Traditional models of outsourcing have required a high level of trust on behalf of the customer. Using cloud technology is reducing that risk at the same time as allowing significant savings. To date much of the discussion about cloud computing has been around the replacement of in-house infrastructure and software with cloud-based alternatives. The real power in cloud technology will be realised when entire non-core business processes are sent to the cloud, taking advantage of the technology and virtual teams. Cloud outsourcing flips the trust in favour of the client and facilitates access to expertise at a lower cost.
Non-core business functions often include accounting, payroll, human resources and the IT department itself. The investment by businesses in the infrastructure, software and people to run these functions is a significant drain on profitability. For many businesses the barrier to outsourcing these functions is the fear of losing control of these important functions. In contrast, the barrier for outsourcing companies to allow greater client control is the cost of allowing clients to access systems and business processes. The breakthrough is cloud technology, particularly software as a service, that provides inexpensive system access via the internet.
Taking payroll as an example, the traditional model requires a customer to sign up to using the business process, software and staff of the outsource provider. The customer may then sometimes access certain data from the system. The system is always the property of the outsource company as is the way of working. In this model clients have difficult questions to resolve. What if theirs is a unique business need not suited to the outsource companies systems? If they terminate how would they get their data back? What investment will they then need to make in a new system or a new outsource provider?
Cloud technology enables a reverse view of outsourcing, changing the whole provider/client relationship. Using software as a service the client allows access to their system. The client owns the data and tells the outsource provider how they want the process to work. This approach is highly empowering. It enables competitive advantage.
Entrepreneurial outsourcing providers are taking advantage of this new technology because it allows a larger market of outsource clients. The costs are significantly lower. Investment in infrastructure and software investment can be redirected to people and flexibility. Mutual competitive advantage is derived from quality people with a service orientation who provide expertise more quickly. Investing in flexibility reduces overhead – office costs and IT infrastructure – and flexible work at home employees are more efficient.
Less risk, lower cost and a higher service level is the outcome of the application of the new technology. Thus the real power of cloud computing is not in the replacement of IT systems but in the ability to send entire non-core functions to the cloud and therefore access standards of expertise that were previously not affordable for many small businesses.
