Hidden Cloud Growth Opportunities for Technology Service Providers

As the U.S. cloud market grows by double digits, it offers diverse growth opportunities for TSPs.

An oil and gas firm migrating to cloud computing provides a good example of how technology service providers (TSPs) can capitalize on the growth of cloud computing. Its IT environment typically has many remote sites but may need only a few cloud features, a handful of application services and a dozen or more infrastructure services. In all, the firm might need 50, 60 or 70 cloud features. Yet the major public cloud providers such as Amazon Web Services and Microsoft Azure release 40 to 50 features in any given month, with total cloud feature sets totalling in the thousands. That pace of innovation is helpful for the market as a whole but leads to a level of complexity and confusion that makes cloud adoption and use difficult for already complex organizations with even more complex IT portfolios.

The number of cloud managed service providers will triple by 2020

“Who is going to help that oil and gas producer pick the right 62 cloud features?” says Gartner research director Sid Nag. “That’s where consulting and managed service providers can come in to help clients navigate these waters.”

Cloud computing is the foundation for digital business, and Gartner predicts cloud computing and services will be a $300 billion business by 2021. The IT services category is growing 2% to 3% per year while cloud growth is expected to grow six times that rate, at roughly 18%. For product managers, product marketers and business leaders in companies that provide technology products and services, this means significant growth of wallet share in the coming years.

The cloud gold rush

Thirty-six percent of IT spending on implementation services is cloud-based, and 28% of IT spending on software is software as a service (SaaS). “When it comes to cloud computing, CEOs are speaking with their wallets,” says Nag. The number of cloud managed service providers will triple by 2020, says Nag. This represents the “cloud gold rush,” and this period of rapid expansion will be followed by a massive consolidation period after 2020 until 2023.

Key questions remain for TSPs: Where are the specific growth opportunities? How can technology vendors identify the areas of growth for their business, and how can they capitalize on cloud growth as a whole?

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The challenge for companies

The promise of cloud computing often masks the hidden challenges built into the migration and management processes involved in moving massive amounts of infrastructure and applications from on-premises into the cloud. A CIO at a global company accountable for migrating 1,800 applications to the cloud has about as many questions as applications regarding the process:

  • How do we migrate?
  • Which apps should go first?
  • What is the decision placement framework to use to know which apps to migrate and which to leave on-premises?
  • Should we use a “lift and shift” strategy? Do we do all cloud-native?
  • Public cloud? Private cloud? A mix?

Provide solutions

Nag details key opportunities to offer services that support organizations on their migration and optimization journeys to the cloud. Migration, preplanning and consultation services are a growth opportunities for TSPs.

Migration, preplanning and consultation services are growth opportunities for technology and service providers

TSPs should take a detailed look at cloud brokerage services as a new  offering to help clients find the best path to the pot of gold at the end of the cloud rainbow. Sixteen percent of cloud budgets are already spent on cloud-related services such as onboarding — precisely the services a company like the oil and gas producer needs to get up to speed on AWS or Azure.

Nag outlines five growth opportunities in cloud services worth exploring for TSPs:

  1. Migration services — how to move to the cloud
  2. Preplanning services
  3. General consulting services and consulting on optimal pricing models
  4. Data center migration services
  5. Cloud brokerage services

Nag advises providers to keep their fingers on the pulse of client business needs and the rapid shift to cloud-first and cloud-only computing. “Think about cloud-first when building your product offering — that will be your ticket to success,” says Nag.

Next steps

While the rising tide of cloud computing lifts many of the boats competing in the marketplace, these areas provide discrete growth opportunities for technology vendors. They should drive growth by linking offerings with clients’ desired digital business outcomes and should partner with leading cloud providers to deliver a complementary value proposition and expand into adjacent markets.

“Differentiate with clear messaging and unique intellectual property by geography, customer size, vertical industry, strategic partnerships or intellectual property,” says Nag.

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