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Cloud: Old Risks Vanish, New Ones Arise

publicado por Alfredo Saad

Figura - Cloud: Old Risks Vanish, New Ones AriseThe contracting of cloud services shows some similarities but also dissimilarities with the contracting of “traditional” IT services. Among the similarities, we can highlight the relevance of managing the risks on each step of the process, namely:

  1. Identification and prioritization of applicable business drivers
  2. Definition of organization’s sourcing strategy
  3. Provider(s) selection
  4. Contractual terms and conditions negotiation
  5. Services transition
  6. Contract governance

As we know, manage the risks in each of these steps avoid that their materialization impair the potential benefits associated to the business drivers which motivated the initial decision.

Among the typical business drivers, non-mutually exclusive, which may motivate the decision, we can find:

  • Cost pressure
  • Agile achievement or recovery of competitive advantage
  • Focus in core business activities
  • New markets penetration
  • Time to market speed up

Concerning the organization’s sourcing strategy we will consider three alternatives, namely:

  • IT Outsourcing(ITO)
  • Business Process Outsourcing(BPO)
  • Cloud Computing

It must be emphasized that the organization’s sourcing strategy will not opt necessarily for only one of such alternatives. Among others, the factors below will be taken into account to define the most adequate sourcing strategy, which may actually embrace any combination of the three alternatives above:

  • Organization profile (revenue, profit, geographical distribution, etc)
  • Complexity of IT environment
  • Definition and prioritization of business drivers
  • Intended timeframe to achieve results
  • Intensity level of competitiveness in the vertical segment where the organization operates
  • Organization’s culture and its propensity to face risks

The sourcing strategy will then, in light of the above factors, define which sourcing alternatives suit better when each current (or planned) part of the IT scope is considered.

It should be remembered that if risks are managed inadequately in any of the 6 steps, the probability of failure to achieve the intended benefits will grow exponentially. The reason for that is simple and straight: if they are not eliminated or at least have their impacts or probability of occurrence mitigated, secondary and interdependent risks will probably arise, with a cumulative effect, in a later step. Such late treatment will undoubtedly be much more complex and costly to offset.

In a follow-on article we will discuss the dissimilarities which exist between the risks inherent to each step and to each alternative, including Cloud Computing. This last one, as the one which more recently reached the outsourcing market, still lacks some maturity (both for providers and – mainly – for buyers) and stability, as its solutions portfolio, tools, prices, providers list, etc is rapidly evolving. Such discussion will show, as briefly anticipated on the heading of this post, that the risks to be considered will embrace three categories:

  • Risks which currently exist for ITO and BPO alternatives and keep existing for the Cloud alternative, although with different and evolving characteristics
  • Risks which currently exist for ITO and BPO alternatives , but do not exist for the Cloud alternative
  • Risks which do not exist for ITO and BPO alternatives but have arisen for the Cloud alternative

Do the readers of this article agree with the concepts presented? Please contribute with your comments!


A  versão em português deste artigo, com o título ” Cloud Computing: Velhos riscos desaparecem, novos surgem “, foi também publicada aqui no site TI Especialistas. Para vê-la acesse o link.

[Crédito da Imagem: Cloud – ShutterStock]


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Alfredo Saad has been acting on IT area since 1970, taught more than 100 lectures in Brazil and abroad (USA, France, Portugal, Chile, Argentina & Uruguay). He has been acting on IT Strategic Outsourcing Services area since 1997. He negotiated and managed, as Varig's IT Technology Manager, the contract signed with IBM (1997-2004). In 2006 he published the book "IT Services Outsourcing" (Brasport Publishing House). He managed (2006-2009), as an IBM Project Executive, the South American section of Michelin's global outsourcing contract. Risk Manager of all IBM Strategic Outsourcing contracts in Brazil (2009-2014). From March 2014 on, he has been acting as an independent consultant, lecturer and writer on IT Outsourcing as the principal of his own company, Saad Consulting.

Alfredo Saad


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