ISG Provider Lens™ Infrastructure & Data Center / Private Cloud - Pan America 2018 - Managed Services and Transformation
Service Providers in the Pan America
The Pan America have 38 countries and 15 colonies distributed across an extensive territory. Regional GDP surpassed $27 trillion in 2016, representing 36 percent of the world GDP, putting it on par with Asia. The wealth disparity is evident. The U.S. accounts for 62 percent of Pan America GDP, followed by Brazil, Canada and Mexico that collectively add 18 percent. The remaining 20 percent comes from the other 34 countries. The service providers covered by this study have operations in 17 countries, which are identified in Table 1.
One of the challenges for service providers is the client dispersion and distances to cover. Developed economies have high population densities that support scale for local businesses to respond to local demands. For example, Japan has 349 people per square kilometer, Germany 236 and the U.K. 275. In the Pan America, Mexico has 67 people per square kilometer, Brazil 25 and Argentina 16. These figures illustrate how difficult it is for a local IT provider to scale, as demand is not concentrated. Low density allows international service providers to use their global scale to be competitive in local markets.
Another way to see the low-concentration challenge is to look at population figures. Caribbean countries have an average of 3 million people per country. In Central America, the average is 7 million people per country. South America, excluding Brazil, averages 20 million people per country. In contrast, the U.S. has 326 million people, Brazil 210 million and Mexico 130 million. These three countries account for two-thirds of the 1 billion people that live in the Pan America continents, concentrating the demand for IT business.
Demographic and economic data are from the United Nations Conference on Trade and Development (UNCTADSTAT) database.
This study covers North, Central and South America. In some references ISG used the term Pan America; however, the Caribbean countries are not included in this study. We evaluated 42 service provider companies, and some did not qualify for inclusion. The service providers covered in the report can operate in a minimum of four countries, can support at least three of the four official languages (English, French, Portuguese and Spanish) and can deliver services at scale.
Data Center Outsourcing is Expanding
Public cloud market entry, the development of colocation facilities and the affordability of software-defined data centers have leveled the competition and pushed price competitiveness that is attracting more clients. Companies that have internal data center facilities and are looking for ways to gain security and infrastructure availability and reduce costs go to public cloud portals first. However, many of these clients do not understand how to use and leverage the cloud and then search for service providers able to offer transparency and hassle-free infrastructure services at low cost.
The quarterly ISG Index published in April 2018 included some evidence to corroborate the expansion statement. It showed the number of contracts awarded in the Pan America market was up by 32 percent year-over-year, with strong results in both traditional sourcing and as-a-service annual contract value.
Extremely Automated Managed Services
Our research found that the data center managed services market is increasingly moving toward a model based on industrialized service delivery and consumption-based pricing. Industrialized services drive cost and efficiency improvements through a set of repeatable and scalable processes that are applicable across several client organizations.
For clients of any country in the Pan America, the service automation and industrialization mean the access to state-of-the-art technologies and scale that sometimes are impossible for local service providers to achieve.
Software-Defined Data Centers Have Reached Maturity
All of the provider organizations participating in this study have implemented or are implementing a software-defined data center (SDDC). The most popular choices are OpenStack and VMware; however, this report is not endorsing products or providers. Clients planning a new data center or improvements to existing service contracts should not be afraid to consider SDDC if it is not already in place.
Hybrid is the Norm Across Buyer Organizations
Enterprise buyers are taking an application-centric view to infrastructure operations and are distributing their application portfolios across traditional environments, on-premise private clouds, hosted private clouds, colocation facilities and public cloud infrastructure. To support this diversity, service providers have changed their services and solutions portfolios to provide comprehensive visibility into hybrid infrastructure operations.
Managed Hosting Holds its Ground by Providing Cloud-Like Experiences
The traditional managed hosting market is evolving to provide server environments in a self-service fashion with shorter contract terms. Several managed hosting providers are also increasing the breadth of their service portfolios above the OS layer to provide managed services support for enterprise applications such as ERP packages.