The Good, the Bad, and the Ugly of Infrastructure and Cloud Services

The infrastructure and enterprise cloud services space is a buyer’s market. It became increasingly clear through our recent research how much choice buyers have. Infrastructure services, unlike some of the other HfS coverage areas, is one of the most mature service industries in the IT services space – making it increasingly hard to be distinctive as a provider.

However, in spite of recent changes, the industry continues to shift as sweeping trends push providers and clients to adapt and evolve. Some of these trends have seen engagement, pricing, and operational models pivot toward delivering business outcomes. Further, the increased adoption of the cloud is transforming traditional service providers into service brokers in a bid to ride the as-a-service wave of consumer demand and expectations.

 

Overview In 2017, HfS published the first of four IT Services Blueprint reports, covering Infrastructure and Enterprise Cloud Services. Prior to publication, HfS analysts conducted a client survey, supported by more qualitative interviews. The following report analyzes the information captured to highlight the good and the bad of this industry sector through the eyes of the customer.

 

The infrastructure and enterprise cloud services space has evolved into a challenging environment for buyers to gauge and identify the right provider for their business. Pure-play service brokers are emerging, pledging to offer best-in-class services supported by a developed partner ecosystem. Similarly, even firms that have invested considerably in proprietary technologies are pitching their services as vendor agnostic. Meanwhile, some providers can expect to turn deals down if the problem or outcome they want to achieve is not properly defined or sits too far in the traditional infrastructure services camp as providers seek to capitalize on the higher value and, indeed, more lucrative transformational deals. In some cases, if the prospect isn’t prepared to make the type of investment required, higher value providers increasingly want to move away from bad deal practices of the past and only take on work that makes sense for them, which ultimately makes sense for the client.

 

In an industry battered by sweeping change, evolving trends, and pivoting business models, one thing doesn’t change: how clients perceive the achievement of business value. It is on this basis that this report seeks to establish broader industry dynamics from the eyes of the customer. Are providers still delivering value with their infrastructure services? What’s going well? And what needs to change?

 

The insight gleaned from the client surveys and interviews conducted by HfS analysts for the Infrastructure Services and Enterprise Cloud Blueprint report has been categorized into three broad categories – fairly predictable ones if the reader is a fan of Clint Eastwood – the good, the bad, and the ugly. In the good, we look at what clients value from providers and what they are doing well. In the bad, we look at the opposite, what’s gone wrong and what needs to change and improve. Finally, in the ugly, we look at some of the broader trends highlighted by multiple clients that signal potential challenges for the infrastructure and enterprise cloud industry as a whole.

 

The Stats Part One: What Does the Infrastructure and Enterprise Cloud Market Look Like?

 

Alongside qualitative interviews conducted for the Infrastructure Services and Enterprise Cloud Blueprint report, we also captured data from enterprise buyers across a broad range of industries and geographies in a client survey. This data provided us with a deep insight into dynamics within the IT services space, and how satisfied buyers were with their current providers. The study contains a large volume of data that HfS will analyse in the subsequent IT services Voice of the Buyer reports across application development and management services, digital technology strategy, and consulting services, and the broader overall IT services Blueprint reports.

 

Stats The stats published in this report originate from a client survey completed by over 300 clients from Global 2000 companies. This data was also supplemented by qualititaive interviews conducted during the Infrastructure and Enterprise Cloud Blueprint research.

 

Quality Leads Service Provider Selection Criteria

 

The first thing we need to understand is what influenced the clients to select a provider in the first place. In a client survey, we captured data across IT Services on the most important selection criteria for choosing an external service provider (see Exhibit 1). While there were some commonalities across services – such as the ability to provide automation capabilities, which was between 6% and 7% across the three IT service areas – there were noteworthy differences.

 

For instance, the quality of service delivery and familiarity with the provider are far more important to clients procuring infrastructure or application services than to those looking for consultancy services. Meanwhile, comparatively few thought capabilities in digital technologies or technical skills of service professionals were as important for IMS as they were for other IT service areas.

 

Crucially, the most important factors for infrastructure and enterprise cloud clients is the overall quality of service and the security of the provider’s future. This result is perhaps unsurprising given the role IT infrastructure services play in the modern business place, where consistency and reliability are vital to the overall health of IT and the business.

