Determining factors affecting Cloud Computing as Outsourcing

Cloud computing (CC) is an emerging usage of IT outsourcing (ITO) that needs software companies in India to fine-tune their sourcing procedures. Although software companies in India have recognized an extensive knowledge based on the basis that drive sourcing choices from numerous theoretical standpoints. The mainstream of cloud-sourcing decisions concentrates on technological aspects. The most determinant factors of sourcing decisions in the ITO context persist valid for the CC context. Stillthe findings for some factors (i.e. asset specificity, client firm IT abilities, institutional influences, client firm size and uncertainty) are indecisive for the ITO and CC contexts. 

Cloud computing (CC) influences how organizations cope and manages their IT landscape, challenges outdated IT governance approaches, and requires organizations to fine-tune their sourcing processes. With cloud computing, organizations can achieve on-demand network access to a common pool of managed and scalable IT resources, such as storage, applications and servers. Since IT sourcing decisions require substantial economic and strategic risks, Software outsourcing companies in India should have broad judgment and insight regarding organizational structures, organization processes, inter dependencies and routines to thoroughly comprehend decision substitutes and the set of required structural selections.

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Following are the factors that software companies in India, can consider for organizations willing to adopt cloud computing.

Asset characteristics

Asset specificity is used in reference to three key categories of assets: physical asset specificity(similarly referred to as technical specificity), site specificity and human asset specificity.

The increased network reliance of cloud computing increases the risks that disturb site specificity, such as the risk of service breakdowns because of probable network outages, which may result in a momentary loss of data accessibility. Therefore, site specificity requires precise consideration for assets that are required on a day-to-day basis (e.g. a customer relationship management system – CRM System). 

Technical specificity may however generate transaction charges when applications are run remotely but these increased transaction costs do not surpass cost savings rising from economies of scale. Thus, these cost savings may humbly outweigh issues related to technical specificity. Furthermore, the impact of technical specificity is expected to vary with organization size and other parameters. However, SaaS (Software as a Service) solutions are restricted in terms of their customizability, which limits the exclusivity of assets that are outsourced via cloud computing. So assets with low technical specificity might be more appropriate for SaaS-based sourcing and applications. High technically specific assets that surpass the configuration and customization limits of SaaS solutions may nevertheless be contenders for outsourcing the underlying infrastructure or PaaS solutions.

Human asset specificity yields inconsistent results.

Client firm characteristics

The impact of a client firm’s internal IT capabilities on sourcing decisions vary between the cloud computing (inconsistent influence) and ITO (consistent negative influence) contexts. Partial support for internal information technology capabilities is observed because there is ‘a plentiful supply of IT personnel with suitable technical expertise’; so, gaps in internal IT capabilities can be effortlessly filled. Organizations started considering to outsource their IT activities because of a deficiency of trained and skilled IT personnel to software outsourcing companies in India, whereas companies believe for internal IT capabilities as a criterion for integrating cloud services into an organization’s IT landscape.A deficiency of internal IT capabilities can be addressed either by acquisitioning competencies (e.g., hiring experts, training existing personnel) or by giving IT tasks to external providers (i.e., outsourcing). Thus, the aspiration to hire IT personnel may be an indication of a lack of IT capabilities.

Environmental characteristics

Uncertainty denotes the degree of complexity, unpredictability and imperfect information that is natural to a transaction. Two types of uncertainty persist: behavioural uncertainty and environmental uncertainty. 

Environmental uncertainty requires further consideration as a determinant of cloud-sourcing decisions, and we specifically differentiate between demand uncertainty as a driving factor and product uncertainty as an inhibiting factor.

The contractual mode of cloud services with short-term contracts permits clients to switch between providers for standardized, commodity-type services at a little cost, thus increasing the client’s inclination to switch vendors if the client is not pleased with the outsourcing arrangement. Still, low-cost switching relates only to standardized services (e.g., low technical specificity) with numerous available provider options. Highly specialized services, which are challenging to replace and lack open interfaces, might be tougher to source via CC. So, the nature of asset and the interference of other factors may play a part in the impact of behavioural uncertainty on sourcing decisions.

