The offshoring boom of the late nineties and its subsequent evolution has been instrumental in empowering global IT firms to expand with incredible speed. It has been responsible for the rapid economic growth of entire countries. It has seen millions employed and millions made unemployed, boosting economies to the point that they are no longer profitable as offshoring locations.

Two decades ago, offshoring was garnering a great deal of interest, concern and speculation. Promises of significant cost savings, agility, scalability and flexibility were being explored with cautious optimism, while questions over security, data protection and business continuity were raised by both press and potential customers, fearing a lack of control. Above all, fear over job security and replacement by counterparts overseas working at a fraction of the wage rocked the previously home-grown workforces of the major IT players.

Fact, fiction and false starts

Now there’s a new delivery model changing much about how IT is done – cloud. Its similarities with offshoring are significant – all of the above hopes and fears can and have been expressed in regard to how cloud will change the IT industry. What then – after all that has happened with offshoring – can CIOs learn to ensure that the same mistakes and failures are not replicated? Is it possible to predict the evolution of cloud services based on that of offshoring?

In spite of several set-backs with offshore in which clients have decided to move work back in-house or on-site, the overall trend with offshore remains on the rise. This is because IT vendors are addressing the blockers and clients are getting smarter in when they use offshore. This education has not come quickly – the offshore model took nearly fifteen years to hit the mainstream. Cloud is going through a phase of correction as it settles down into a mature model. However, given the fact that innovation cycles are rapidly compressing, cloud services could mature within five years - it is therefore imperative that potential issues are identified and resolved sooner rather than later.

As there was with offshore, there is already a lot of myth and noise surrounding cloud. These rumours will need to be segregated from genuine concerns and clients provided with the awareness to help them make the right decisions. This will require a level of investment from the IT vendors and will require cloud site visits and workshops to reassure potential clients that lessons have been learned. One such lesson learnt during the offshore evolution is the importance of setting the right expectations. Promising too much in the way of cost savings without taking into account overheads and other constraints will result in businesses being disappointed.

Offshore is a niche delivery model and requires experience and expertise to sell and deliver. Cloud will need a similar approach and set-up to be successful. Both the IT vendors and their clients will need to invest in building such teams alongside mature models for assessing what can and cannot go into cloud. This is what offshore pure-plays had to do to be able to convince their clientele that it was worth considering.

Developing the support structure

As IT vendors facilitated the acceptance of offshore, so they will play their part in cloud. This will involve building infrastructure and developing standards and tools that will support growth of cloud services in the marketplace. Cloud-related processes, skills and risk mitigation will evolve with time and help in the process of general business acceptance.

Similarly, businesses will need to change and adapt to the new world of cloud in the same way that they did with offshoring. Changing employee roles, introducing new areas of management and up- and cross-skilling of staff, will all play their part in the journey towards Cloud acceptance.

No one size fits all

The fact that not all activities are conducive to offshore applies to cloud as well. Clients should be under no illusion that everything can go into the cloud - a balanced hybrid model will always be necessary in the real world. It is therefore important to be able to deal with integration and migration issues between the ‘old’ and the ‘new’ worlds. Whether or not a company decides to go with the cloud, offshore outsourcing or a hybrid of the two will depend completely on specific needs and the tasks at hand.

Finally, it is worth noting that the offshore IT industry is now a $100 billion industry and it is still growing. We predict that cloud services will go the same way but probably in half the time. For CIOs, the current economic climate will only hasten any decision towards cloud. As they did with offshoring, organisations will eventually lower their barriers and work around the areas of resistance to reap the benefits of a new delivery model.