U.S. Public Sector Seeks Partners as Cloud Use Expands

Broad, deep public cloud adoption fuels demand for services to control costs, manage growing complexity, ISG Provider Lens™ report says

Rising cloud investments in the U.S. public sector have led organizations to look more closely at their cloud use and the growing number of services available to the sector, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2023 ISG Provider Lens™ Multi Public Cloud Services report for the U.S. public sector finds that public cloud adoption is still rising among state, local and educational (SLED) organizations, many of which moved to the cloud to support remote work and digital constituent services when the COVID-19 pandemic hit. New, pandemic-related federal grants and loans have not yet caused a massive spending boom, because close scrutiny of cloud investments, changing regulations and other factors led many organizations to slow down their efforts, ISG says. However, the SLED market for cloud-related services has grown significantly, and more providers have entered the market.

“There is still widespread public-sector interest in the cloud,” said Nathan Frey, partner and lead, ISG Public Sector, in the U.S. “Service providers are stepping up to meet the demand, so organizations have more choice.”

Many SLED agencies are likely to progress from early cloud deployments to cloud-first environments soon, and cloud adoption in the sector eventually will be even broader than first forecast, ISG says. The need to do more with smaller budgets, while facing staff shortages and the end of life for legacy IT systems, will force more public organizations to the cloud.

As these organizations expand their cloud-first or cloud-plus-legacy environments, especially with more than one hyperscale provider, managed services are becoming more essential to public-sector cloud strategies. Agencies are engaging with cloud service management providers to make their cloud environments more efficient, reliable and cost-optimized. Many begin by procuring managed services from the providers that introduced them to the cloud, then add other providers.

The use of cloud infrastructure and platform services in the U.S. SLED sector is growing more slowly than expected, but also more broadly and deeply, ISG says. In response, hyperscalers have begun engineering and managing their services to comply with the strict regulations covering the public sector, such as security and privacy rules. System integrators, IT consulting firms and other providers are following suit, and clients are favoring those with the strongest partner networks.

Cloud migration is also changing SLED organizations’ approach to SAP deployment, with some making compulsory transitions to the cloud while others adopt SAP for the first time because of the low cost of using it in the cloud, the report says. These trends increase the sector’s need for SAP migration, development and hosting services.

“This is a new day for public-sector cloud use,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Most public agencies need strong support from partners to make the most of the cloud, but they can choose from more providers than ever.”

The report also explores other public cloud trends in the U.S. public sector, including the rise of cooperative contracting among agencies and SLED organizations’ increasing reliance on states’ cloud-based IT environments.

For more insights into the cloud challenges faced by U.S. public sector organizations, including heightened security requirements, and advice for how to overcome those challenges, see the ISG Provider Lens™ Focal Points briefing here.

The 2023 ISG Provider Lens™ Multi Public Cloud Services report for the U.S. public sector evaluates the capabilities of 37 providers across four quadrants: Consulting & Transformation Services, Managed Services, Hyperscale Infrastructure & Platform Services and SAP HANA Infrastructure Services.

The report names IBM as a Leader in three quadrants. It names Accenture, AWS, CGI, Deloitte, Infosys, Kyndryl, Microsoft, Rackspace Technology and Unisys as Leaders in two quadrants each. Ensono, NTT DATA and SAP are named as Leaders in one quadrant each.

In addition, HCLTech, Kyndryl and Tech Mahindra are named as Rising Stars — companies with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant each.

A customized version of the report is available from Unisys.

The 2023 ISG Provider Lens™ Multi Public Cloud Services report for the U.S. public sector is available to subscribers or for one-time purchase on this webpage.

About ISG Provider Lens™ Research

The ISG Provider Lens™ Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of detailed data and market analysis to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe, as well as in the U.S., Canada, Brazil, the U.K., France, Benelux, Germany, Switzerland, the Nordics, Australia and Singapore/Malaysia, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit this webpage.

A companion research series, the ISG Provider Lens Archetype reports, offer a first-of-its-kind evaluation of providers from the perspective of specific buyer types.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.

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