Rise in cloud computing starts to cut revenue for IT outsourcing companies

Sean McLain, writing in the Wall Street Journal, describes how the shift to cloud computing is dramatically reducing the number of IT support staff needed to maintain and customize servers and software, and the result is a big drop in hiring of outsourced IT staff.  AstraZeneca, a major biopharmaceutical firm, is planning a 50% reduction in its outsourcing budget:

AstraZeneca PLC is sharply scaling back the business it gives to the Indian outsourcing companies that it has long relied on for tech help.

David Smoley, AstraZeneca’s technology chief, said he expects to cut in half the $750 million the drug maker used to spend annually on outsourcing over the next two years. He said the number of people working on information technology also would drop by 50%.

The changes at AstraZeneca are part of a major shift toward cloud computing, which is starting to bite into the revenue and profits as well as hiring in India’s critical outsourcing industry and poses an existential threat to the players that fail to adapt.

Outsourcing executives are bracing for a big disruption.

This entry was posted in Information Technology, Pharmaceutical Industry and tagged , . Bookmark the permalink.

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