End-user spending on public cloud services is expected to grow 18% in 2013 to total $131 billion, according to a Gartner forecast.
“The initial resistance to public cloud has begun to subside and customers are beginning to realize its efficiencies as the solutions mature,” said Ian Marriott, research VP at Gartner.
“Cloud-based services will not replace offshore services, but will complement them,” said Marriott.
He said that cloud services will not “make or break” all offshore providers, considering that there will always be a need for “pure-play” providers that operate a labor-intensive delivery approach.
He added, however, that strategic investments in cloud-based services are mandatory for broad-based offshore providers that operate in multiple geographies, industries and service lines.
In parallel, offshore service providers feel the increased pressure to adapt to changing market demands, and those that are unable to evolve from traditional delivery models could be displaced.
Gartner believes that over time, all leading offshore providers will use their investment in industrialized services and automation to break their labor-intensive linear growth path.
The proposed changes in the issuing of H-1B visas (US work permits) could also have a significant effect on offshore service providers that depend heavily on these work visas.
This could increase the need to both invest in local hires within the providers' major target markets and increase investments in cloud-based service offerings.