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IDC finds service providers are having a demanding time in managed cloud services

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Overall expected cost savings from managed cloud services in 2021 is 40%, up from 37% in 2019

As enterprises continue their transition to the cloud, the opportunities and roles for managed service providers have expanded and become more complex.

At the same time, the managed cloud services market has become more competitive as organisations look to 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 service providers and their ecosystem partners need to invest in to optimise market opportunities and drive competitive advantage in managed cloud services.

What are managed cloud services?

Just to be clear, IDC defines managed cloud services as involving third-party service providers taking ownership of and responsibility for managing all or part of a client's IT environment (such as applications and 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 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 like Amazon, Microsoft Azure, Google, IBM and Alibaba.

IDC's Managed CloudView survey polled 1,500 organisations, including both IT and line of business respondents, across six countries and a range of industries.

Here are the main findings:

Cloud strategy and business resilience – in the wake of the pandemic, organizations want to use public cloud capabilities (IaaS, PaaS, SaaS), innovative technologies and processes (IoT, edge computing, blockchain), and multi-cloud management platforms to support future cloud strategies and ensure business resiliency.

Critical metrics – very few organizations have shifted 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.

Enterprises' 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 to 24 months.

Sourcing strategy – most firms prefer to work directly with a managed service provider 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 – about 40% of firms are already using no code or low code capabilities as part of their managed cloud services with another 30 to 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 that use managed cloud services consider centres of excellence as the most critical to ensure operational excellence, although centralised command centres and business units for public cloud providers are equally important in some sectors. Most organisations are also looking to public cloud providers to help reduce carbon emissions from their data centres.

Private, public and hybrid clouds – most organisations prefer to rearchitect existing IT assets into private clouds rather than buy prebuilt private clouds, but they overwhelmingly prefer to use public cloud services rather than private clouds to meet an array of needs – such as productivity, return on investment, resource usage – 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.