U.S. Public Sector Accelerating Move to Private/Hybrid Cloud

Changing operational requirements and increasing complexity boost demand for modernization, cloud migration and outsourcing, ISG Provider Lens™ report says

Public-sector organizations in the U.S. are still rapidly adopting private and hybrid clouds, increasing the need for managed services and hosting, 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™ Private/Hybrid Cloud — Data Center Services report for the U.S. Public Sector finds many state, local and educational (SLED) organizations are migrating or modernizing legacy applications, often in response to changes in work modes and service delivery caused by the COVID-19 pandemic. They continue to seek outsourcing engagements, which until recently were rarely used in the sector, to manage increasingly complex IT environments.

“It’s hard to see an end to this growth. Every factor that drove public-sector IT transformation in 2022 is still accelerating,” said Nathan Frey, partner and lead, ISG Public Sector, for the U.S.

Those factors include overall cloud adoption, increasing use of edge computing, rising security threats, the end of life for legacy software and hardware and a growing embrace of new computing styles and development methods, the report says. The pandemic generated new demand for hybrid work modes and more online services, and it triggered a wave of retirements in a sector already suffering from an IT skills shortage.

New private and hybrid cloud infrastructure and services to meet these demands make public-sector IT environments, which typically include several generations of separate on-premises and cloud applications and systems, even more complex, ISG says. Managed services providers are stepping in with monitoring, control and management capabilities that have been lacking in many public-sector IT departments, making operations more cost-effective and sustainable.

A growing number of SLED organizations are also seeking managed hosting for older core business software that is reaching the end of life but cannot be shut down yet, the report says. Managed hosting providers offer the skilled resources to keep these applications running, which public agencies often lack. In an increasing number of cases, hosting is integrated into managed services portfolios. Increasing digital maturity and a recent surge in funding has made the U.S. public sector a more attractive cloud services market, ISG says. This year’s report identifies 24 qualified managed services providers, up from 19 last year, and 17 qualified managed hosting providers, up from 12.

“The modernization wave since the pandemic has caused an influx of service providers to the public sector,�� said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Clients have a growing number of potential partners to consider.”

The report also explores other cloud trends in the U.S. public sector, including the growing use of edge computing and increasing pressure to support uniform services across state and local governments.

For more insights into the top cloud challenges facing the U.S. public sector and advice on how to address them, including how to acquire cloud services tuned to the needs of SLED organizations, see the ISG Provider Lens™ Focal Points briefing here.

The 2023 ISG Provider Lens™ Private/Hybrid Cloud — Data Center Services report for the U.S. Public Sector evaluates the capabilities of 30 providers across two quadrants: Managed Services and Managed Hosting.

The report names Ensono, Kyndryl, Rackspace Technology and Unisys as Leaders in two quadrants each. Accenture, IBM, Infosys, Lumen, NTT DATA, TCS and Wipro are named as Leaders in one quadrant each.

A customized version of the report is available from Unisys.

The 2023 ISG Provider Lens™ Private/Hybrid Cloud — Data Center 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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