ISG Provider Lens™ Cloud Transformation/Operation Services & XaaS - UK 2019 - IaaS – Public Cloud Hyperscaler
In 2018, enterprise organizations are significantly advancing their multi-cloud strategies with public cloud providers. Large companies are now willing to trade in their old capital expenditure models of managing data centres and servers in exchange for more speed to go to market, cost flexibility and a great amount of elasticity, the key ingredient of public cloud offerings.
At a recent cloud conference, a U.K.-based multinational financial services firm discussed its multi-cloud strategy, and its efforts serve as a good illustration of how the market is developing. The organisation uses each major cloud provider for different purposes. The company stressed the importance of having multiple suppliers to meet regulatory requirements and of expanding its IT organization to become increasingly multiskilled. One cloud provider is used for the client’s data warehousing and its communications platform, another for applications and test and development, and another for required enterprise cloud software for specific geographic locations. ISG observes this new, complex, multi-cloud, multi-skilled approach is now the standard in business and a key trend driving enterprise organisations.
Companies face business challenges, such as the need to improve flexibility and to reduce costs. They have different workload requirements for performance and data protection, making hybrid or even multi-cloud models particularly suitable. However, medium-sized companies usually lack the time and know-how to design or operate such a solution themselves. Managed services providers (MSPs) can take over this task and guide their clients through the jungle of cloud services. Infrastructures and platforms are, of course, still relevant, but can increasingly be operated automatically. Software defined data centres (SDDCs) and containers within cluster management tools, such as Kubernetes, pave the way for success. Platform management still plays a key role in this respect.
A challenge to cloud transformation is to shift the focus of employees involved in operating the infrastructure to the planning, design, building and migrating phases. Unfortunately, this path is hard and not suitable to everyone. The complexity increases and sometimes becomes too much to manage internally. Organizations are overwhelmed by challenges due to the need to control software defined system architectures while incorporating every technical innovation into current and furthermore new business models opportunities.
Key trends and observations in the cloud transformation report are presented below.
Providers are essential to help enterprises with cloud complexity: Enterprise organisations can’t keep up with the complexity and with the thousands of yearly offerings being released by the hyperscale and other public cloud providers. ISG sees that the flood of innovation places high importance on enterprise clients receiving provider guidance for public cloud consulting and implementation.
Service providers with extensive hyperscale cloud partnerships are becoming more important to enterprises: Enterprises planning large and complex cloud transformation projects are looking beyond providers’ technical capabilities. Key factors for enterprise partner selection and service retention include depth of hyperscale joint partnerships, certifications, industry specializations and the providers’ cloud business unit growth. Technology vendors are also placing high emphasis on ecosystems and partner-led deals by increasing their collaborative joint ventures and centres of excellence (CoEs).
Multi-cloud enterprise strategies are key driver: As much as hyperscale cloud providers would like enterprises to exclusively go “all in” with one provider, clients are increasingly shifting toward multi-cloud services by using numerous vendors. The specialization of hyperscale provider offerings gives enterprises choices for the right service to match the application or business need. As cloud providers expand their service lines to compete, enterprises should anticipate reduced costs and increased flexibility to attract their business.
Hyperscale investments into new platforms: Hyperscale cloud providers have started to offer modern software-defined network architectures, hybrid cloud offerings and container readiness in combination with Kubernetes and serverless code deployments.
Continued IaaS market contraction: The hyperscale IaaS public cloud market will continue to contract and be dominated by a few players. Providers are building cloud practices primarily around Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP). These organisations are making the largest infrastructure investments globally. However, Chinese hyperscale provider Alibaba announced in August 2018 it would not expand in the U.S. due to recent tariffs and regulation fears.
The majority of cloud business is still within the U.S., but Europe is gaining. The U.S. is currently the largest market for public cloud adoption by enterprise organizations migrating applications to various platforms as part of a multi-cloud strategy. Europe is gaining in as-a-Service market share growth, but current regulations may hinder large gains in the region.
Midsize provider specialization and large provider optimisation: Midsized managed service providers with deep technology expertise can win larger deals where specialization, and not scale, is most important to customers. The specialization trend continues to disrupt larger, more established providers. Enterprises will rely heavily on MSPs to manage their global application requirements and geographic compliance as services become more complex.
Enterprises are continuing their DevOps journeys: The public cloud partner ecosystem is essential to enterprises on their DevOps journeys. This calls for a highly automated and orchestrated systems, which is where MSPs and implementation service firms provide their greatest value.