Enterprises Turn to Managed Services Providers to Operate Their IT Infrastructures

ISG Provider Lens™ report finds enterprises across the globe looking to cut costs and focus on their core business by using managed services providers

Company Release - 7/30/2020 11:25 AM ET

STAMFORD, Conn., July 30, 2020 (GLOBE NEWSWIRE) -- Enterprise IT organizations are under immense pressure to deliver secure applications and increase product time to market, and as a result many are turning to managed service providers to run their day-to-day infrastructure operations, according to a new report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2020 ISG Provider LensNext-Gen Private/Hybrid Cloud – Data Center Services & Solutions Archetype Report finds many enterprises across the globe using cloud and data center managed services providers to cut IT costs and to focus on their core businesses.

Shrinking IT budgets and the high costs of system downtime are also driving many enterprises to managed services providers, the report says.

“Managed services providers play a key role because they have extensive experience in infrastructure management and are well equipped to support enterprises in their digital journeys,” said Jan Erik Aase, director and global leader, ISG Provider Lens Research. “Deployments are efficient and quick due to the providers’ vast accumulated experience, capabilities in leveraging new technologies and their large workforces.”

With cloud infrastructure becoming commoditized, enterprises have been increasingly adopting cloud technology, driving growth in the sector, the report adds. Many CTOs and CIOs are seeking rapid cloud adoption and are focused on moving critical workloads to a hybrid cloud environment as quickly as possible.

Enterprises also want to use the cloud to equip their mobile workforce with a highly secure work-from-home environment. With COVID-19 lockdowns in recent months, there are fewer on-site IT workers, and enterprises are leveraging cloud capabilities to check, maintain and monitor their server and storage installations in data centers.

The report finds cloud and data center providers embracing artificial intelligence and machine learning tools to speed up service delivery, increase efficiency and deliver superior user experiences. Providers have developed tools that take data from various sources to predict downtime and implement self-healing measures to prevent such outages. AI for IT operations (AIOps) can monitor various elements of the entire hybrid environment and provide predictive analytics for incident management to aggregate events and identify the probable root causes.

The report also finds the hyperconverged infrastructure (HCI) industry has gone through a major transition during the past year. Enterprises have realized that moving to a high-density environment allows them to improve cabinet space utilization by more than 100 percent. This can lead to a four-fold increase in processing performance and a significant cost savings.

In addition, enterprises are using cloud and data center providers to deal with the explosive growth in data, the report says. These large volumes of data have to be stored and managed in a secure environment, which poses a major challenge for enterprises. Providers have been addressing these challenges by developing expertise in managing large amounts of data efficiently.

Finally, the report notes the data center industry is facing a major shortage of talent. Employees with more than 20 years of experience are either moving toward retirement or management positions, while a small percentage of the workforce has less than five years of experience. It has been difficult to find qualified candidates.

The ISG Provider LensNext-Gen Private/Hybrid Cloud ­Data Center Services & Solutions Archetype Report examines four different types of customers, or archetypes, that are looking for private cloud, hybrid cloud and data center services. The report evaluates the capabilities of 36 cloud and data center providers to deliver services to the four archetypes:

Traditional Archetype: These customers have limited outsourcing experience and engage with service providers through selective outsourcing. They only outsource a fraction of their data center operations. This is done through one or a mix of the following options: staff augmentation, project-based work or partial outsourcing of ongoing infrastructure management. Cost optimization is the primary driver for such engagements. Project work typically includes standardization, consolidation and expanding virtualization. Infrastructure automation and cloud enablement efforts are still evolving. While these customers are receptive to the benefits offered by public clouds, mid- to large-scale hybrid cloud deployment initiatives are in a rudimentary stage. Outsourcing contract sizes are not large.

Managed Services Archetype (Mid-Sized Deal Focus): These customers have already signed small outsourcing contracts with a focus on cost optimization and are now willing to transfer greater operational responsibility to an outsourcing service provider. However, budgets are constrained, and deals sizes are not very large, with an annual contract value of $5 million to $15 million. While the main focus is still on tactical service-level agreements, these customers are willing to embrace some transformation elements, such as making modest investments in automation and cloud. The outsourcing engagement scale is considerable compared to the traditional archetype. The managed services client is willing to engage in a multi-sourcing model and work with mid-size providers owing to their flexibility and responsiveness. Besides optimizing ongoing infrastructure management, this archetype client also aims to achieve a moderate level of hybrid cloud adoption as a short- to mid-term goal.

Transformational Archetype (Large-Scale Deal Focus): These customers are third-generation outsourcers with a preference for an optimized mix of onshore, nearshore and offshore delivery models. They are not severely constrained by budgets and undertake large transformation initiatives. They view service providers as strategic partners that would be willing to participate in gain-share deals. These customers want to provide IT services to their business units through an as-a-service, utility-based model. Accordingly, their short to mid-term goals include increasing the adoption of private clouds that have core functionalities of self-service and high levels of automation, orchestration and chargeback. Long-term goals revolve around issues such as ensuring high availability of infrastructure resources to support business. These customers seek to simplify hybrid IT management through unified monitoring and management tools.

Pioneering Archetype: These customers seek to extend their transformation initiatives with investments in software-defined networking and storage to attain an end-to-end software defined data center. They seek service providers with knowledge and experience in software-defined enabling tools, including hyper-converged storage systems. They view service providers as strategic partners with a commitment to participate in gain-share deals that include business outcomes. These customers have already achieved a significant level of cloud adoption and are now focused on further optimizing their hybrid cloud management capabilities, including next-generation practices such as artificial intelligence- and machine learning-led automation, hyperconverged infrastructure implementations, containerization and workload portability. Pioneering archetype customers strive to improve the productivity of developers by providing an abstraction layer over complex infrastructure and its operations. They prefer service providers that can manage infrastructure with a DevOps-oriented approach.

Among the providers ISG evaluated, Cognizant, Ensono, HCL, IBM, TCS and Wipro were named leaders across two archetypes. Accenture, Atos, Capgemini, CenturyLink, DXC Technology, Fujitsu, Hexaware, HTC (Ciber/CareTech), Infosys, Microland, Mindtree, Mphasis, NIIT Technologies, NTT, Rackspace Technology, Sungard AS, Tech Mahindra, Unisys, UST Global and Zensar Technologies were all named leaders in one archetype.

A customized version of the report is available from Mindtree.

The ISG Provider Lens Next-Gen Private/Hybrid Cloud ­ Data Center Services & Solutions Archetype Report is available to subscribers or for immediate, one-time purchase on this webpage.

About ISG Provider Lens™ Research

The ISG Provider Lens™ Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of detailed data and market analysis to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe and Latin America, as well as in the U.S., Germany, the U.K., France, the Nordics, Brazil and Australia/New Zealand, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit this webpage.

The series is a complement to the ISG Provider Lens Archetype reports, which offer a first-of-its-kind evaluation of providers from the perspective of specific buyer types.

Starting this year, each ISG Provider Lens™ study will include a Global Summary to help enterprise subscribers better understand provider capabilities across all geographic markets covered by that study. All ISG Provider Lens™ reports also will now include an Enterprise Context feature to help executives quickly identify key insights related to their roles and responsibilities.

About ISG 

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 700 clients, including more than 75 of the world's top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.

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Will ThoretzInformation Services Group, Inc.
+1 203 517 3119
Will.Thoretz@isg-one.comJim BaptisteMatter Communications for ISG
+1 978 518 4527
jbaptiste@matternow.com

Source: Information Services Group, Inc.