Ewa Zborowska (Research Director)
Riccardo Barrai (Research Analyst, European Services Group)

IT services markets in Europe have been heavily impacted by the COVID-19 pandemic. In IDC’s latest BlackBook update, the European services market is expected to decline overall at 4% in 2020. The hardest hit will be project and business services. While managed services (overall) are expected to decline moderately, managed cloud services (MCS) are a potential bright spot.

IDC’s latest COVID-19 Buyer Pulse Survey results (from April 27, 2020) indicate that despite the current COVID-19 crisis, infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) services are among the few technologies for which IT spending is likely to remain relatively resilient; 58% of European businesses are expected to either maintain or increase their IaaS and PaaS spending, and this will have a knock-on effect for managed cloud services providers.

In addition to seeking feedback from IT buyers in Europe, IDC analysts have also talked to MCS providers to get their perspective on the impact on their business. This blog shares some of our key takeaways from these discussions.

Cloud Services Can Thrive in Times of Uncertainty and Crisis

What stood out in the discussions with major European MCS providers is that most expected their managed cloud services business to remain relatively resilient and, in some cases, to be positively impacted by the current situation. Most expect MCS contract renewals to continue, while anticipating an uptake in cloud migrations and, in some instances, an acceleration in cloud transformation from some of their customers.

Managed cloud services provide business continuity and agility, which are extremely valuable for companies in periods of uncertainty and crisis. Some have been very agile in adapting and launching new managed cloud services to respond to their customers’ needs. A good example is Cloudreach, a multinational managed cloud services provider that has released a set of accelerated business continuity services to help customers operate their business in these unprecedented circumstances. Such services include cloud strategy and remote consultation (particularly focused on areas such as business continuity), cost optimization, and remote working and connectivity — all of which are helping customers to digitally run their business and tackle some of their main challenges.

Nordcloud has adopted a similar proactive approach to help its customers; the company offers short-term solutions such as remote working and infrastructure setup, and mid-term solutions to increase overall business resiliency, such as recommended best practice guides and policies.

These are just two examples of managed cloud service providers that have taken a proactive and customer-centric approach to their customers, and this has been mirrored in many discussions with managed service providers in Europe.

Because COVID-19 has forced companies across Europe to shut down offices, it has encouraged businesses to embrace technology for remote working — and cloud services can play an important role in ensuring business continuity.

Also, with cloud in general and IaaS in particular operating in an opex and/or consumption model, this helps customers to more flexibly adjust to demand; it’s also extremely valuable in times, like these, when cash preservation is key and customers can’t allocate significant budgets up front. The relative flexibility of cloud contracts enables companies to scale up and down to adjust to current business needs. As the main business priority for companies now is cashflow management to survive and stay in business, the crisis could accelerate cloud transformation for many organizations seeking more efficient ways to manage their IT resources.

Managed cloud services could be a bright spot for the IT services industry. Many markets in Europe have been fairly conservative toward cloud adoption, but the current situation could accelerate wider cloud adoption.

Recommendations for Cloud Service Providers

From our recent discussions with both end users and cloud service providers, one powerful message has emerged for cloud service providers: Just be there!

  • Be there for your customers. Managed cloud service providers have realized that it’s critical to reach out to their clients and take care of them, that they have access to all the resources they need, that they are able to regroup their cloud platforms to support quickly changing business needs, and that they use cloud in the most cost-efficient way. Customer-centricity is more important now than ever before. They should look to offer new services offerings to support their clients during these uncertain times — and, in some cases, offer them free of charge. MCS providers need to sustain their own businesses, of course, but additional and more flexible support for clients will help build long-term relationships that will stand them in good stead in the future.
  • Be there for your employees. Managed cloud services companies have already provided their services remotely and communicated with their customers and partners via various digital channels, so most providers have had no problems shifting their employees to remote working. It’s not enough, however, to just offer your employees high-speed internet and access to all the applications they need to use. To maintain their business, companies need to make sure their employees feel safe and comfortable. That’s why it’s crucial to offer flexible working hours, when and where possible, especially for employees that also have to home-school their children or take care of older family members. Also, it’s worth remembering that working from home is not just a to-do list — it’s also about keeping corporate communication, connection, and collaboration alive. Companies have already reached out to apps and platforms offering more informal ways of working and communicating. Your employees also may need extra support to maintain their mental and emotional well-being, so look to work with partners to provide this if needed.
  • Be there for your company. MCS providers are not immune to the current uncertainty and business risk. Cashflow and business continuity remain important. Look to put crisis teams in place to keep your finger on the pulse, adopting an outside-in and inside-out approach to respond to new requirements and new measures quickly. Sales, marketing, customer care, and operations departments have had to adjust quickly. You need to adjust contract terms and launch new services to support customer needs, stay up to date with changing government guidelines aimed at helping companies during the post-pandemic economic slowdown, and rethink recruitment processes now. Your experts’ bench-time can be devoted to learning new skills, performing pro bono projects associated with the COVID-19 response, or enhancing competences to support future growth and development. It’s worth noting that most managed cloud service providers were continuing to recruit in the first quarter, albeit more cautiously. In the second quarter, IDC expects more cautious hiring, but the talent war in cloud means that some providers may continue to recruit for top talent.
  • Be there for your community. Offering support for a common good is what counts in times like these. MCS providers can support companies and public and healthcare institutions fighting COVID-19 directly by offering technology platforms for operations continuity or data analysis. OVH, for example, launched the Open Solidarity initiative to offer technology platforms and support for businesses in the healthcare, education, and remote working sectors, offering its solutions and services free of charge, on a commitment-free basis. Many MCS providers have engaged in new projects aimed at creating tools for COVID-19 case tracking or therapy development. Support for remote communication and collaboration for the education sector is invaluable. Many are also offering softer help — providing help for the elderly in care homes, for example. Every form of material or financial aid is needed at a time like this, when cooperation and social solidarity are vital.

Managed cloud service providers are more resilient to the current economic situation than many others, and should use their position wisely to become heroes to their customers in their time of need.

To learn more, please contact Riccardo Barrai or Ewa Zborowska.

For more on COVID-19 and how it is affecting the European technology landscape, click here.

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