 

Exhibit 1: External Service Provider Selection Criteria

What is the most important selection criteria for choosing an external service provider for the following services?

 

 

Source: HfS Research 2017, n=302 IT Services Clients

 

Cloud Delivery’s Two-Year Forecast

 

HfS has long been the prophesising the rise of the As-a-Service economy and research continues to support this. Take, for example, data captured in client surveys seeking to understand where business executives see processes and technologies moving into the cloud (see Exhibit 2). Across the broad range of categories we studied – from infrastructure to enterprise applications – business leaders are almost uniform in identifying the considerable growth of cloud delivery in their companies.

 

For each of the categories, well over half of the respondents advised they expected the proportion of processes and technologies in the cloud to grow – with some expecting to see significant growth. In comparison, on average just over 10% expect their proportion of cloud delivery to decline within the next two years.

 

By a slim margin, the most likely services to move to the cloud are enterprise applications, with email software the least likely to grow in the next two years.

 

Exhibit 2: Cloud Delivery Changes for Next Two Years

How will the proportion of cloud delivery change in the next 2 years? 

Source: HfS Research 2017, n=302 IT Services Clients

 

Processes Delivered via Cloud-Based Solutions

 

There’s a compelling argument that infrastructure and enterprise cloud services will be increasingly in demand in the future – but what’s the situation like now? To answer this, we asked respondents to estimate the proportion of IT processes that are currently delivered through cloud-based services and solutions (See Exhibit 3).

 

In Exhibit 2, we learned that email software is the area we’re least likely to see increased adoption in the cloud; however, Exhibit 3 offers some explanation for this. According to this data, email software is one of the IT processes already heavily cloud based, with large proportions of clients advising they have over 50% of email related processes delivered via a cloud service or solution.

 

Indeed, across IT processes, a significant proportion are delivered through cloud services and solutions – including enterprise applications and VOIP software.

 

 

Exhibit 3: IT Processes Delivered via the Cloud

Can you estimate the proportion of the following IT processes that is delivered via a cloud based service/solution?

 

Source: HfS Research 2017, n=302 IT Services Clients

 

The Stats Part Two: Client Feelings Temperature Check in the Infrastructure and Enterprise Cloud Space

To get a better understanding of how clients perceive the quality and effectiveness of the services they received, we asked the following questions to shine a light on two key areas – keeping things running smoothly and ensuring lines of communication are open between the service provider and the business.

 

Exhibit 4: Keeping Things Running Smoothly

How effective are providers at keeping operations running smoothly?

Source: HfS Research 2017, n=302 IT Services Clients

 

The modern enterprise thrives on efficient and reliable infrastructure, whether that is on-premise data centers or full as-a-service solutions. Without confidence in the technology supporting IT and business processes, enterprises will struggle to make the decisions and take actions that will drive their businesses forward.

 

Unsurprisingly, therefore, a key indicator of overall satisfaction with IT infrastructure services is the ability of the provider to keep operations consistent and smooth. We asked a large group of clients and buyers how effective their provider was at keeping the cogs turning. It’s encouraging to see more than half of those surveyed advising that their providers are very effective at keeping operations smooth. Nevertheless, it’s concerning – particularly when IT infrastructure plays such a foundational role in most modern businesses – that 42% regard their providers as somewhat effective and 5% argue they’re not effective at all.

 

Without efficient operations running in the background, enterprises will struggle to realize their digital ambitions and, crucially, their customers’ expectations. Providers must investigate and resolve inefficiencies and problem areas across the infrastructure services they deliver to ensure clients have confidence in services and can focus on delivering customer-centric products and services with minimal interruption from efficient and smooth managed infrastructure services.

 

Exhibit 5: Communication Is Key

How effective are providers at communicating with the business?

Source: HfS Research 2017, n=302 IT Services Clients

 

Effective communication channels between service providers and their clients’ businesses are essential not only to ensure the implementation of efficient feedback loops to drive service improvements but also to build collaborative and productive relationships. Without effective communication, relationships can become unnecessarily transactional, limiting opportunities to build additional value into engagements. Communication must also be strong at an operational level to ensure services are meeting requirements and that issues are dealt with quickly and efficiently.

 

Positively, half of the respondents to the survey advised that their service provider is very effective at communicating with the business, with only 4% reporting that their provider is not effective at all.

