IDC survey shows that Managed Service Providers face numerous challenges in the evolving and highly competitive Managed Cloud Services market
Oct 7, 2021
NEEDHAM, Mass., October 7, 2021 – As enterprises continue their transition to the cloud, the opportunities and roles for managed service providers (SPs) have expanded and grown more complex. At the same time, the managed cloud services market has become more competitive as organizations increasingly look to their public cloud service providers for solutions and leadership. A recent International Data Corporation (IDC) survey examines the set of service and business requirements that managed SPs and their ecosystem partners need to invest in to optimize their market opportunities and drive competitive advantage in the market for managed cloud services.
Key findings from IDC's Managed CloudView 2021 survey include the following:
Cloud Strategy and Business Resiliency. In the wake of the pandemic, organizations are looking to utilize public cloud capabilities (IaaS, PaaS, SaaS), innovative technologies and processes (IoT, edge computing, blockchain), and multicloud management platforms to support future cloud strategies and ensure business resiliency.
Critical Metrics. While very few organizations have shifted all (100%) of their IT (applications and infrastructure) to the cloud, it appears that firms will accelerate this shift over the coming years with the rate of transition varying by country and industry. The overall expected cost savings from managed cloud services in 2021 is 40%, up from 37% in 2019.
Enterprise Maturity. Buyers are using managed cloud services to create more agile IT, drive new revenues, and improve customer experience, but there are still concerns over ensuring service level agreements (SLAs), performance of IT for critical applications, and security. However, organizations indicate that they plan to increase spending on these services significantly over the next 12-24 months.
Sourcing Strategy. The majority of firms prefer to work directly with a managed SP to manage their public cloud provider and any assets that are hosted on the public cloud provider's platform to ensure better communications and that SLAs are met. At the same time, most organizations prefer using the management tools of each public cloud provider.
Advanced Automated Technologies. A significant share (about 40%) of firms are already using no code/low code capabilities as part of their managed cloud services with another 30-35% planning to do so within the next two years. In utilizing cognitive/AI as part of managed cloud services, enterprises are focused on more efficient IT operations and aligning consumption of IT with individual (role-based) needs.
Operational Expectations. Enterprises utilizing managed cloud services consider CoEs (centers of excellence) as the most critical to ensure operational excellence, although centralized command centers and business units for public cloud providers are equally important in some sectors. Most organizations are also looking to public cloud providers to help reduce carbon emissions from their datacenters.
Private, Public, and Hybrid Clouds. While most organizations prefer to rearchitect their existing IT assets into private clouds over buying prebuilt private clouds, they also overwhelmingly prefer to utilize public cloud services over private clouds to meet an array of needs (e.g., productivity, ROI, resource utilization) as part of managed cloud services. The role of public cloud as part of a hybrid cloud strategy is to provide access to public IaaS cloud capabilities not available in private clouds and to meet the need for surges in demand.
"Ensuring success in the managed cloud services market will require that managed SPs provide a means of adapting their talent, technologies, processes, and organizational structures to meet client needs; integrate professional services into managed cloud services; emphasize customer centricity; and work with cloud service provider partners to optimize matrix position and market opportunities," said David Tapper, program vice president, Outsourcing and Managed Cloud Services at IDC. "In addition, they will need to invest in sustainable offerings for the socially conscious customer; create a business operations center; incorporate an intelligent, unified multicloud management platform; implement a robust governance model; and build centers of excellence and labs for cloud platforms."
Taxonomy Note: "Managed cloud services" involves 3rd party service providers taking ownership of and responsibility for managing all or part of a client's IT environment (e.g., applications, infrastructure) operations (24x7) based on a service-level agreement delivered via the use of a private (dedicated to one firm) and/or public (shared between unrelated firms) infrastructure as a service (IaaS) cloud. This can also include using managed services to support platform as a service (PaaS) and software as a service (SaaS). Managed cloud services do not include internal IT departments managing their own clouds either privately (for their own firm) or as part of procuring public cloud services via self service functions directly with public (IaaS) cloud providers (e.g., Amazon, Microsoft AZURE, Google, IBM, Alibaba).
IDC's Managed CloudView survey polled 1,500 organizations, including both IT and line of business respondents, across six countries and a broad range of industries, to collect information on adoption of managed cloud services by enterprises. Key topics covered include cloud strategy and business resiliency, critical metrics, enterprise maturity, sourcing strategy, advanced automation, operational expectations, cloud operating models (private, public, and hybrid), mainframe, recovery services and availability, and perceptions and preferences of managed SPs (service providers). The IDC report, Managed CloudView 2021: Executive Summary (IDC #US48220821), provides an analysis of these results and includes strategic messages, key highlights, implications for service providers, and IDC's essential guidance for managed SPs.
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