Technology, IT Infrastructure

Cloud computing is outsourcing version 23.0, sayeth CIOs

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The cloud may be powerful and promising, but I think it grates on CIOs.

Why? Because it just seems like so much outsourcing that they've been through before and the cloud hype is suffocating. Ahh, such is the price for a technology that will probably for the basis on most IT departments in the future.

This view is born out by two recent discussion threads. One asked CIOs if they had put a cloud roadmap in place or were moving to it on an adhoc basis. Another asked if the cloud is just outsourcing version 23.0. The answer to that one was a resounding and universal yes and thank you for asking.

Out seven comments to the roadmap question posted at the CIO Forum on LinkedIn by AllPerspectivz Global Communications managing director Paul Calento, about half said they have them in place -- several expressing deja vu all over again. Here's two representative comments:
-- "Yes and we have had one in place for years. It is only marketeers who have suddenly "discovered" the cloud."  
--"Businesses should want out of the business of IT to focus on what is core to their business objectives. Getting out of the business of IT used to mean utilizing outsourcing." 
It was much the same with the outsourcing question. I posted that question at the CTO/CIO Leadership Forum on LinkedIn. Ask a CIO if the cloud is outsourcing, most will say yes if this thread is any indication.
-- "Cloud" is not a new technology, it's a concept we all already tried to implement: No client software installation, transparent application/data location, resiliency, etc,etc,etc. if you cannot do it with your existing applications, don't expect the so called "Cloud" to do it for you."
--"Cloud" is the same as any third party relationship. Sometimes we use 3rd parties for commodities (payroll, electricity), and sometimes for critical, core activities (Apple doesn't manufacture any hardware, for example)."
Casting the cloud as a commodity like electricity might over-simplify it. Here's another comment that says proceed with caution:
"Conceptually the premise of cloud computing is incredibly appealing and it makes for an easy sell. The reality is that some of the abstraction that allows the cloud to be so flexible also leads to inconsistencies in expected performance. A case in point is the social news web site Reddit. They are hosted on the Amazon EC2 cloud, use Amazon EBS storage and have seen huge unexpected growth over the last year. This all should have played out very simply. Just add nodes, add storage and voila instant scalability. The reality was far different and Reddit has been forced to withdraw elements from the cloud because of the inability to predict and receive reliable throughput."
Both are great discussion threads with the gravitas of several CIOs and CTOs. I urge you to read them.
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Christian Verstraete 429 Points | Thu, 09/13/2012 - 08:35

John, I actually fundamentally disagree with the statement that Cloud (and here I mean Managed or Public Cloud) is outsourcing version 23. It's a completely different business model. Where Outsourcing is focused on long term contractual arrangements to provide you a fixed amount of capacity, cloud is all about giving you the flexibility/agility required.

I believe the CIO reactions come from the fact many CIOs are still focused mainly on infrastructure so they can run programs. Cloud is about the service that is delivered, not the infrastructure. When talking to CIOs I see many of them just looking at IaaS, the infrastructure view of things. Moving beyond infrastructure to services implies a fundamental transformation of IT. Is that what is holding them back?

Pearl Zhu 90 Points | Wed, 05/30/2012 - 17:01

Hi, John, just left a comment at the discussion spurred in the CIO forum, my comment is: thinking about cloud concept is no different from earlier version of IT on premise or outsourcing, just like thinking mobile computing no difference with physical phone line, or tablet is exactly same as pc. In essence, it may just the nature evolution for technology, to get cheaper, better and faster, to embrace a "wired" world without wire.

Compare to traditional BPO or ITO, Cloud may have more comprehensive and transparent delivery model, either public, hybrid and private, to allow enterprise to orchestrate IT resources via the right pace and time from architectural, economical, functional perspective, , it may also means, business and IT can think cloud as enterprise-base strategy, not just single dimensional cost-cutting, with agility and elasticity, help well categorize IT into competitive necessities and competitive uniqueness, and further inspire innovation. thanks.

Ron Batra 2 Points | Tue, 05/29/2012 - 20:18

Very true, although I believe it is one of the drivers for Cloud Computing.  I tried to capture this in my view on "Cloud Computing Top 10 Use Caess".

Outsouricng and core-competency is one of them, and I guess what CIO's say, one of the big ones.

John Dodge 1535 Points | Wed, 05/30/2012 - 13:14

Ron, Good stuff. The chart in your post does a good job of breaking down where the cloud is getting traction. You might want to contribute to this CIO Question of the Week, which explores IaaS, SaaS and Paas.

