Business process outsourcing (BPO) is a common term. Companies have been using this model for years to acquire specific skills and expertise for a limited period. Almost every organization is familiar with outsourcing and its core benefits.
Over the years, outsourcing has evolved with changing consumer needs. As technology became a necessity for corporate growth, businesses started looking for new ways to leverage tech solutions for high productivity and efficiency. With time, new models were introduced to help companies streamline operations and strengthen their competitive advantage.
One such solution is cloud computing. It can be considered an improved form of technology outsourcing. Thousands of businesses today partner with cloud providers to access apps, data, and desired services via the internet.
But the question is: Are these two similar terms or differ?
Let’s address this question in this detailed cloud computing vs. traditional outsourcing comparison.
What is Traditional Outsourcing?
Traditional outsourcing refers to acquiring third-party products or services to meet short-term or long-term organizational needs. The model enables businesses to subcontract less critical tasks and focus on their core operations.
To understand this model, consider the example of a real estate agency. It deals in all kinds of commercial and residential properties for its clients. The property experts of this agency are highly talented with extensive experience in their relevant domains.
However, the agency has a website that requires regular maintenance. For this purpose, they need a skilled web developer proficient in handling website-related tasks.
So, instead of hiring an in-house web developer, the agency finds an outsourcing partner that has a pool of talented resources. They hire a certified web developer on an hourly basis. The developer works as an extension of their team and manages the agency’s website remotely.
This model is called outsourcing. The real estate agency outsourced web development and maintenance to a third party. As a result, the agency now focuses on business growth to achieve desired objectives.
What is Cloud Computing?
Cloud computing involves using third-party servers to store and access confidential data. The cloud provider is responsible for data protection, system upgrades, and installations. Besides, the security of server rooms is also the responsibility of the cloud company.
Let’s take the example of the same real estate agency again. The agency has now decided to go online. They are looking to launch a digital website where buyers and sellers can interact and finalize their deals.
In digital transactions, the safety of users’ data is paramount. A company can’t handle large amounts of sensitive personal information on local servers.
Hence, the agency partners with a cloud computing company for the storage and safety of their customers’ data. Cloud computing ensures safe digital operations while complying with international data protection laws like GDPR.
As a result, the agency now concentrates on finding new customers without worrying about data privacy.
Cloud Computing vs. Traditional Outsourcing: 10 Key Differences
The table below gives a side-by-side comparison of 10 major differences between cloud computing and traditional outsourcing. Have a look:
Criteria | Cloud Computing | Outsourcing |
Ownership | Cloud computing services are available on a pay-as-you-go basis. Clients need net spending on expensive infrastructure like servers and data centers. | Infrastructure ownership is the sole liability of the client. The outsourcing company does not build servers or data centers. |
Scalability | Businesses can instantly scale their cloud computing resources per their business needs. | Traditional outsourcing offers limited scalability depending on the capacity of IT infrastructure owned by the clients themselves. |
Upfront Costs | These services are available on a subscription-based or pay-per-use model. Hence, the upfront costs are minimal. | Setting up and maintaining in-house IT infrastructure involves high costs and specialized resources. |
Control | Managing cloud infrastructure, security, and updates is the responsibility of the cloud service provider. | Clients get more control over the infrastructure. They can limit access to sensitive and confidential data. |
Security | Stringent protocols implemented by cloud providers ensure high security. | The level of security depends on the strategies followed by the outsourcing company. Weak protocols may result in security breaches. |
Deployment | Ensures quick deployment of resources and cloud services. | The procurement and deployment of on-premises infrastructure may take more time. |
Flexibility | Working with a reliable cloud computing company offers great flexibility to clients. | Outsourcing involves frequent infrastructure changes. Hence, the flexibility levels are limited. |
Conclusion
Cloud computing and traditional outsourcing are important business models. Both help organizations thrive in today’s competitive business landscape.
In terms of flexibility and cost-efficiency, however, cloud computing is always preferable. It allows small businesses, particularly startups, to access secure servers for data storage. The pricing structure is based on pay-as-you-go; which means you can get the cloud storage space depending on your business needs.
Companies can even scale up or scale down cloud computing services in a short time.
On the other hand, outsourcing is more expensive than cloud computing. It requires establishing expensive IT infrastructure and servers on the client’s premises. The model, therefore, involves high costs that are not bearable by businesses with limited resources.
Nevertheless, outsourcing offers more control over data. There is no risk of sharing sensitive and confidential information outside an organization.