Decline of Traditional Infrastructure Outsourcing

18 Jul 2011
by Peter Bendor-Samuel, Yugal Joshi


Executive Summary

Traditional infrastructure outsourcing always grabs industry headlines due to its large deal size, complex structuring, stern SLAs, asset transfer, and general media publicity. However, it has also seen its share of controversies in terms of buyer concerns, cancellations/renegotiations, and other issues.

Over the years there have been visible signs of significant problems with this model with fewer very-large deals, declining average deal size, and a general decline in overall traditional IO business. This has led to stagnation and reduction in IO business of these traditional providers.

There are multiple reasons that are driving the decline of traditional IO model including reduced or flat IT budgets, newer engagements models, and irrelevancy of asset outsourcing.

With the advent and significant rise of the remote infrastructure service models, flexible and agile methods of infrastructure delivery such as cloud; and reduced value of outsourcing assets the imminent fall of traditional IO appears to have accelerated.

This report evaluates the challenges traditional IO model is facing and the reasons that are causing its decline. The report covers:

  • Current status of traditional infrastructure outsourcing (e.g., deal size, revenue growth of providers, deal range etc)
  • Reasons for the decline in terms of asset outsourcing, return from a traditional IO deal, and evolution of RIMO model
  • What lies ahead for traditional model
  • What providers can do to transform their offerings, survive, and grow

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