Cloud computing is a new business model, and it is changing outsourcing

Plus vendor management and co-sourcing for successful outsourcing

By Staff
September 9, 2010

Cloud computing has had a short, yet remarkable, history. Amazon officially released its Web services, AWS, in 2008, charging rates as low as 85 cents an hour for on-demand servers. In just over a year, IDC estimates that AWS accounted for close to US$200 million in revenues. Google has used the Web and software-based cloud services such as Google Apps, which came out of beta in 2009, to become one of the largest companies in the world with a market cap of more than US$150 billion. And this year, the CRM and infrastructure-based service pioneer Salesforce.com is anticipated to exceed $40 million in revenue in Canada alone.

The cloud is a new business model for Facebook and Twitter too, as well as IT powerhouses such as IBM and Microsoft. Yet IDC believes its greatest impact is still to come, in the changes it will introduce to the way Canadian companies do business and how they support technology. Instead of buying hardware and developing applications, companies can now access software- and infrastructure-based cloud services on a pay-as-you-go basis from Google, Salesforce and Canadian providers such as TELUS and Bell. What makes cloud services unique is that it introduces best-in-class technologies and processes that, in the past, have been cost prohibitive to an entire class of businesses. With the cloud, these investments are primarily designed for the benefit of all companies. The cloud not just lowers but eliminates barriers to entry for enterprise-class IT services. This has tangential business benefits for Canadian companies to become more agile, cost-effective and ultimately more competitive over time. There are additional advantages, although the cloud also presents challenges for Canadian businesses. Based on recent Canadian research conducted by IDC, these include:

In the future, IDC anticipates Canadian companies will expand their use of outsourcing, but not through the traditional asset-based model. Instead, IDC anticipates that outsourcing will evolve as businesses increasingly rely on cloud computing to augment and, in situations, displace the way IT is currently supported. The cloud delivery model is a powerful means of facilitating change within organizations through helping transition towards greater efficiency. The movement from an asset-based outsourcing model is not just a disruptive technology. In the long term, it will change the outsourcing model as we know it today.

Cloud delivery graphBenefits 

  • flexibility and Scalability 
  • financial advantages 
  • faster Deployment and Less IT commitment


  • reliability of Services and performance 
  • risk exposure related to security and privacy 
  • performance



Vendor management for outsourcing success

Over the years, businesses build countless vendor and outsourcer relationships, and the victim is an IT environment that becomes complex and fragmented.

Reducing this complexity, by consolidating IT vendors, will drive down costs, maximize value and lower risk; however, it is important when making this move to carefully consider the current market landscape, new delivery models and proven sourcing strategies. A consultancy specialized in vendor management can help ensure that a business is on the right course with vendor consolidation today, as well as for the years to come.

As outsourcing arrangements have become more prevalent, several consultancies have emerged to help with the RFP process and determining which vendor has the services and skill set required for their clients to succeed. They can help. But too often these consultancies also have a “set-it-and-forget-it” approach and are no longer involved after the solutions are in place.

Trust, but verify

Blind absolute trust with one’s key vendors is a mistake. A consultancy experienced in vendor management can guide you in establishing an effective vendor relationship, performance and governance model.

Businesses need to consider finding a consultancy that provides the management tools, dashboards, performance scorecards and expertise required to keep their IT vendors on track. The right model, tools and skills can add a much-needed layer of transparency and control to their vendor relationships.

Today, so much of a business’s IT services are managed by vendors engaged in multi-year arrangements that are effected by a changing landscape (priorities, acquisitions, regulatory requirements and market risk). It is essential to establish effective R3P controls and transparency (Risk, Price, Performance and Productivity) for the duration of the multi-year relationships to provide expected and predictable outcomes.

R3P Consulting specializes in assisting organizations with IT sourcing strategies, vendor consolidations,

Co-sourcing for success

Selective outsourcing lets businesses focus on what they do best and leaves putting out tech fires to experts

A few misconceptions that exist around outsourcing can prevent small- and mid-sized businesses from taking advantage of the benefits it can bring.

