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Cloud professional services revenue grows by double digits as pandemic increases demand for cloud migration

Cloud professional services market summary

Market overview

In the most recent iteration of TBR’s Cloud Professional Services Market Forecast, we projected the market would grow at an 11.7% CAGR between 2019 and 2024 as vendors balance the effects of COVID-19 with rapid growth in digital transformation. Opportunity for benchmarked vendors comes from the large number of customers still operating on premises, which leads to the need for advisory, consulting and implementation services, as plans to shift to the cloud come to fruition. Additionally, the pandemic will likely have many businesses reevaluating their IT road maps, causing an inevitable uptick in cloud adoption. As a result, cloud managed security and application services, especially during a new working-from-home reality, will prove opportunistic for benchmarked vendors. Meanwhile, for existing cloud users, the need for hybrid and multicloud environments will necessitate ongoing integration and management needs from technology-neutral vendors.

Market disruptors

Changes in general purchasing habits brought on by the COVID-19 pandemic have proved disruptive for many professional services vendors; however, the market is expected to rebound quickly as customers replace legacy IT systems with cloud solutions. As a result, managed cloud services is expected to be the fastest-growing subsegment of the cloud professional services market, especially as hybrid IT sprawl intensifies. However, some other submarkets, primarily application development and maintenance, will feel some pressure from automation, especially as adoption of cloud-native technologies rises and plays a role in suppressing labor-driven resources.

TBR’s Cloud Professional Services Benchmark covers the professional services that are critical to enabling customers to take advantage of available technology as well as the market opportunity that exists for firms that cater to service needs. Additionally, the benchmark analyzes the size, growth and leading providers of services around cloud environments.

Rising cloud adoption and associated complexities present opportunities across service lines

Changes in general purchasing habits brought on by the COVID-19 pandemic have proved disruptive for many professional services vendors; however, the market is expected to rebound quickly as customers replace legacy IT systems with cloud solutions. As a result, managed cloud services is expected to be the fastest-growing subsegment of the cloud professional services market, especially as hybrid IT sprawl intensifies. However, some other submarkets, primarily application development and maintenance, will feel some pressure from automation, especially as adoption of cloud-native technologies rises and plays a role in suppressing labor-driven resources.

Cloud professional services and hosted private cloud markets will grow over the next 5 years as COVID-19 drives cloud adoption

Cloud professional services and hosted private cloud markets will grow over the next 5 years as COVID-19 drives cloud adoption

COVID-19 has undoubtedly created financial pain for businesses across all verticals. Business operations have been disrupted and revenue streams have declined in many industries across the globe. At the same time, the pandemic has required additional investment to support remote work and adjust business processes to align with public health guidance from the Centers for Disease Control and Prevention, including social distancing. However, even amid these financial challenges, businesses have spent and plan to continue spending more of their IT resources on cloud-delivered services. Cloud’s benefits of agility, innovation and a high degree of automation have been reinforced during the pandemic and have prepared adopters for the next unknown disruption to their business.

Given these circumstances, TBR’s market forecasts for cloud professional services and hosted private cloud have been adjusted to reflect the impact of COVID-19 over the five-year forecast period. In the next two years, we anticipate growth will slow slightly due to the impacts social restrictions are having on supply and demand. Particularly given the uncertain environment, business spending will likely take longer to rebound than in previous economic downturns. This holds true across IT departments, as many businesses that have on-premises IT infrastructures will postpone cloud deployments until after the pandemic abates.

As such, workload activity including legacy SAP, VMware and Oracle migrations to bare metal IaaS and the associated services opportunity will be affected. While these impacts will reduce market growth by a few percentage points through the remainder of 2020 and into early 2021, the flexible nature of cloud-based transactions make the cloud professional services and hosted private cloud markets less susceptible to the virus’s near-term effects than other markets within the IT industry. COVID-19 is testing many companies’ IT preparedness, and as a result, a notable increase in cloud usage will occur once the virus subsidies and IT spending returns to normal, driving accelerated growth from 2022 to 2024.

TBR’s Cloud Professional Services Market Forecast and Hosted Private Cloud Market Forecast provide insights into how market sizes, growth and vendor positions will change over the next five years. Each forecast is broken down into four subsegments and both forecasts cover the Americas, EMEA and APAC.

Accelerated adoption of cloud due to COVID-19 will lift cloud professional services and hosted private cloud markets

COVID-19 impacts and assumptions

COVID-19 has undoubtedly created financial pain for businesses across all verticals. Business operations have been disrupted and revenue streams have declined in many industries across the globe. At the same time, the pandemic has required additional investment to support remote work and adjust business processes to align with public health guidance from the Centers for Disease Control and Prevention, including social distancing. However, even amid these financial challenges, businesses have spent and plan to continue spending more of their IT resources on cloud-delivered services. Cloud’s benefits of agility, innovation and a high degree of automation have been reinforced during the pandemic and have prepared adopters for the next unknown disruption to their business.

Given these circumstances, TBR’s market forecasts for cloud professional services and hosted private cloud have been adjusted to reflect the impact of COVID-19 over the five-year forecast period. In the next two years, we anticipate growth will slow slightly due to the impacts social restrictions are having on supply and demand. Particularly given the uncertain environment, business spending will likely take longer to rebound than in previous economic downturns. This holds true across IT departments, as many businesses that have on-premises IT infrastructures will postpone cloud deployments until after the pandemic abates.

