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

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.

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.