Richard Ferrara 0 Points | Thu, 01/26/2012 - 16:52

John, I agree, another form of outsourcing. We've been down this road before and I'm sure it won't be the last time. Remember the "ASP" model touted in the late 90's early 00's...kind of like that. Sure it has evolved a bit. Don't get me wrong, in certain situations it could make sense. Businesses starting out with no internal IT, yep, it could work. Existing with IT, perhaps not. To make the most of it you almost have to be all in and therefore all in to outsourcing your IT. In my mind, you still need local support.

As far as the CapEx/OpEx discussion we've all heard, well you can get around that by moving to a leasing model for infrastructure that gives you the OpEx and a known method of refresh cycles and costs. It's what we've done. 96% virtualized moving to 100% as software improves and always striving for automation....and we control the environment. For what it's worth....

John Dodge 1535 Points | Fri, 01/27/2012 - 18:21

Good one, Richard. I had forgetten about ASPs aka Application Service Providers...and the leasing model takes us back almost a half century!

Trevor Williamson
Trevor Williamson 0 Points | Wed, 01/11/2012 - 17:05

One of the biggest "hype" problems is that CIO's look at cloud as a place or a thing when, in fact (as I believe) it is a holistic, enterprise spanning, IT management methodology. By only focusing on the location aspect they see it as another outsourcing story (and not a good one) and by looking at it like a thing, they restrict themselves to thinking about it terms of hardware and software which is no significant change from what they do now.

Cloud computing is about separating the business value of a compute asset from the operation of that asset so that each, the value and the operation, can be optimized individually regardless of where the assets reside (on premise, co-lo, outsourced, etc.) or where the business benefit is derived.

Any organization moving some or all of their applications to the public cloud without working out, internally, what cloud computing does and doesn't do is planning to have a world of hurt fall down on them. It is extremely important to test and prove out the concepts (and adjust to the massive operational differences) internally, where the environment is known and can be adequately controlled before any type of workload is moved to a public cloud.

One simple yet devastating example; in a traditional environment, the composite applications that make up a business critical service are inextricably tied to the underlying hardware platforms and are treated as a single entity for tax purposes such that a business depreciates those combined assets over time. These combined assets are also used as the basis for calculating operating costs in relation to derived benefits so that the financial performance can be tracked and compared to predicted results.

This fundamentally changes in a cloud environment because the connection between the composite application and the underlying platform is tenuous (if not non-existent) therefore all of the associated financial accounting, tax compliance, asset procurement, performance management, etc. systems that are the business backbone of the enterprise have to be adapted...and if this isn't done before the cloud environment is in place, the entire initiative will fail simply because there is no way to actually operate it adequately.

Ron Batra 2 Points | Fri, 11/11/2011 - 15:19

The real interesting question CIO's already seem to have figured out the answer in the context of Cloud and Outsourcing is really about tangible gains from Cloud Computing.

My observations:

-Corporations spent the last decade reducing cost by exploring lower-cost markets.   Reduced Labor Cost on IT Support, New Development.

-Infrastructure and Hardware is a clear function of Moore's law. In other words, what you get for $10K is likely 10 times more powerful than what you did in 2000. 

-So where is the clear money saved in Cloud ?  It leans more towards a decision between OpEx and CapEx.  A Public Cloud Provider is a "for-profit" business as is a company making commercial virtualization platforms.

-For a Public Cloud model , the net sum/spend of data-center  (including facility, power, HVAC, rent/buy) + IT Support Staff + Other People costs to keep it running is essentially compared with the "lease cost" of running the same on a Public Cloud/Hosted Infrastructure.

But to this discussions point, by outsourcing it even more, a business can give up a lot of control.  (Tried to cover this aspect in my bloga at

Ultimately how much control does a business give up on mission-critical, bet-the-farm stuff ?

And is the Public Cloud Ready for all the work loads that run in Private Clouds/data Centers today ?



John Dodge 1535 Points | Fri, 11/11/2011 - 16:07

Hi Ron and welcome to the Enteroprise CIO Forum. I think the control question depends on the app...I would think there are a raft of applications you can put into the public cloud and not give another thought to. CRM apps and even some HR apps...What kind of control are you talking about?

Bill Laberis 161 Points | Fri, 10/07/2011 - 19:39

You can look at virtualization and say, 'Well, IBM was doing that forty years ago" and that would be accurate. But not like today! Similarly with cloud, going elsewhere for IT services is not new. In fact in IT, what is truly new? IT has been an iterative science for more than 50 years with one innovation leaping ahead off the shoulders of the one before it. I might make an exception in the case of mobility, however.

John Dodge 1535 Points | Mon, 10/10/2011 - 15:01

We hve a tendancy to say new technologies such as the cloud and virtualization were invented and deployed a long time ago. Conceptually, there may be a grain of truth to those notions. However, embracing those notions can limit you from the real advancements that have been made in those technologies.     

