ISG: Enterprises Turn to MSPs to Operate Their IT Infrastructures


Enterprise IT organizations are under immense pressure to deliver secure applications and increase product time to market. As a result, many are turning to managed service providers to run their day-to-day infrastructure operations, according to a new report published by Information Services Group (ISG) (Nasdaq: III).

Many enterprises across the globe now tend to use cloud and data center managed services providers to cut IT costs and to focus on their core businesses, according to the 2020 ISG Provider Lens Next-Gen Private/Hybrid Cloud – Data Center Services & Solutions Archetype Report. Shrinking IT budgets and the high costs of system downtime are driving enterprises to these 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 ISG 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.

AI and Machine Learning Tools

The ISG 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.

Erik Aase
“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.

The ISG 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 ISG 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 ISG 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.

4 Different Types of Customers

The ISG Provider Lens Next-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 ISG 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. They are now focused on further optimizing their hybrid cloud management capabilities. This includes “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.

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