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More U.S. Companies Embrace Private, Hybrid Clouds as Pandemic Response Increases Demand for Outsourcing

U.S. enterprises have stepped up their adoption of private and hybrid clouds in the past year, sometimes choosing them over public clouds, according to a new report published today by Information Services Group (ISG), a leading global technology research and advisory firm.

This trend comes as the use of IT outsourcing has grown, with many U.S. enterprises turning to managed services, managed hosting and colocation services as they seek new ways of doing business in response to the COVID-19 crisis, the 2021 ISG Provider Lens Next-Gen Private/Hybrid Cloud - Data Center Services & Solutions report for the U.S. finds. ISG expects enterprise use of outsourcing to continue growing.

The ISG Index shows first-quarter 2021 spending on infrastructure-as-a-service (IaaS) rose 18 percent to a new global record of $7.2 billion of annual contract value (ACV), a trend mirrored in the Americas, which saw IaaS rise 14 percent, to a new high of $3.5 billion of ACV.

After freezing their outsourcing programs in the first few months of the pandemic, companies started adapting their IT operations to deliver everything virtually, and many that had never used outsourcing before began exploring it this year, the report says.

"Organizations in the U.S. are starting to see that outsourcing IT infrastructure management can help them realign IT with business objectives," said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. "It can also give them access to IT skills not often found in typical IT departments. We expect companies to continue increasing their use of outsourcing."

U.S. enterprises are embracing cloud infrastructure and managed services partly because more mature technologies make it easier to take the leap, the report says. Tools for assessment, planning and automation of cloud migrations have become reliable enough for companies to achieve the outcomes they expected. It is also becoming easier to understand the potential benefits of the cloud and to choose which workloads to migrate and which to keep on existing infrastructure.

When choosing outsourcing vendors, many U.S. enterprises are focusing on flexibility, ISG says. They look for providers that can scale resources up and down depending on client needs and restructure teams quickly when necessary. Vendors should be able to accept and adapt to the client's business ethics and provide offshore developer teams that can easily integrate with the in-house team.

Close partnerships are becoming more important as companies realize the challenges of finding reliable partners and establishing productive relationships, the report says. The recent trend of enterprises outsourcing an infrastructure assignment to multiple vendors is fading in favor of choosing one or two partners for a comprehensive managed services solution to address all infrastructure requirements. This reduces risks and can lower costs, ISG says. In addition, enterprises are favoring providers that have strategic relationships with large technology vendors.

The 2021 ISG Provider Lens Next-Gen Private/Hybrid Cloud - Data Center Services & Solutions report for the U.S. evaluates the capabilities of 57 providers across four quadrants: Managed Services for Large Accounts, Managed Services for Midmarket, Managed Hosting and Colocation Services.

The report names Ensono, IBM and Rackspace Technology as Leaders in two quadrants each. It names Accenture, Capgemini, Cognizant, CoreSite, CyrusOne, Cyxtera, DataBank, Digital Realty, DXC Technology, Equinix, HCL, Hexaware, Infosys, Lumen, Mphasis, NTT Ltd., TCS, Unisys, Wipro and Zensar as Leaders in one quadrant each.

In addition, Mindtree, QTS and Rackspace Technology are named as Rising Stars-companies with a "promising portfolio" and "high future potential" by ISG's definition-in one quadrant each.

A customized version of the report is available from Hexaware.

Published Tuesday, June 29, 2021 2:29 PM by David Marshall
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