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IDC: APeJ service providers’ business model changing rapidly

By Ben Moore
Fri 24 Aug 2018
FYI, this story is more than a year old

APeJ (Asia Pacific excluding Japan) services providers are rapidly exiting their traditional business models with only two-thirds saying they will have a similar business model by 2020, a recent IDC survey shows.

It reveals that cloud service demand due to digital transformation is changing the delivery of business-oriented solutions.

Service providers are ramping up their investments in new offerings to cater to their client's requirements, not just for new infrastructure, but also applications, and managed and professional services delivered via cloud services.

This is the first survey from the recently launched IDC ‘Service Provider Pulse’, the latest subscription service available from IDC Cloud Primary Research which provides a complete understanding of suppliers, buyers and consumers of cloud products and services across the entire ecosystem.

"Cloud service providers around the world are rapidly changing their business models in response to unprecedented customer demand, offering a mix of new cloud infrastructure, application, and managed services as part of an agile investment strategy," says IDC Asia/Pacific cloud service providers research vice president Chris Morris.

"What is striking is not only the pace of transformation but also the variety of offerings coming to market as a result. From managed cybersecurity to performance optimisation, the hosting of complex business applications and hybrid cloud are offering the potential for service integration at the point of delivery."

Highlights from the IDC Service Provider Pulse 1Q18 Quarterly Summary includes:

  • APeJ cloud service providers - including systems integrators (SIs), value-added resellers (VARs) and distributors are dramatically shifting business models to managed services, PaaS & Cloud.
  • Unsurprisingly, security is the most important consideration for 38% of cloud service providers to achieve their business goals in the next two years, while security services will account for the largest increase in new cloud service investment with 44% indicating that by 2020 they will bundling managed security services and professional services with their infrastructure service offerings.
  • 81% of service provider revenues are for services above the infrastructure level, with opportunities existing in managed and professional services pulling-through demand for the underlying cloud services. Professional services are now a larger part of the revenue profile for smaller providers as they replace their traditional resale and hosting revenue streams with new managed services, while larger organisations are more focused on security services.
  • While resale of services from the hyper-scale cloud SPs is common, maintaining control of their own IT is a key business strategy for cloud service providers with 69% planning to increase their level of spending on software, device, and/or IP development to better compete.
  • Software specialists will increasingly become services specialists over the next two years, creating offerings usually associated with managed service providers, cloud service providers, hosting firms, telco providers, and outsourcers/systems integrators.

The IDC Service Provider Pulse is a quarterly survey using primary research from insights provided by IT business leaders and Line of Business executives with knowledge of their service strategy.

The Q1 2018 findings are based on a May 2018 online survey of 500 respondents across North America, EMEA and Asia/Pacific.

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