In cloud, the definition of the sourcing strategy, as well as its implementation, shows distinct characteristics as compared with those of traditional outsourcing. The comprehension of these differences and their appropriate handling are some of the determinant factors that make a cloud implementation project in the organization succeed. It should be kept in mind that sourcing activities, such as provider(s) selection, contract negotiation and its governance, are important components of such implementation. Here we will discuss 6 of these differential characteristics of the sourcing activities in both cases.

1. Alfredo Saad
IT Sourcing Consultant
16/06/2015 https://br.linkedin.com/in/alfredosaad

2. https://br.linkedin.com/in/alfredosaad
 Sourcing:Traditional Outsourcing x Cloud
 Sourcing: 6 Differences
 Contract Scope
 Contract Duration
 Providers Market
 Flexibility of ContractualTerms and Conditions
 IT Action Focus
 Charging and Quality Mechanisms

3. https://br.linkedin.com/in/alfredosaad
 In cloud, the definition of the sourcing strategy, as well as its
implementation, shows distinct characteristics as compared
with those of traditional outsourcing.
 The comprehension of these differences and their
appropriate handling are some of the determinant factors
that make a cloud implementation project in the organization
succeed.
 It should be kept in mind that sourcing activities, such as
provider(s) selection, contract negotiation and its
governance, are important components of such
implementation.

4. https://br.linkedin.com/in/alfredosaad
 Here we will discuss 6 of these differential characteristics of the
sourcing activities in both cases, concisely seen on the table below:

5. https://br.linkedin.com/in/alfredosaad
 Traditional Outsourcing >>> Static
 Few scope changes along contractual lifetime
 Compatible with “make & sell” business model
 Review cycle of contractual requirements: month / years (long and
frequently pre-planned)
 Complex contractual renegotiations result when eventual scope
changes are needed
 Cloud >>> Dynamic
 Led by client’s mutant business requirements, mainly applications such
as
▪ customer-facing apps through mobile devices
▪ employees’ mobility apps
 Compatible with “sense and respond” business model
 Review cycle of contractual requirements: hours / days / weeks (short
and frequently random)

6. https://br.linkedin.com/in/alfredosaad
 Traditional Outsourcing >>> Long
 Typically 5 to 10 years
 Duration defined by the depreciation of assets dedicated to customer
organization, to assure economic viability of the contract
 Cloud >>> Short
 Typically 1 to 2 years
 Experimental periods of time to launch pilot-projects
 No assets to depreciate

7. https://br.linkedin.com/in/alfredosaad
 Traditional Outsourcing >>> Few
 Small number of qualified providers
 Frequent adoption of only one provider (sole sourcing)
 Cloud >>> Many
 Market is still fragmented, immature, volatile, non standardized and not
much transparent
 New providers emerge everyday
▪ On specialized and innovative niches
▪ Possible risks to be evaluated
▪ Solutions that do not use open standards making it difficult to migrate between providers
(vendor lock-in)
▪ Mergers and acquisitions that may alter provider strategy
▪ Lack of technical and financial solidity of provider, provoking its sudden exit from the market
▪ Emphasis on ...
▪ ... definition of a solid sourcing strategy
▪ ... management of multiple providers, focusing on their integration
▪ ... compatibility among services and applications of all providers under contract

8. https://br.linkedin.com/in/alfredosaad
 Traditional Outsourcing >>> Low
 Possible alternatives are pre-defined in the contract
 Complex renegotiations arise when additional flexibilization is needed
 Cloud >>> High
 Contractual provision to permit agile modifications on ...
▪ ... Services
▪ ...Volumes
▪ ... Resources
▪ ... Scope ...
 ... including real-time provision through web portals

9. https://br.linkedin.com/in/alfredosaad
 Traditional Outsourcing >>> Cost Reduction
 Efficient allocation of IT resources
 Cloud >>> Outcome for Corporation
 CIO – Corporation C-Level integrated action aiming at
▪ Minimizing time-to-market
▪ Increasing market-share
▪ Reaching new markets
▪ Maximizing revenue and profitability / reduce costs
▪ Launching innovative products and services

10. https://br.linkedin.com/in/alfredosaad
 Traditional Outsourcing >>> Based on profile of technical
resources
 Charging based on volume of consumed resources
 Quality assurance mechanisms associated to pre-defined technical
deliverables not directly related to the business activities of the
customer
 Cloud >>> Based on risk & reward mechanisms
 Risk sharing, leading to innovative mechanisms
 Empiricism, transparency and partnership on client-provider relations
 Charging and quality assurance mechanisms associated to business
activities of the customer