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Drafting ITO Contracts in the Cloud

Alsbridge predicts Cloud-based delivery of applications will account for half of the market within 5 years and outsourcing e-mail as a service will be routine within 2 years.

The key to all successful outsourcing relationships is the quality and flexibility of the commercial agreement between the customer and the supplier. An IT outsourcing contract can be anything from a highly complex and weighty document to a shorter ‘consumer’ style arrangement, but either way it is crucial to all outsourcing relationships as it provides the legal framework between the organizations involved.

As with contracting for traditional ITO services, a detailed understanding of service provision and delivery is vital before entering into Cloud-based contractual commitments.

However, as contracting for services in the Cloud becomes the new standard, it will require a different set of contracting principles and a new basis for customer and supplier relationships. It is a case of adapt or die; those slowest to market will be left behind.

An IT outsourcing contract must stand the test of time, which means that it continues to meet both parties’ expectations during the lifetime of the ITO contract, not just at the start or key milestones.

This paper defines the key principles for what constitutes a ‘good’ contract and deal management organization in the current outsourcing landscape, and addresses the key challenges for ITO contracts in the future Cloud-based, on-demand IT and business services environment.

Alsbridge’s Top 12 Cloud Predictions for 2012

Cloud sourcing is a dynamic aspect of the IT industry that is revolutionizing the IT services market. Alsbridge's expert cloud sourcing advisors predict 2012 will be a year of both opportunity and destruction for providers and enterprises in the cloud.

Top 12 Cloud Predictions for 2012:

1. There are massive opportunities to bring cloud features into the enterprise and there have been increasingly more providers with tooling to help make that a reality. But, it is also going to be a year where consolidation across enterprise cloud vendors will increasingly occur. If the vendor competes in a crowded solution space, short term survival means being acquired, or going public. Only a sliver of vendors are positioned to survive as stand-alone providers.
2. Cloud projects for top-line revenue growth; +50% by 2014 (SaaS and BPaaS particularly) sponsored by business line or functional managers will accelerate over the next 18 months as business perceives IT to be too busy to meet demands for expansions and experimentation.
3. Security concerns will continue into 2012 and will be the main impediment to adopting public and hybrid cloud solutions by enterprises. There will be a re-examination of the differentiation between business requirements and business policies to refine information security requirements.
4. Cloud support for social networking mobile app access and enterprise collaboration will continue to accelerate (like business driven top line revenue project), over the next 2 years. Grassroots knowledge [content] sharing adoption will ramp up with double to triple digit pace year-over-year and thus on-demand options will be the flavored delivery method. Legacy corporate intranets will be molded into this new information ecosystem.

Is Your Organization Ready for the Cloud?

Sweeping change is difficult for any organization. But in an industry such as insurance whose operations are tethered to a complicated aggregation of legacy systems, will the organization's ability to adapt and embrace cloud-based technology be especially challenging?

Incorporating any new technology into an embedded business infrastructure is always difficult. But multiply the risk in an industry whose infrastructure is typically comprised of myriad platforms serving a plethora of products subject to a range of regulation, and it's possible to get a sense for the considerable challenges faced by the insurance industry.

Cloud-based products represent the industry's greatest opportunity to move the dial forward. Implementation of private or public clouds in conjunction with a SaaS delivery model is a fast, cost-effective strategy to keep legacy systems current, and support ever-changing products and services by linking disparate channels and products, distribution and claims. And, as the insurance industry moves to embrace new mobility channels, working within a cloud framework is certainly the only way to tap into customer segments that cannot be reached through more traditional channels. Cloud not only provides the ability to reach users via channels they prefer, but can also support an insurer's efforts to retain brand salience.

Cloud's implications for the insurance IT organization are considerable. Despite the emphasis upon cloud computing and SaaS over the past few years, the insurance industry is still a slow mover. Seemingly, a number of questions are still open: are the products truly fit-for-purpose? How will cloud's adoption change the way the department functions – are new capabilities required? Will the landscape of providers change dramatically? How can risks be best assessed and managed?

With cloud-based applications readily available, the question is not whether cloud is right for the insurance industry, it becomes a question as to when the IT function is ready to deal effectively with the implications of cloud.

How to Overcome Six Common Challenges to Adopting Cloud Computing

The major impediments to wider use of cloud services are not technology related. In fact, CIO executives from a broad range of industries who attended the Alsbridge Executive Round Table Summit: "Cloud Sourcing Harnessing the Forces of Change," identified six common obstacles that slow the adoption of cloud services.

The content and thesis of this white paper are based on the collective thoughts, observations and general conclusions that were a result of discussions with these executives, who are interested in leveraging cloud computing in their businesses.