Cloud Computing May Bring Down IT Employment; Companies to Watch in Sector

by: Outsourcing Insider

By Jamee C.

The growth of the IT outsourcing industry is part of the impact of IT solutions commanding a big share in company processes. But in the wake of advancing technologies and processes becoming more streamlined with focuses on energy and cost efficiency, the face of IT solutions are changing. Traditionally, IT outsourcing companies provided services such as programming and development. But with the increasing popularity of cloud computing, the IT outsourcing industry is feeling the pinch as more companies turn to the cloud rather than develop or purchase software, computation, data access or storage.

The IT outsourcing industry is dominated by companies such as Accenture (NYSE:ACN) and IBM (NYSE:IBM), with many smaller IT solutions providers as well. However, recent news in the IT industry suggests that cloud computing, which is gaining more attention these days, is leading to a decline in the demand for IT personnel, news which may not bode well for smaller players. Hackett Group (NASDAQ:HCKT), a U.S.-based research and consulting firm, conducted a study which showed that the outsourcing industry has seen growth in companies seeking cloud computing services. Cloud computing services that are gaining popularity can be attributed to the benefits, which mostly address the issue of cost, a common issue for companies that are looking to outsource. In using cloud computing, there are minimal costs in availing of the service, likewise, administrative costs are also lessened since the company no longer needs to hire developers, administrators and other IT personnel to monitor and maintain the software.

Many companies, including big players, are taking advantage of the benefits of cloud computing as they see an increase in clients seeking cloud computing services. A number of deals related to cloud computing have gone through this past February. Accenture and NetApp (NASDAQ:NTAP) signed an extension of their partnership that covers two areas of information technology. One of the two agreements covers the development and implementation of a set of processes including data center and application optimization and cloud computing. The other agreement is aimed at the expansion of NetApp’s services with the assistance of Accenture’s consulting and integration services. Accenture’s Global Alliance Channel Lead Rockwell Bonecutter mentioned that there can be a shift in trends especially now that it seems plausible for the IT industry to emerge as a major business driver. In addition to the IT industry being a business driver, Accenture also claims that the industry is undergoing some changes especially since that data management systems and cloud computing has a lot to contribute to the evolution of the enterprise IT industry.

Another industry leader, Hewlett-Packard (NYSE:HPQ), recently sealed a cloud deal with Centrica (OTCPK:CPYYY), a U.K.-based company which operates under British Gas. This contract, which is valued at $400 million, will span seven years and will cover delivery of a private cloud and utility-based computing environment. The services will be hosted at two of HP’s U.K. offices, but according to the press release, the project will likewise receive support from HP’s offices in India, Malaysia and Philippines.

Cloud computing may potentially be causing a decline in the IT industry’s employment rate, but it is also contributing to the growth of the IT industry in terms of the expansion and evolution of IT services being offered by outsourcing companies.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.