Donny Buckman 4 Points | Thu, 07/14/2011 - 03:32

You must be right John because the industry is positioning itself to bring cloud infrastructure in-house. Cisco, VMware, and EMC were at the forefront of this movement with their combos of unified computing, virtualization, and storage virtualization, and now Microsoft and HP are putting out an Azure appliance. The cisco arrangement is more of a virtualization play, I know, but I expect it to become more cloud oriented in future versions. I am looking forward to discussions on how well these products function on the enterprise LAN as opposed to the outsourced datacenter model cloud was built on.

Just as a side note, I know how the mainframe was partitioned, and that functioned as a cloud, but a feature that makes modern cloud computing different is self-provisioning, and cloud bursting and shrinking (thin provisioning). That is, an administrative user in a cloud computing environment can provision new instances from a Web interface without the support of IT. That is the defining feature that separates these elements. You are right about the outsourcing elements, and I know people who adamantly oppose cloud computing over those arguments. These new products are poised to show us the way forward in meeting compliance requirements, and they should sell well in vertical markets that missed the cloud hype craze. Only time will tell.

John Dodge 1535 Points | Thu, 07/14/2011 - 15:21

You mentioned Microsoft Azure, which prompted me to do some research and I found this video which is pretty good, IMO...

The first minute is wo propanganda, but runs down all the things IT needs to think about in the cloud and its tremendous benefits - faster, less hassle and less $$. In the main, Azure seems similar to Amazon Web Services, no?   

Donny Buckman 4 Points | Thu, 07/14/2011 - 21:42

Hi John,

The services are pretty much the same, except that Amazon likely processes Linux workloads better since it is built from Linux. The Azure product I consider practical for a number of reasons (e.g. compliance, bandwidth constraints, security, etc.) is an appliance built by HP that is purchased as a turn-key internal cloud solution. I recently experimented with SQL Azure for a grad school course I am taking on database management, and an important component of Microsoft's product is the tight protocol links with SQL Server Management Studio. The same is true of Visual Studio 2010 and the compute component of Azure. Microsoft has made it simple to deploy solutions directly from developer workstations to the cloud. Taking a step back to the enterprise appliance we have the power to provision a node, deploy a solution, then draw in the interface giving users access. Probably the greatest benefit of the internal cloud solution will be the lifecycle management capabilities it gives to IT with the tight integration and ease of deployment using available tools. I do not believe that Amazon EC2 is as easy to deploy to as I have not experimented with it. I know that Eclipse contains an EC2 plug-in that does basically the same thing as Visual Studio, so perhaps adoption will be a matter of how well an organization's IT department understands the tools.

Paul Muller 119 Points | Mon, 06/20/2011 - 22:29

Okay John, you had me at the headline (which is I guess your craft after all!).

So my answer - not even close to the same thing, in fact, I feel so strongly about it, I'll fire off a longer post in the IT Delivery section.

Jerry Bishop 100 Points | Thu, 04/14/2011 - 00:18

This is a very compelling set of ideas which always captures my attention in the Q&A sites. 

On the sissue of roadmaps for cloud computing - Yes, a roadmap is in place and being executed for my college. I recently shared this strategy at AFCOM Data Center World in The Decision: Build New vs The Cloud which you can find and in an earlier post Private Clouds Here We Come which highlights the installation of our first pair of Cisco UCS. You can also find recent updates to this strategy in the coming days as I share the results of the first phase of our UCS implementation.

On Is Cloud Outsourcing: I believe the best answer is no with one narrow exception. The more general concept is one of sourcing, which is a procurement decision. If you use outside legal counsel is that outsourcing? What about hiring a firm to help raise capital - outsourcing? When you shut down the corporate travel office because you could self perform online was that outsourcing or the evolution of a business process? And so cloud represents the evolution of business processes that are delvered off premise. We only envoke outsourcing when we talk IaaS and PaaS since that touches IT directly and impacts jobs. the narrow exception, if you use cloud-based crowdsourcing solutions to move manual work - that is outsourcing.

John Dodge 1535 Points | Thu, 04/14/2011 - 00:34


I checked out your build v. cloud presentation. It's an excellent walk-through template for cloud newbies. I plan on doing a short post and linking back to your presentation unless you want to post it yourself. 

Jerry Bishop 100 Points | Thu, 04/14/2011 - 02:14

I still haven't found the spot to post a new item yet. But I will look some more.

John Dodge 1535 Points | Thu, 04/14/2011 - 02:24


I believe if click on your name, a screen will come that says BLOG (between Network activity and My Content.). Click on Blog and to the right you should see New Blog Post. Click on that and the template should come up.

