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The cloud is forcing a change in the IT outsourcing market—IDC

The IT outsourcing market is experiencing a fundamental shift caused by cloud services, which are the key to the growth of outsourcing, hosting, and managed services, according to the latest IDC Asia/Pacific, excluding Japan (APeJ) Semiannual Services Tracker.

Total outsourcing services revenues in the Philippines exceeded US$300 million for the full-year 2017, with 8.2% year-over-year growth (in constant currency).  The local IT outsourcing market witnessed a 3.5% decline from 2016 due to the radical change and cannibalization of cloud-based models of outsourcing involving infrastructure as a service (IaaS) and software as a service (SaaS), a changing cost structure, and fundamental shifts in the competitor environment. 

However, IDC believes that the IT outsourcing landscape in the country is evolving as players utilize different strategies from cloud-centric to hybrid IT approach to become the leader in this market. 

“Currently, the traditional outsourcing service providers have been pressured because of the increased shift to cloud providers. More traditional services providers are expected to include new delivery structures to accommodate end users that require services such as cloud, automation, and security solutions,” said Alon Anthony Rejano, Senior Market Analyst for Services, IDC Philippines. 

“Although this shift is seen as a positive sign for the overall IT outsourcing market, we believe that it will also impact traditional outsourcers negatively. From a market perspective, cloud continues to grow in the country but the overall market value remains muted due to the lack of scale for ICT deployment and availability of advanced skills in application migration in the Philippines,” Rejano added. 

Managed services, including managed network, servers, security, and connected services, are gaining traction and local enterprises will soon realize the lack of maturity in service management will make their IT operational environment to become more complex, expensive, and difficult to operate. Therefore, local enterprises should leverage on cloud technologies to achieve their business objectives. 

Cloud is forcing a change in the market profile because of its massive scalability, low cost, and increased agility. Cloud managed services are getting more pronounced than traditional managed services because of such factors like reduced capex and accelerated time to market. 

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