Will the Cloud Kill Modern Outsourcing?

The times are coming to an end when a company could simply uproot its current IT operations and transplant them into a emerging country such as India and cut cost simply from the benefits of labor arbitrage. Why is this? A recent article in Businessweek by Arjun Sethi, outlined how this will happen.

How do I feel about this? I feel that economically and socially it makes perfect since. Google and Amazon are household names that the generation of tomorrow already trust. They are also technology behemoths that have the know how and financial strength to incorporate these technologies. As mentioned Google already processes transaction for Pfizer, which is by no means a small company.

In the end, economies of scale will declare the winner. Outsourcing benefits is shifting from a physical location to a efficient and reliable resource based service. This is where cloud computing comes in. It allows companyies to outsource their in house computing needs to large behemoths like Google and Amazon that will be able to handle large amounts of data at a lower cost per byte than in house operations or current Indian based companies.

From a managers perspective I see this as a good move. Besides the cost savings that economies of scale will offer, managers are going to be able to improve effeciences by having their data processed faster. Their are also inherent advantages when you deal with an industry leader, they know the industry. They are able to tell you how to use your data to gain the most knowledge, and in the end, the company with the best knowledge wins.

Note: This doesn't necessarily mean the end of tech jobs in India. This economies of scale will come through consolidation in the tech industry. In the long run the behemoths will buy up the Indian companies and transplant their model and efficiencies to these locations. True, some jobs will appear in the states; however, do not expect all of the Indian jobs that were once American to come back.