BTW, maybe I have the Stihl MS 270...that's the Wood Boss. It's late and raining so I'll check in the morning. you might have the Farm Boss.





Jerry Bishop 100 Points | Thu, 04/14/2011 - 02:33

I see it now.

I do have the Farm Boss with and18" on it most of the time.

Doug Goddard 123 Points | Wed, 04/13/2011 - 19:59

Not sure why they would say it is just outsourcing since companies can build their own "Cloud" platform? There certainly is a lot of marketing hype around it. There is a joke going around that the timeshare people are saying they should have called it the cloud 25 years ago. However, the promise of the technology, it seems to me, lies in the potential cost savings, especially for those organizations that still have big investments in mainframe technology. On the outsourcing front, it ought to give rise to new pricing models, moving from fixed to variable costs, even for services that have not seen that yet in the outsourcing world.

John Dodge 1535 Points | Thu, 04/14/2011 - 00:18

Several of the comments in those threads delved into standardized app and cloud platforms...sort of suggesting the cloud is forcing them to clean up whatever incompatible messes presently exist in their enterprises. I own a couple of timeshares...maybe I should try to sell them as the "cloudshares."

How would describe the ideal cloud platform?  

Doug Goddard 123 Points | Thu, 04/14/2011 - 14:41

Thanks for the clarification John but I still don't understand why cloud = outsourcing to so many CEOs. Granted, if you can find an outsourcer who satisfies your security and quality concerns and you haven't built your enterprise applications on the latest fad interpretive language and the outsourcer is willing to amortize the cost of building and maintaining the cloud across multiple clients, then outsourced cloud may be the way to go. It may also be the best alternative if you don't have the internal expertise to integrate all your legacy applications together into a new web-based or cloud application.

John Dodge 1535 Points | Fri, 04/15/2011 - 13:21


I think there is a perception that the cloud is handing off your apps to a cloud provider and to some extent it is. Again, I'd like to hear from you and what constitutes an (internal?) cloud platform. 

Doug Goddard 123 Points | Fri, 04/15/2011 - 14:07

I think of it as a computing environment that features the same sorts of things we associate with public clouds, such as virtualization, automation and service-oriented architecture, except it is located separately from other businesses. That may be on an organization’s own computing infrastructure or data center but it can also be in a third-party data center. If I am not mistaken Amazon offers both public and private clouds. For example, we are starting to see internal shared service organizations setup private clouds. I think one could argue that an organization could also use a public cloud but maintain control over the development and support of the applications they deploy on it and that isn’t really outsourcing either, in the sense of handing over an entire business function to a third party.

Paul Calento 255 Points | Fri, 05/27/2011 - 14:28

Doug, agree with you that the cloud is not outsourcing, particularly when a hybrid delivery approach (public cloud, private cloud and traditional IT) is used. Would take it a step further and say that cloud isn't even a technology, but a management and deployment strategy. The outsourcing association may even impede cloud deployments.

--Paul Calento

(note: I work on projects sponsored by and HP)

Doug Goddard 123 Points | Fri, 05/27/2011 - 15:39

That is a good way of putting it Paul. However, one can point to virtualization software, new database systems for handling Big Data, smartphone and tablet apps, web applications that can scale on an as needed basis, etc. as Cloud technologies, I would argue. I tend to think of the Cloud in the context of the BAT strategy, if I can call it that, viewing the cloud as central to three transformations, or modernizations, one a hardware technology transformation, another, the transformation of application and database architectures, and the third, a transformation of the entire business, moving the legacy world unto the cloud, and then figuring out how to move the entire business there. Obviously, alot of work goes into all three.
James Raddock 1 Point | Wed, 05/25/2011 - 15:29

I believe you're referring to Amazon VPC on the private cloud side, where Amazon provides the hardware and the bandwidth, but their servers authenticate with your network and act as if they are on it.

I haven't used it on any deployments, but I can see this service as viable for many security crucial applications such has high-frequency trading, financial stat crunching. I frequently have financial clients ask me how they can use cloud resources but keep the data where it physically resides, VPC and other similar services can give the best of the cloud (redundant vitrual hardware) without being public.

Doug Goddard 123 Points | Fri, 05/27/2011 - 15:28

I had heard Amazon offered a private cloud. Data seems to be the sticking point. I think there is a great reluctance to trust data to the cloud still. Of course, if it is your own cloud, or the data still resides in your data center, even if the app server is running on a public cloud, the risk seems to be reduced. One can always deploy employees to the public data centers too. I wouldn't be surprised that once the security issues are mostly resolved we will see more organizations use public clouds  as redundant or mirrored data centers, for disaster recovery plans. It would certainly be much cheaper than buiding your own redundant data centers.