown on-premise or hosted solution.”

Cloud outsourcing provides customers with a level of flexibility and predictability that traditional outsourcing models often do not, according to Steve Garrou, vice president of Global Solutions Management at Savvis.

“Clients come to us for data center outsourcing. What they are really looking for is flexible spend with predictable results. The capital environment where they can spend what they want and when is changing rapidly. They are looking for a model that matches more with what the cloud model provides.”

Outsourcing to the cloud can also position companies to use the cloud to provide new services to clients and enter new markets, driving revenue and growth. While some fear that cloud will contribute to the demise of the IT department, Garrou maintains the converse is true in that IT is playing a pivotal role in so-called cloud sourcing.

“Cloud is another line of disruptors that we see in the IT services market. This is not a one-time phenomenon. IT is playing more of a role of portfolio management – the way they do that is consistent across customers,” adds Garrou, underscoring the increasing role CIOs have in managing multiple service providers.

Part of the benefit of cloud is the introduction of a self-service model, where outsourcing can be achieved through a self-service user interface and even through automation. This in turn drives ever lower costs, making for a huge benefit to enterprise IT, adds Porticor’s Parann-Nissany. However, enterprise solutions also tend to use more sensitive business data, and as this new kind of outsourcing changes the market, the need for security solutions that are built for the cloud becomes paramount.

Today, new practices and technology are emerging, which allow organizations to outsource to the cloud, while keeping control. “Split key encryption” is the practice of protecting data and processes through multiple keys; master keys remain in the hands of IT project owners or even business owners.

“Data can be in the cloud but control remains completely in the hands of the business,” he explains.

“Homomorphic key encryption” is the practice of encrypting encryption keys, in such a way that even when they are used, they are still encrypted and kept private. The true “keys to the kingdom” remain in the hands of IT.

“Such innovative approaches allow IT to have their cake and eat it too,” says Parann-Nissany. “Outsource to the cloud more and more, enjoy the benefits of flexibility and economy, yet keep IT as the trusted face of the digital revolution.”

Edited by Braden Becker
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