As such, workload activity including legacy SAP, VMware and Oracle migrations to bare metal IaaS and the associated services opportunity will be affected. While these impacts will reduce market growth by a few percentage points through the remainder of 2020 and into early 2021, the flexible nature of cloud-based transactions make the cloud professional services and hosted private cloud markets less susceptible to the virus’s near-term effects than other markets within the IT industry. COVID-19 is testing many companies’ IT preparedness, and as a result, a notable increase in cloud usage will occur once the virus subsidies and IT spending returns to normal, driving accelerated growth from 2022 to 2024.

TBR’s Cloud Professional Services Market Forecast and Hosted Private Cloud Market Forecast provide insights into how market sizes, growth and vendor positions will change over the next five years. Each forecast is broken down into four subsegments and both forecasts cover the Americas, EMEA and APAC.

IBM expands hybrid cloud activities by partnering with India-based IT services peers

Partnering with IT services peers and integrating Global Business Services and Global Technology Services capabilities will help IBM improve client engagement and increase cloud signings

Hybrid cloud remains an area of investment for IBM as the company pursues transformational opportunities with clients. IBM’s recent investments in improving its hybrid cloud capabilities, most notably with IBM Cloud Paks and bringing Red Hat solutions and professional services on board, help strengthen its position in cloud. IBM’s ambition is to deepen its understanding of clients’ journeys to hybrid cloud and AI; in 1Q20 the company announced that it is making hybrid cloud its fourth platform — the others being services, mainframe and middleware.

Partnering with India-centric IT service providers such as HCL Technologies (HCLT), Infosys and Tech Mahindra expands IBM Services’ client reach for hybrid cloud solutions. IBM partnered with HCLT in November to migrate and modernize VMware workloads on the IBM public cloud. IBM is combining its secured, enterprise-grade public cloud with HCLT’s delivery and managed services capabilities to move, manage and modernize complex VMware workloads in the cloud.

In March IBM partnered with Infosys to enable clients’ digital transformations through the IBM public cloud offering. IBM Services’ reach in the financial services, insurance and healthcare sectors will expand as the partners integrate their professional services capabilities to enable clients to transition, modernize and transform enterprise workloads and applications, leveraging security, open innovation and enterprise solutions on the IBM public cloud. The partnership will also increase adoption of IBM’s Red Hat OpenShift platform and generate opportunities for IBM Services around consulting and technology services offerings for Red Hat and multicloud management. In April IBM partnered with Tech Mahindra to migrate core business applications to the IBM public cloud utilizing IBM Cloud Paks. The partners will open innovation centers, with the first one in Bangalore, India, to address business problems using transformational solutions developed with IBM Cloud Paks.

According to TBR’s 4Q19 Cloud Professional Services Benchmark, COVID‐19 has jolted the cloud adoption timeline from a comfortable curve to a forced spike, which opens up myriad cloud professional services opportunities. IBM Services’ well-established security and hybrid cloud capabilities will provide growth opportunities for the rest of 2020 as business disruptions caused by COVID-19 highlight the benefits of cybersecurity and cloud-based solutions. The pandemic will accelerate IBM’s partnership activities as the company pursues opportunities to ramp up adoption of hybrid cloud and AI solutions to enable clients to restore and relaunch post-pandemic and establish new business models in a new normal.

The need for short-term support, coupled with an anticipated surge in cloud adoption, will create security and advisory opportunities

The need for short-term support, coupled with an anticipated surge in cloud adoption, will create security and advisory opportunities

Cloud professional services is on the cusp of a wave of growth that will outpace prior estimates. Prior to the COVID-19 outbreak, the increasing complexity of enterprise hybrid and multicloud environments had already established a growing need for managed services and system integration vendors. Traditional deployment schedules and delivery timelines have been accelerated as the pandemic has created a short-term need to fulfill the demands of a new work-from-home (WFH) reality, especially in the realm of security and privacy. The increased demand for cloud professional services will necessitate both immediate and ongoing advisory and implementation services as the pace of multicloud and hybrid cloud adoption will increase rapidly for many enterprises needing advisory and implementation services.

TBR’s Cloud Professional Services Benchmark covers the professional services that are critical to enabling customers to take advantage of available technology as well as the market opportunity that exists for firms that cater to service needs. Additionally, the benchmark analyzes the size, growth and leading providers of services around cloud environments.

Wave of growth that will outpace prior estimates expected for cloud professional services market

Cloud professional services market overview

Market overview

Prior to the COVID-19 outbreak, the increasing complexity of enterprise hybrid and multicloud environments had already established a growing need for managed services and system integration vendors. Traditional deployment schedules and delivery timelines have been accelerated as the pandemic has created a short-term need to fulfill the demands of a new work-from-home reality, especially in the realm of security and privacy. The increased demand for cloud professional services will necessitate both immediate and ongoing advisory and implementation services as the pace of multicloud and hybrid cloud adoption will increase rapidly for many enterprises needing advisory and implementation services.

TBR’s Cloud Professional Services Benchmark covers the professional services that are critical to enabling customers to take advantage of available technology as well as the market opportunity that exists for firms that cater to service needs. Additionally, the benchmark analyzes the size, growth and leading providers of services around cloud environments.