IT service providers develop cloud despite expectations of slow return on investment


IT service providers develop cloud despite expectations of slow return on investment

Karl Flinders

IT service providers are investing in business models such as cloud computing despite their own conservative estimates about its take-up.

Research from Gartner has revealed that, despite growth being back on the agenda, IT service providers are very cautious in their expectations of sales from new delivery models.

Gartner's latest research says 62% of IT service providers have put growth as their top priority and are investing heavily in marketing cloud, utility and as-a-service delivery models.

The service providers are however conservative about their predictions and on average suppliers believe 18% of datacentre deals will include cloud, utility or as-a-service in 2011, rising to 24% in 2012.

There are also mixed feelings about how new delivery models will drive growth. A total of 56% expect these alternative delivery models will drive overall ITO revenue growth by 2015. But 29% believe it will cannibalise existing ITO revenue.

But suppliers have no choice but to put their money up from, says Gartner analyst Allie Young. "There is no going back to business-as-usual for ITO providers. Traditional business models are being turned inside out: it has started with the new business models and cloud ecosystem, and these trends will continue to impact the outsourcing business.

"Providers that ignore those trends could find themselves stuck with yesterday's delivery models and high cost structures as the market moves on around them," added Young.

Between 60% and 64% of suppliers nominated their cloud spending in the top three investment priorities for 2011.

See Computer Weekly's guide to cloud computing >>

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