While cloudy vendor marketing is creating customer confusion, cloud computing represents a powerful force that will change the IT services landscape. Public and private clouds in particular represent a new paradigm for provisioning enterprise IT infrastructure services. The first wave of cloud services will provide benefits to self-contained enterprises, while the second wave of clouds will primarily address outsourced IT infrastructures. Some service provider strategists perceive cloud services as a threat to their business. But in this report, Forrester introduces an alternative approach to enable outsourcing providers to benefit from close collaboration with SaaS application vendors for cloud-based services.