By Olivia Cahoon
Managed cloud services oversee client’s applications, computing, networks, operating systems, storage, and complex tools. This market is composed of segments including cloud optimization, cloud management services, and cloud consumption services. Many cloud service providers are available to help manage operations in the cloud.
According to a recent report, Cloud Managed Service Market by Service Type (Managed Infrastructure, Managed Network, Managed Security, Managed Data Center, and Managed Mobility Services), Deployment Type, Organization Size, Industry Vertical, and Region—Global Forecast to 2022, by MarketsandMarkets, the cloud managed services market is projected to grow from USD 27.15 Billion in 2017 to USD 53.78 Billion by 2022, at an expected Compound Annual Growth Rate (CAGR) of 14.6 percent.
Several segments make up the managed cloud services market including cloud management services, managed platform services, and cloud optimization.
Cloud management services is the first segment in managing on-going cloud operations. It delivers management and operations services to the infrastructure as well as platform-as-a-service components, which blend into cloud operating models, skills management, and security management, says Tristan Morel L’horset, North America cloud & infrastructure services solution leader, Accenture Operations.
Cloud optimization manages how clients consume the cloud on an on-going basis. According to L’horset, this segment is necessary to maximize both the financial as well as the innovational benefits of the cloud. “A strong cloud optimization capability should deliver between ten to 30 percent savings across your estate,” he offers.
As purchasing cloud services becomes an on-going process rather than a one-time or periodic activity, cloud consumption services are increasingly important. “As such, billing, invoicing, discount reconciliation, and other aspects of cloud procurement require new skills within the IT or procurement departments,” adds L’horset.
To enable cloud management services, cloud optimization, and cloud consumption services, L’horset says clients must invest in a cloud management platform that delivers capabilities for high automation, self-service, adaptability, and financial transparency. “The feature rich capabilities of cloud combined with legacy and new components of most IT estates calls for a complete redesign of legacy to cloud Control Plane in order to abstract the complexities of cloud while unleashing its benefits,” he explains.
In conjunction with cloud management platforms, managed platform services include services that enable companies to leverage the provider’s expertise around cloud platforms. “Management of private cloud, virtual cloud data centers, and accounts requires an understanding of different platforms, terms, and business use cases,” says Matthew Hon, head of hybrid IT, Fujitsu America, Inc.
This service becomes increasingly critical to enterprises expecting cloud sprawl. According to Hon, dealing with multiple cloud platforms also means dealing with multiple vendors, contracts, accounts, and billing. “It is a huge headache for the CIOs and CFOs we meet and support today,” he offers.
The managed workload management segment is similar to traditional ITO services, except it revolves around the cloud and is designed for managing VM’s, OS, monitoring, and backup. Challenges occur when clients leverage a mesh-based architecture with workloads and applications in multiple clouds. Enterprises want to select a cloud that is right for the specific application, meets the needs of the business, and to select the cloud of their choice. “We are no longer limited to one cloud platform, and finding a services partner that excels in supporting multi-cloud workload management—and the automation and orchestration capabilities to go with it—is critical yet not easy to find,” says Hon.
Additional segments in managed cloud services include managed network operations, managed infrastructure, managed storage, managed security, managed mobility, and managed applications services.
The managed cloud services market is driven by increased cloud adoption and the need to reduce costs and increase agility.
As cloud adoption significantly increases across enterprises, it’s difficult for on-premise infrastructure innovations to keep up with the cloud. From an enterprise standpoint, Manoj Karanth, associate VP/head, cloud, data science, and engineering, Mindtree, says cloud adoption is driven by the desire to free budgets for spending on digital transformation, create process standardization and efficiency for digital service applications, deliver business solutions in a faster, scalable, and agile fashion, and to build cloud native strategic platforms for business differentiation and continuous availability.
“While many enterprises start looking at cloud from an open perspective, the primary reason for increased adoption is the agility that the cloud provides,” comments Karanth. Cloud adoption gives rise to managed cloud services, with the primary goal of increasing agility while driving down operational costs both from direct costs to a cloud provider and decreased costs per unit in operations, he adds.
To reduce costs and increase agility, companies can move on-premise infrastructure and applications to the cloud, also known as data center transformation, says Girish Phadke, technology head, Microsoft and cloud platforms, alliances and technology unit, Tata Consultancy Services. This is done by using microservices, API, and containers for innovation systems and systems of differentiation.
There’s also an increase in security threats to various clouds and other data sources. “The managed cloud services market is growing in order to meet and create more sophisticated regulatory compliances. These compliances are easier to meet on the cloud,” says Phadke.
From a business standpoint, he suggests those who want the ability to stay competitive to leverage enterprise data as a strategic competitive asset particularly as cloud-based data platforms.
Contracts for managed cloud services are generally determined by application, but today they are evolving.
For a long time, Karanth says managed services pricing was effort-based including activities/catalogue items of service delivery. “This gave way to unit-based pricing like VM-based pricing with reduced yearly costs priced in,” he explains.