Determinant factors of cloud-sourcing decisions assist as a basis for practitioner-oriented guidelines and best practices about how to select and offer cloud services. Also, software companies in India may use the set of determinant factors to lead their procurement procedures and to identify challenges that may stand up during the adoption, acquisition, or integration of cloud services.

Choosing between SaaS and On-Premise for a Software Outsourcing Company in India

Software as a Service (SaaS) is a software delivery model for software outsourcing companies, in which vendors host the applications centrally and charge on a levered basis. These applications are available to the users via Internet. This software delivery model is in line with terms like ‘On-demand’, ‘Off-premises’ and ‘Application Service Provider (ASP)’. E.g. Microsoft Office 365

On-Premise is a software delivery model in which a client, installs and works on the software in-house. Organization’s own resources are used and it needs to obtain a software license for using the software for each server. On-premise software is commonly referred as ‘ShrinkWrap’ and ‘Software as a Product’.

The need for web servers is one of the main reasons for the companies for migrating from On-premise to SaaS.

The decision of going with SaaS or staying with On-premise, involves multiple steps:

• Determine whether there are any SaaS providers for the software you need and are they trustworthy.
• Some of the important concerns while making this decision are Cost (this being the primary one), Security, Customization, Control, Compliance and Infrastructure.
• Get an understanding of business needs of outsourcing companies and baseline them.
• Obtain a free trial from both vendors (On-Premise vendors and SaaS vendors) and then analyze and evaluate.
• Suitability check of applications should be performed for SaaS or On-Premise.
• Obtain the knowledge of vendor relationship difference between SaaS and On-Premise.
• With SaaS vendors, the benefits of multitenancy are realized. Multitenancy is allowing multiple users to share a single application instance at the same time retaining their own separate information.

The comparison of On-premise and SaaS is done to make the decision easy:

Parameters	SaaS	On-Premise
Implementation	Faster to implement because convenient and already built platform is available.	Takes longer duration to get implemented as personnel and equipment are needed to set up an environment.
Infrastructure	No purchase of software or hardware needed.	Extra hardware and software need to be purchased.
Customization	Customization is difficult as multitenancy is given the focus.	Highly flexible for customization.
Support & Maintenance	Very low dependency for maintaining the application. Control is in the hands of vendor.	Your responsibility to maintain the application. Control is in your hands and ownership is yours.
Mobile Access	Accessible through browser on mobile devices.	Minimal access through mobile devices.
Upgrade Cycles	Upgrades are iterative with very less involvement of IT.	Upgrade is your responsibility which is costly and takes a lot of productive time.
Cost	Pay per use & entry costs are low. High annual maintenance. Internal resources required are less.	No flexible pricing option and entry high costs are high. Low annual maintenance comparatively. Lot of internal resources such as tangible hardware assets are needed.
Security	Security risks are higher as applications are accessed via Internet. Server and Network security experts are needed.	Lower security risks as applications are accessed in-house. No specific security experts needed.
Validation for regulatory compliance	Vendor does the baseline review.	Validation is your responsibility. Enforcing these requirements is comparatively easy as control is in your hand.
Integration	Complex as it’s difficult to integrate with existing as well as new processes.	Simpler to integrate with existing and new processes.
Scalability	Scale up and scale down of solutions is easier.	Difficult to scale solutions easily, as it requires a lot of effort and commitment.
Redundancy	Redundancy is a bigger concern as to what happens if the solution provider fails.	As the data lies in-house it’s easier to store backup of the data and so redundancy is a lesser concern.
Availability	Resolution of cloud outage makes you dependent on vendor.	Outages resolution is your responsibility.

After comparing the two options based on these parameters, cost benefit analysis is performed for each of the vendors offering the solutions. The results of the analysis are compared and evaluated to make the right decision for a software outsourcing company.

To choose the deployment model that will suit the outsourcing company’s business, depends on factors including:

• Resource’s availability during each phase of the project.
• Data’s criticality.
• Size & culture of the organization.
• Organization’s requirements for integration.
• Control over customized environments.
• Annual Budget and Investment constraints.
• Regulatory commitments.

Conclusion: Thus a software outsourcing company in India should choose the option that suits the best, after analyzing and comparing the insights derived from this comparison.