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Centrica deal reveals deep cuts into the IT outsourcing sector

Centrica’s move to Microsoft Office 365 is further evidence of how the cloud is forcing the IT services sector to transform

When Fujitsu took the desktop services contract at Centrica from T-Systems in 2011, it was a clear sign to the sector that suppliers providing commoditised services required scale to be able to compete. However, the next iteration of this contract reveals that even large services provides that have scale can’t compete.

The contract, which saw Fujitsu use its size and economies of scale to price T-Systems out, was evidence that commoditisation desktop services might mean the big suppliers will start replacing more niche players.

When T-Systems lost the contract, it retained work on Centrica’s SAP in the cloud and worked on the development of smart grid technologies.

More than five years later and that work is being switched to the cloud with Microsoft Office 365, with Fujitsu now playing a peripheral role wrapping services around Office 365.

Interim CIO David Cooper told Computer Weekly the company is part way through migrating to Office 365, which is a big change in the contract.

“We won’t have dedicated email servers with Fujitsu, and we won’t be using Fujitsu datacenters. This is a big change as we have a lot of users and applications,” said Cooper.

“But Fujitsu will still be part of this, as it will provide services that wrap around Office 365, such as the IT service desk,” he added.

This is further hard evidence of how technology advancement and the cloud in particular is shaking up the outsourcing sector. You only need to look at a company such as NetSuite to understand how cloud is encroaching on the enterprise sector. The software-as-a-service (SaaS) supplier grew fast, boasts an impressive customer list and has been acquired by Oracle for $9.3bn.

However, adoption is going beyond the SaaS model. Almost every renewal contract today involves some cloud element. With nearly 3,000 IT outsourcing contracts worth more than $5m – representing a combined total value of more than $270bn (£175bn), coming up for renewal between 2016 and 2019, according to ISG – that’s a lot of cloud elements.

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