 

The Good: The Practices and Characteristics that Support Success

 

Let’s start with the good; encouragingly there’s plenty of it to write about. We asked several infrastructure and enterprise cloud services clients what they valued from their relationship with their service provider. The responses were broad and covered everything from simply listening to the business to reacting swiftly to tackle global cyber attacks. Below are some of the key pieces of positive feedback we culled from qualitative interviews with clients.

 

“We expected excellence, received it, and continue to require it.” – Anonymized buyer response

 

– Deep understanding of business requirements: A large number of clients advised that their providers had a deep understanding of their business and the outcomes they were trying to achieve. Providers who were able to get to grips with the particular business needs and challenges of clients have been able to design and deliver services and solutions that add additional value to engagements. In the case of some client interviews, without the deep business understanding exhibited by the provider, the engagement would have been unlikely to succeed and, potentially, the provider would not have been selected in the first place.

 

– Good at building high-level relationships with executives: Communication is the key to a successful engagement. And, in a similar vein, clients have recognized the value providers deliver when they have an aptitude for building strong relationships with business executives. With the support of these business leaders, engagements were able to move faster and deeper to deliver the results and outcomes expected by the client.

 

– Teams who fully understand services and requirements: Talent plays an important part in any service engagement and has been identified by clients as a key success factor in the infrastructure services space. Finding a provider with teams and individuals who understand services and requirements, and can place them in the context of the clients business, can drive an engagement to success. For several of the clients who cited this reason as a key positive for their engagements, it’s led to the opening up of opportunities to expand current engagements. Simply put, the clients are confident that the provider has the talent and skills needed to drive their business forward.

 

– Global reach: For large global companies, finding a provider that delivers infrastructure services at a global level is essential. Large enterprise clients cited the ability of the firm to leverage a global delivery network to meet the needs of their multinational business is key to the ongoing success of any engagement.

 

– Flexibility and optimisation: A theme that cropped up several times during interviews is the need for ongoing service improvement activities. Clients value providers that offer them the flexibility to flex and scale services as their business needs change, alongside a concerted and embedded drive to focus on optimizing infrastructure services.

 

– Collaboration across relationships: For some clients, their provider’s willingness to build collaborative relationships was a notable positive. Engaging in practices such as knowledge transfer while also leveraging client business experience to deliver more aligned services supports clients and providers in building collaborative partnerships with the outcome of more responsive and effective infrastructure services.

 

– Transparency: In the complex and cluttered enterprise technology market, all some clients wanted was a degree of clarity and transparency from their provider. For some this stretched across cost, automation, and optimization activities the firm was undertaking to drive the engagement to new levels. For others, it was simply regular communication at an operational level about service availability, efficiency, and any issues that were being investigated.

 

– Good improvement plans and methodologies: Providers who could clearly display and articulate service improvement plans and methodologies to support consistency and efficiency won over some clients. The clarity and ownership of service improvement is crucial for clients to understand the provider’s direction, ensure it meets their own, and hold providers accountable on the improvement journey.

 

– Outstanding management of specific incidents: Several clients came forward with stories of how their provider had gone above and beyond to handle global or particular impactful incidents. From urgently shoring up cyber security to putting additional resources into place, some providers have proved themselves as reliable partners when the chips are down.

 

– Ability to listen and adapt: Finally, one of the key characteristics raised by several clients was the ability of the provider to listen to the business, understand the circumstances, and adapt their approach or services to meet changing needs. For some this was an incremental story of feedback loops fueling adaptations to services, for others, it was an unplanned but essential change in direction. Ultimately, clients appreciate providers that listen to them and act on what’s being said.

 

“[our relationship is] evolving from a technical service provider to a real partner, including bringing in new business ideas, reducing complexity – even at the expense of their business with our company.” – Anonymized buyer response

 

The Bad: The Practices and Characteristics Holding Engagements Back

 

Now for the negative side of the coin – and the practices and characteristics that are not so hot in the eyes of clients. A similarly diverse set of comments has been extracted from client interviews, ranging from a lack of ownership when tackling certain parts of an engagement to firms struggling to keep hold of talent and the knock-on effect that has when trying to develop relationships. Below are some of the key pieces of feedback we received.

