Digital transformation demand is great news for cloud providers: survey

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Cloud service providers are increasingly confident in their business outlook thanks to very strong customer demand for cloud services to enable digital transformation, according to a new survey from IDC.

The IDC Service Provider Pulse 1Q18 Quarterly Summary found that cloud service demand due to digital transformation is outpacing supply, with service providers ramping up their investments in new offerings to cater for their client’s requirements for new infrastructure, application, managed and professional services in the cloud.

Security is the most important consideration for 38% of cloud service providers to achieve their business goals in the next two years, while security services will account for the largest increase (23%) in new cloud service investment.

Maintaining control of their own IT is a key business strategy for cloud service providers with 64% planning to increase their level of spend on software, device, and/or IP development to better compete.

The survey also found that software specialists will increasingly become services specialists over the next two years, creating offerings usually associated with managed service providers, cloud service providers, hosting firms, telco providers, and outsourcers/systems integrators.

digital transformation cloud

“Cloud service providers around the world are rapidly changing their business models in response to unprecedented customer demand, offering a mix of new cloud infrastructure, application, and managed services as part of an agile investment strategy,” said Rory Duncan, research vice president for Cloud Service Providers at IDC. “What is striking is not only the pace of transformation, but also the variety of offerings coming to market as a result. From managed cybersecurity to performance optimization, the hosting of complex business applications and hybrid cloud are offering the potential for service integration at point of delivery.”

Michelle Bailey, group vice president, general manager and IDC Research Fellow for Datacenter and Cloud added that the ‘long tail’ of Tier 2 and Tier 3 service providers is clearly driving growth in emerging service opportunities and regional markets.

“We have learned that over 60% of these providers’ client base consists of organizations creating new products or markets as well as those reinventing their businesses – and they need to invest in infrastructure and services to achieve this,” she said.

This is the first survey from the recently launched IDC Service Provider Pulse, a quarterly survey using primary research from insights provided by IT business leaders and line of business executives with knowledge of their service strategy. The Q1 2018 findings are based on a May 2018 online survey of 500 respondents across North America, EMEA and Asia/Pacific.

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