COVID-19 Shapes Enterprise Sourcing Strategies, Fueling Growth in Private/Hybrid Cloud Adoption

ISG Provider Lens™ Archetype report says companies at different stages of sourcing maturity look to service providers for selective, transformational or cutting-edge projects

Private and hybrid cloud adoption has accelerated significantly over the past year, partly due to changes caused by the COVID-19 pandemic, according to a new report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2021 ISG Provider Lens™ Next-Gen Private/Hybrid Cloud – Data Center Services & Solutions Archetype Report finds many companies that had never used outsourcing before are embracing the strategy in 2021. Overall, ISG says the number of companies that plan to outsource their managed services has been rising since last year and is expected to keep growing.

At the outset of the pandemic, many enterprises halted IT outsourcing plans, but the global health crisis ultimately caused them to accelerate their sourcing strategies and technology investments. Organizations, in particular, needed to scale up development teams to implement systems for remote working and to enable better digital engagement with their customers.

“The pandemic helped companies recognize that outsourcing their IT infrastructure is a cost-effective way to align IT and business goals,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Outsourcing can provide skills that are not available in-house, as well as shared resources such as facilities managers, better cost visibility and many other benefits.”

One effect of the pandemic was a sharp spike in calls to enterprise help desks for assistance with connectivity, security and other issues, the report says. Service providers prevented interruptions to their services, while reducing the need for in-person support, by quickly giving agents virtual desktops in the cloud and remote access to cloud-based service desk platforms.

Most managed services are now delivered virtually and remotely, not only because it is faster and more cost-effective, but also because it can be a better way to provide services, according to the report. Managed services provided remotely include sales, due diligence and transition and migration of workloads.

The report finds the top three enterprise criteria for selecting a service provider are automation capabilities, a good track record with business continuity plans and a strong infrastructure management program. Automation is an important consideration, particularly for large enterprises with siloed infrastructure spread around the globe, ISG says.

The 2021 ISG Provider Lens™ Next-Gen Private/Hybrid Cloud – Data Center Services & Solutions Archetype Report examines four types of customers, or archetypes, that are looking for next-generation private and hybrid cloud services and solutions. The report evaluates the capabilities of 30 providers to deliver services to the four archetypes:

Traditional: These customers have limited experience with outsourcing and only engage in selective outsourcing of a fraction of their data center operations. Their infrastructure automation and cloud enablement efforts are still evolving. While they are receptive to the use of public clouds, midsize or large-scale hybrid cloud deployment initiatives are still at a rudimentary stage. Outsourcing contracts are small and typically involve staff augmentation, project-based work or partial outsourcing of ongoing infrastructure management, all with the primary goal of cost optimization.

Managed Services: These customers already have small outsourcing contracts focused on cost optimization and now are willing to transfer more operational responsibility to a service provider. While they are still focused on tactical service-level agreements (SLAs), they are willing to embrace transformational efforts, including investments in automation and cloud. These organizations aim to achieve moderate hybrid cloud adoption in the short or medium term. Their budgets are tight, and engagements are typically for an annual contract value of $5 million to $15 million. They are willing to engage in multi-sourcing.

Transformational: This archetype represents third-generation outsourcers that prefer a mix of onshore, nearshore and offshore services delivery. They undertake large transformation initiatives and view service providers as strategic partners that should be willing to participate in gainshare arrangements. These customers want to provide IT services to their business units as a service on a utility-based model. Their short-term and mid-term goals include increasing adoption of private clouds with self-service, high automation, orchestration and chargeback. Long-term goals involve ensuring high availability of infrastructure resources to support their business.

Pioneering: These customers have achieved a high level of cloud adoption and are focused on further optimizing their hybrid cloud management with practices such as automation, containerization and workload portability. They aim to extend their transformations with investments in software-defined networking (SDN) and storage, in some cases to build an end-to-end software-defined data center (SDDC). This archetype seeks out service providers with knowledge and experience in software-defined enabling tools, including hyperconverged storage systems. They view providers as strategic partners with a commitment to participate in gainshare engagements that include business outcomes.

Among the providers ISG evaluated, HCL and TCS were named Leaders across three archetypes. Accenture, Atos, Ensono, Infosys and Wipro were named Leaders across two archetypes each. Capgemini, Coforge, Cognizant, DXC Technology, Fujitsu, Hexaware, IBM, Lumen, Microland, Mindtree, Mphasis, Persistent Systems, Rackspace Technology, Tech Mahindra, Unisys, UST and Zensar Technologies were named Leaders for one archetype each.

Customized versions of the report are available from Persistent Systems and Unisys.

The 2021 ISG Provider Lens™ Next-Gen Private/Hybrid Cloud – Data Center Services & Solutions Archetype Report is available to subscribers or for 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, as well as in the U.S., Germany, Switzerland, 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.

A companion research series, the ISG Provider Lens Archetype reports, offer a first-of-its-kind evaluation of providers from the perspective of specific buyer types.

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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