 

“We’d like to see more ownership of services such as end user devices and overall service management.” – Anonymized buyer response

 

– More ownership: In many ways, this is a classic negative point across managed IT services. A lack of ownership can significantly damage a client’s relationships with providers as they are forced to pick up neglected areas of the service structure. Several of our client interviews advised they would like to see more ownership of services from core infrastructure to hardware and end-user devices. Without this, they felt they were not able to get the full value out of the relationship as their own talent and resources needed to be drafted in to fill in the gaps.

 

– Resource attrition: A key challenge for many service providers analyzed as part of this research is the struggle to keep hold of the best and brightest. From a client perspective, this can be a real challenge with one client advising it seemed like every time they got used to the provider team; a complete changeover took place. This impacted their ability to take relationships to the next level and compromised their view of the provider as service professionals didn’t remain in position long enough to pick up all of the business knowledge they needed.

 

– Being more proactive: Some clients come away from engagements feeling like they needed to direct every move and action of their provider. A reactive approach to service delivery can significantly weaken the value proposition of a vendor, as clients have to put more effort into monitoring and requesting adjustments to services to ensure they keep meeting outcomes. For many, the lack of a proactive approach from providers hit their confidence in the effectiveness and reliability of services.

 

– The depth of skill: While many clients complimented the skills and knowledge of the service professionals they worked with, other came away with a less rosy view. Multiple clients advised that the depth of skill for some of the individuals they were working with didn’t meet expectations and limited the speed of services.

 

– Keeping resources in core infrastructure roles: Finally, the old adage that exceptional people deliver exceptional services rings true here. For some clients, the best and brightest were being plucked out of core infrastructure roles too quickly. While limiting the movements of a provider’s best talents is not the ideal solution, there is a consistent call across clients for a degree of consistency and stability across provider talent. Providers should engineer solutions that support the transfer of knowledge to mitigate the impact of turnover, alongside investigating why it’s high enough for clients to notice in the first place.

 

“We had a number of senior members involved in the project initially – which was great, but when we came to review services at the end of each week, they were often unavailable which caused some issues” – Anonymized buyer response

 

The Ugly: Industry-Wide Themes That Are a Cause for Concern

 

Besides trying to force the theme of the similarly named Clint Eastwood film, we needed to build in a “the ugly” section to capture some of the broader themes that are of concern and have the potential to impact all providers. Outside of specific feedback, clients raised alarmingly similar points about broader challenges, such as issues retaining talent and challenges with meaningful communication.

 

“Keeping hold of the right individuals and skills in core infrastructure roles is key, turnover can sometimes be too high for us to build the right relationships.”   – Anonymized buyer response

 

– Talent – getting the right people, and keeping them: A common theme across client feedback is the obvious challenge many providers face either attracting, retaining, or training service professionals. The most common weakness cited by clients was the challenge they experienced with attrition on the provider’s side, which limited their ability to build strong relationships and damaged both their overall perception and the confidence they had in the provider’s ability to deliver services. Struggles with attracting and retaining is not a challenge specific to the IT service-provider community, but measures need to be put in place to mitigate the impact these issues are having on clients.

 

– Communication:  Communication has been a real sticking point for a significant proportion of clients – with some advising in surveys that communication with the business is non-existant. While clients in qualitative interviews were a little more positive in this respect, we still saw a concerted call for better quality communication between clients and providers. Both parties have a part to play in relationship building, but based on the feedback provided by others, providers should start by becoming more transparent with clients to open up communication channels. They should then focus on building collaborative partnerships by implementing feedback loops that result in real change and improvement to services.

 

– Lack of alignment within the provider’s business: Several clients pushed communication issues to the next level by advising that they had experienced a disconnect between different departments and business units from providers when they secured more than one distinct service – such as infrastructure management and consultancy. As the traditional silos that divided IT services erode, providers must focus on building greater alignment or else risk losing out to more integrated competitors.

 

“A particular weakness is the confusion and lack of alignment between different provider business units.”   – Anonymized buyer response

 

Bottom Line: With Infrastructure Services a Buyer’s Market, Providers Must Do More to Improve Services and Deliver Business Value

 

The IT infrastructure and enterprise cloud services industry has some positive stories to tell – with particular emphasis on the noticeable shift from transactional and traditional engagements to those that are more collaborative and partnership based. Nevertheless, there is still plenty of room for improvement if providers are to continue evolving and delivering value in the complex and competitive market.