Savvis Inc., a subsidiary of CenturyLink, Inc. (CTL), recently released a study on IT Outsourcing and Cloud Computing. The study was conducted through a survey that highlighted the growing trend of corporate houses using outsourced IT infrastructure rather than developing in-house IT infrastructural facilities.
According to the study, the enterprises believe that having an in-house IT infrastructural facility incurs higher cost without providing optimum utilization of resources.
In collaboration with Vanson Bourne international research firm, Savvis conducted this survey among 550 enterprises across the U.S., the United Kingdom, Germany, Japan, Hong Kong and Singapore. The survey offers an insight into nearly all aspects of a corporate enterprise like finance, media, retail, software and automotive, IT outsourcing, cloud computing and the costs of IT infrastructure.
The research highlighted that the organization would outsource over 40% of its IT requirement within next five years compared to the existing 25%. The report projects that currently 85% of the organization are using public and private cloud for storage of information as against only 39% in 2010.
However, the survey also shows that 56% of the global participants have in-house IT facilities and the practice is more prevalent in Japan. Almost 78% of the Japanese participants admitted that they rely more on owned IT infrastructure.
Conversely, according to the survey, an increasing number of businesses point out that owning an IT facility leads to wasteful spending. In 2010, about 38% of the business houses held this view which has now grown to approximately 60%; representing a potential opportunity for outsourced IT infrastructural services. With the acquisition of Savvis, we believe CenturyLink will be able to tap these opportunities that would translate into future growth of the company.
The acquisition strengthens CenturyLink’s footprint in the hosting managed cloud services business including 51 data centers in North America, Europe and Asia. The company continues to expand data centers this year with a view to generating higher revenue growth in collocation as well as managed hosting and cloud services.
These acquisitions bequeathed several additional benefits along with greater scale and operational efficiencies, providing the company with a competitive edge over rivals like Leap Wireless International Inc. (LEAP).
We maintain our long-term Neutral recommendation on CenturyLink Inc. The stock also has a Zacks #3 Rank, implying a short-term Hold rating.
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