‘Radical’ cloud services transforming Philippines IT outsourcing market

The IT outsourcing market in the Philippines is in the midst of a fundamental shift caused by cloud services that are key to the growth of outsourcing, hosting, and managed services.

According to the International Data Corporation (IDC), total outsourcing services revenues in the Philippines surpassed US$300 million in 2017, increasing just 8.2 percent from the year before.

The local IT outsourcing market underwent a 3.5 percent decline from 2016 which IDC has put down to the 'radical change and cannibalisation' of cloud-based models of outsourcing involving infrastructure as a service (IaaS) and software as a service (SaaS), an evolving cost structure, and significant shifts in the competitor environment.

It is a tumultuous time for the market, as IDC believes the IT outsourcing market is adapting to the implementation of cloud services with players applying different strategies that range from cloud-centric to hybrid IT to push to the top of this market.

According to IDC, cloud is imposing a change in the market profile largely because of its colossal scalability, low cost, and increased agility. Cloud managed services are getting more pronounced than traditional managed services because of such factors like reduced CAPEX and accelerated time to market.

"Currently, the traditional outsourcing service providers have been pressured because of the increased shift to cloud providers. More traditional services providers are expected to include new delivery structures to accommodate end users that require services such as cloud, automation, and security solutions," says IDC Philippines services senior market analyst Alon Anthony Rejano.

"Although this shift is seen as a positive sign for the overall IT outsourcing market, we believe that it will also impact traditional outsourcers negatively. From a market perspective, cloud continues to grow in the country but the overall market value remains muted due to the lack of scale for ICT deployment and availability of advanced skills in application migration in the Philippines.

Rejano says managed services like managed network, servers, security, and connected services, are all gaining traction in the area and local enterprises will soon come to the realisation that the lack of maturity in service management will have negative consequences that include a more complex and expensive IT operational environment.

Therefore, his advice for local businesses is to leverage on cloud technologies to achieve their business objectives.