First, too often business owners confuse having extensive service with expensive service, and think outsourcing sounds a lot like off-shoring. The reality is outsourcing lets businesses focus on the core of what they do, while external experts can focus on the day-to-day of patching software and managing IT infrastructure.

Still, it’s not surprising that many small businesses are skittish when it comes to outsourcing. Yet, through paid consultants, many already participate in outsourcing, although not calling it that. This typical LAN-guy-for-hire is often involved in all aspects of a small business’ IT, from toner to telecom. Still, he or she is just one person—who has only so many hours in a day and only so much time to learn what’s new.

To get the most out of technology investments and of outsourcing opportunities, small- and mid-sized business owners should look closely at where they could free themselves up through external assistance. At Primus Canada, we call this co-sourcing. Although we have a full line of virtual and managed services, each business’ individual needs are unique. Some need to make sure their hardware is running, others need operating systems managed, and others want their phone systems outsourced.

When employing a co-sourcing approach, outsourced services are provided à la carte, which works especially well for small and medium businesses where internal technical expertise can be slim. Often small business IT staff find themselves pulled in every direction; they must be a Jack-of-all-Trades, and so master of none.

Co-sourcing offers a few key advantages:

It’s predictable. Often the smaller a business is the less predictable are its operating hours. An Engineering firm might be working on a project until 11 p.m., until a server goes down and they cannot provide the design to their clients. At that time the LAN-guy-for-hire could be out at a movie, not picking up his phone. When co-sourcing services, the experts are always available.

It’s not complicated. Co-sourcing allows smaller businesses access to enterprise-grade technology in the bite-sized chunks they require. By co-sourcing, a business doesn’t need to buy cheaper or smaller tech; they can purchase exactly what they need.

It’s future proof. Because both co-sourcing and outsourcing allow a business to buy only the technology it needs, it can similarly be prepared for growth. It can purchase a slice of the enterprise technology it needs for its four-person shop today, and add to it as staff and performance needs grow. The alternative is to forecast and try to buy technology that supports where the owner thinks the business will be in three to five years—usually accompanied by a large capital outlay.

It saves money. In addition to not being forced to pre-spend on currently unnecessary IT, co-sourcing saves money in times of crisis. Overtime for IT staff or hired consultants is not required when something goes awry off-hours. As well, loss of business from downtime is prevented through redundancy. Disasters are not just tornados, fires and hurricanes; they are anything that causes a business to lose access to its crucial IT applications.

It’s not just for data anymore. Twenty-first century service providers don’t only offer storage and data services. At Primus Canada, for example, we offer hosted IP-based PBX services. Just like data services, this allows smaller businesses to have the features of phone systems typically found only in large enterprises, but at the smaller scale required for their businesses.

Whether turning to an outsourcer for virtual servers, managed services or hosted IP telephony, co-sourcing can give small businesses a share of big business features at a cost and scale they can handle.

Bigger isn’t always better

Size matters when selecting managed services or hosting providers, but not in the way many think
It is common for businesses to seek out big players, when seeking vendors to outsource their IT; however, it is not uncommon for them to later move on to a smaller or mid-sized company with the same enterprise capabilities.

Why? The first reason is financial. Smaller providers have smaller overhead related to business infrastructure. For companies under the crunch of cash-strapped budgets, securing a better price for the same technology and services can be crucial.

Smaller outsourcers will often also have market nimbleness, comparable to a SME’s own professional culture. Customers might, in fact, see improved service, since a small- or mid-sized client isn’t just a “drop in the bucket” to a smaller managed service provider.

When looking for an outsourcing provider, businesses should consider a few things that will help them make good choices: 

  • Investigate the levels of service provided to a company of the same size as your business. How does it guarantee those service levels? 
  • Make sure the provider can support all the company’s technology platforms. 
  • Look at the company’s history. Is it long? Is it varied? 
  • What company does it keep? You can tell a lot about a service provider by looking at its existing client base. Who are its marquee clients?
How a managed service provider measures up has more to do with those important questions than its global size and scale.

For more than 40 years Cover-All has been providing managed IT and hosting Services at value prices to the IT industry.

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