For years now, enterprises have focused on investing in cloud services. It’s been a gradual and, in some cases, lethargic process of migrating legacy applications to bring the touted benefits of reduced costs and improved agility and scalability. In a recent report, we established how enterprises were racing to cloud services to help them provide remote and decentralized teams the access and data they need to perform amidst the COVID-19 crisis. Many have looked to temporary SaaS solutions to paper over any cracks, while others focus on re-platforming their entire business, using the impetus of one of the most disruptive global events to hammer home the need for investment. For providers in this space, there is just as much uncertainty, but with potential revenues nose-diving, the smart ones will be pivoting their marketing and sales efforts to bring the cloud and cybersecurity services their clients crave.
In a market hammered with uncertainty, enterprises and vendors alike are spotting opportunities in cloud and cybersecurity services
In Exhibit 1, we can see that both providers and clients predict significant investment in cloud and cybersecurity to help them tackle the impact of the COVID-19 pandemic. Providers, as they often are, are more optimistic about the potential opportunity—on average, they are predicting double the potential spending compared to enterprises. Nevertheless, in a market reeling from uncertainty and analysts predicting a significant impact on the revenues of global services companies, even 5% increased spending is reassuring to most.
Exhibit 1: Enterprises and providers anticipate increased spending on cybersecurity and cloud solutions
Source: HFS Research April 6, 2020
Sample: Coping with COVID-19 study, 631 major enterprises
For providers, this increased investment is a welcome lifeline to business areas that will find the next few months and years to be one of the most challenging economic environments in modern history. The smart providers will be working with their hyperscale partners to pitch in-demand services to the market, which is no mean feat in a hyper-complex and foggy marketing landscape.
To be successful, they must focus on the short-, medium-, and long-term requirements of businesses. Immediate demands from enterprises are quite simply to keep their IT infrastructure running as smoothly as possible—as it struggles to handle increased remote-access workloads and systems designed to be at their best when accessed in central locations. Over half of the enterprises we spoke to in a recent study advised their immediate concern was whether their IT infrastructure would cope with extra working at home and the complex requirements this brings.
As the COVID-19 crisis continues, business requirements will shift—providers must look beyond the immediate to help their clients address the next phase of challenges
But these short-term concerns will quickly move on to the next step of challenges businesses will face. As core infrastructure demands stabilize, enterprises will need to figure out how they leverage new technologies to modernize legacy systems, and many are expecting cloud transformation to be an important lever to achieve this with.
Exhibit 2: Enterprises and providers anticipate increased spending on cybersecurity and cloud solutions
Source: HFS Research April 6, 2020
Sample: Coping with COVID-19 study, 631 major enterprises
In Exhibit 2, we can see immediate requirements on the left of the chart—more network provisions, security, and decent personal computing devices are challenges enterprises are grappling with now. In the box on the right, , we can see longer burning consideration—most notably investment in cloud solutions and a pivot from 29% of enterprises to re-platform applications for the cloud.
Several years ago, cloud computing witnessed a significant burst in investment—fueled by investment in core technology from the hyperscale firms and a budding consulting and strategy business. However, as many CIOs soon found out, migrations require more than dragging and dropping applications into new shiny cloud environments. Before most legacy applications can be migrated, they need a highly-technical team to modernize and optimize them—a time-consuming, complex, and often expensive task that is usually packaged into broader multi-year transformation programs. However, many of the executives we’ve spoken to advise that this timeline has become dramatically shorter—with modernizing and re-platforming the core the only long-term sustainable approach to managing the COVID-19 business environment.
IT services firms should be focusing on this line of high-value work right now. They must ensure they have the teams, tools, and delivery credentials to help enterprises move beyond short-term infrastructure considerations and onto a re-platforming exercise that meets the needs of the now mandatory transformation requirements businesses are facing with a rapidly shortening runway.
The Bottom Line: Smart providers will invest now in anticipation of increased business spending on complex IT transformation initiatives—once the dust has settled on immediate business concerns.
The reality for many enterprises today is that immediate considerations are taking up the bulk of corporate mindshare. When there are complex logistical challenges to getting laptops to the newly decamped workforce, focusing on sweeping IT change seems counterintuitive. However, this short-termism will soon subside with a moment of awakening for many IT leaders—that simply kicking the transformation can down the road over the last decade has left them sorely prepared to meet the needs of an enforced decentralized world. And with no sign of things returning to normal, they will soon realize they need to make important decisions now—and providers must ensure they are ready to answer the call.