The pricing differs for units that also support application processes for SaaS-based systems. According to Karanth, SaaS providers charge their customers through a user or transaction based pricing. “Managed services for SaaS has been an extension of this method, with an added support for slab based pricing.”
When looking at business processes as a service, Phadke says the contracts are based on the monthly business transaction volumes. Otherwise, cloud migration services are priced per application and factor in the migration model as well as application complexity.
Contracts related to managed cloud services for businesses are evolving based on influences from the consumer market, where on demand solutions are expected, often with no cost for the lowest tier of service—or freemium—and no long-term commitment requirements for higher tiers of service, says Ken Seitz, director, global service provider channel, Cisco. These aspects of the application economy also integrate into business agreements as well.
“Service providers are now often expected to consume technologies in a post-paid utility model. That said, they are most often taking the services based on these technologies to market with a term-based commitment required from the end customer,” says Seitz. Additionally, end customers expect that the service provider backs the offering with a service level agreement (SLA). The service provider will then use the revenue commitment to offset the liability of the SLA.
“Even in the large enterprise segments, Cisco has witnessed that the average managed services term is decreasing over time; with three years being the average but an increase in one-year term with an associated decline of five-year term agreements,” explains Seitz.
In cases where the service provider is not making a guarantee of service availability or performance, such as non-production use of managed cloud services, there is a greater likelihood of short- or no-term contracts, says Seitz. “Consumption models have become a point of differentiation within the market with those providers willing to ‘earn the business everyday’ able to attract subscribers from more established SPs who may not have evolved contractual terms.”
In the managed cloud services market, mobility services allow consumers to engage with brands efficiently and quickly.
Mobile is one of the reasons why many companies quicken their digital transformation journeys. “The ubiquitous access to information at the consumer’s fingertips is requiring enterprises to rethink how they serve up their data,” says Meg Ramsey, VP cloud services product management, Sungard Availability Services. Cloud services allow enterprises to reach customers with reduced latency and expanded global reach.
Mobility services also allow consumers to be more engaged with brands in their daily lives. “We have apps that track our workouts, our heart rates, our friends, and even our professional networks. We can bring our professional lives with us anywhere we go, whether that’s good for our productivity and work life balance or not. None of this would be possible without the extensive use of cloud and edge computing services,” offers Ramsey.
The sheer scale of the cloud is also an enabler for mobility services. According to L’horset, the mobile services ecosystem now needs to adapt at speed to jumpstart cloud services. “For example, if you’re a mobile provider promoting voting capabilities for the most successful talent television show, you need capacity on-demand and you need it quickly. Only the cloud can scale for unpredictable number of users,” he explains. Cloud managed services today should be targeted toward scaling at the micro and macro levels.
The opportunity for automation in cloud managed services involves managed infrastructure, network operations, security, applications, and mobility. While the majority of managed service operations are delivered in segments, it’s essential how managed services are delivered.
Broadly speaking, there are two essential elements for managed service operations—IT request management and managed operations of the functions, says Ajay Gupta, director of presales, Jamcracker.
“Cloud industry is not only witnessing accelerated growth but also the speed of change in cloud technologies. Accelerated growth has increased the complexity and to keep cloud managed services affective automation is the key solution,” he explains.
According to Gupta, there are a variety of key opportunities for how cloud management platforms can achieve automation. This includes aggregated service catalog with request management, a self-services portal with policy-based access of resources, automating continuous integration and continuous delivery, automation to simplify resource management, and deployment governance.
Geography plays a significant role in adoption rates for managed cloud services. Cloud adoption rates are consistently different by location.
In North America, the cloud market is mature with new technology adopted quickly at varying speeds, and inline with respective business drivers and industries, says Hon. “Tech startups and digital-first companies are looking to leverage AI, blockchain POV as the starting point to keep their market position or grow their share, while large enterprise CIOs are increasingly pressured by both the business units and the CEO to enable new services and reduce cost,” he offers.
Europe currently lags behind North America, where large hyper-scalers are either new to the European market or have not reached the full potential of their services. Increasingly, Hon says data privacy and the regulatory environment are causing companies and individuals to take a more measured approach. Additionally, General Data Protection Regulation is a concern for enterprises in Europe and other companies with operations and users in Europe. “These enterprises will need to have a detailed plan for data and may need to relocate data to meet the new regulations.”
Asia cloud-based services also lag, with clients in this region having concerns about using U.S.-based hyper-scalers. According to Hon, Asia-based cloud providers are more trusted and therefore have the upper hand and are racing to be the first to deploy service relevant to their market. However, cloud connectivity is playing an increasingly significant role as networks, Internet of Things, and the cycle of collecting, analyzing, converting, controlling, and delivering data becomes more vital.
“As connectivity continues to improve, we’ll see tremendous growth in this market, particularly as population continues to rise and as investments are made to bring Asian regions to parity. Availability of feature-rich infrastructure will remain a concern for providers, as internet connectivity is required to deliver services,” offers Hon.
Managing the Cloud
The managed cloud services market is composed of several segments including cloud management services, cloud optimization, and cloud management platforms, which together, can transform IT organizations into a fully flexible, as-a-service business enabler.
Sep2018, Software Magazine