Surveys reveal opportunities for better enterprise IT, service-provider alignment in COVID-19 era

September 1 2020
by Nicole Henderson


As enterprises progress further into cloud-enabled digital transformation efforts and encounter complexity in building, securing and operating those systems, organizational skills gaps are emerging as a key barrier to execution. One of the primary roles of service providers is to offer access to a level of expertise that the enterprise lacks internally, and it is critical that service providers package that expertise in a way that aligns directly with enterprise priorities. The COVID-19 pandemic has emphasized this by adding urgency to digital transformation plans in which enterprises put hiring on hold as a cost management strategy.

The 451 Take

Service providers play a critical role in enterprise digital transformation by offering access to a high level of expertise that better enables enterprises to accomplish the business outcomes they have defined for their use of cloud services. Understanding the business objectives driving enterprise engagement with their services can be critical to the success of those engagements. While SLAs help to define and track performance requirements, they don't translate directly to satisfaction; it is entirely possible for an enterprise to be dissatisfied with the net outcome of a service that is effectively meeting its SLAs. Enterprise IT objectives for cloud are often fully aligned with big-picture organizational objectives, so a service-provider engagement is ultimately likely to be judged on whether it made the business more agile or operations more cost effective. However, a comparison of 451 Research survey responses suggests there is a gap between enterprise IT spending priorities versus where service providers are allocating the most funds. Many service providers surveyed also fail to grasp some of those enterprise business outcomes driving engagement. At worst, this misalignment could lead to lost business for service providers, especially as many customers may require immediate support to navigate challenges as a result of the circumstances surrounding the COVID-19 pandemic, as well as guidance to help understand the long-term impacts of these decisions toward digital transformation outcomes.

Service-provider spending is driven by digital transformation

Digital transformation is not only an imperative for enterprises, it is also consistently cited as a priority among the service providers we survey. Responding to 451 Research's Budgets & Spending 2019 survey, 94% of service providers say that at least partial transformation of their IT environment is necessary to support their business. While this survey was conducted prior to the full brunt of COVID-19, we continue to see digital transformation as a critical area of investment for service providers as enterprises adjust to new ways of working.

Transformation is an area in which service-provider plans are particularly aligned with the needs of their enterprise customers. In response to an enterprise survey from roughly the same time period, 451 Research's Cloud, Hosting & Managed Services, Organizational Dynamics 2019 study, 87% of enterprises said they were currently developing or actively executing on strategies for digital transformation.

These businesses are applying new technologies to processes across the organization and creating new requirements for how and where data is stored, analyzed, archived and distributed. These new requirements open the door to new opportunities for service-provider support, but create new requirements for software, capacity, security and expertise.

According to the service providers survey, more than half (57%) of service providers plan to increase IT spending in 2020. Service providers that expect to grow IT budgets plan to do so to scale capacity and grow their existing business (54%), meet new internal IT initiatives/project requirements (47%), increase performance requirements (47%), and add new product and service offerings (41%). Many of these areas were impacted by the circumstances surrounding the COVID-19 outbreak, although for some service providers existing business has grown, and has required increased performance as more customers leverage cloud services and additional applications that facilitate secure work-from-home environments.

Service-provider portfolios must incorporate transformative technologies

Although service providers and their customers are aligned with digital transformation as a guiding principle, survey data from 451 Research shows that they are not always aligned on which technologies are most influential to the success of their business. For instance, emerging areas like machine learning and IoT are not treated equally by service providers despite enterprises identifying them as the most transformative technologies behind cloud. Identifying this misalignment can provide an opportunity for service providers to support new technology areas, where enterprises are likely to require more guidance while they work on developing internal skills or perhaps outsource these capabilities completely to service-provider partners.

Figure 1

Aligning to Transformative Technologies

Mismatched priorities will make it difficult for service providers to articulate the value they bring to an organization, particularly if they are unable to package their expertise in a way that is directly relevant to enterprise decision-makers. If enterprise budgets prioritize the most transformative technologies, service providers should reflect on how they address these areas through their services and expertise.

Making the case for managed services

When we look at the qualities that are important for enterprises to make the business case for managed services at their organization, a top feature is the ability for organizations using managed services to free IT staff to focus on other IT projects (45%), according to 451 Research's Cloud, Hosting & Managed Services, Workloads and Key Projects 2019. Service providers we surveyed in 451 Research's Differentiation & Vendor Selection 2019 survey consider this factor a lesser pain point for customers.

Figure 2

Meeting Key Customer Requirements

Another key factor among enterprises in choosing to use managed services is cost effectiveness. If customers are looking for a cost benefit as a critical part of their engagement, service providers need to effectively articulate how, despite managed services costing more money than DIY approaches, service providers can help customers save costs.

Enterprises are not often selecting managed services to access better management tools, even as service providers regard management tools as a key pain point for customers. While management tools are a component of customer experience, they are not a driving factor for decision-makers in making purchasing decisions around managed services. A good management tool should blend into the overall experience, which may be why it is not a standout capability for enterprises. If a service provider believes a capability to be a differentiator, they need to explain how that differentiator ties into business outcomes. The ability to have persuasive conversations with customers that clearly identify how the tools and support service providers offer help customers accomplish business goals is critical to the success of an ongoing engagement.

Pace of digital transformation accelerates as COVID-19 presents challenges, opportunities

Digital transformation has remained a top priority for enterprises, even as the circumstances surrounding COVID-19 present new challenges on a constant basis. In some ways, the COVID-19 pandemic has acted as a catalyst for enterprises exploring new technologies that put them on a path toward digital transformation, and a reliance on service providers to help them meet changing requirements. According to our Digital Pulse, Coronavirus Flash Survey June 2020, 20% of respondents are accelerating overall digital transformation initiatives as a result of the COVID-19 outbreak. Aside from digital transformation, security (29%), automation of business practices (24%) and shift to digital delivery of customer experience (29%) are all on an accelerated timeline as a result of the pandemic.

Enterprises are looking to service providers to offer some direction around how to effectively deal with the challenges presented by the pandemic. This is an important time for service providers to support their clients with some prescriptive strategic advice on how to successfully accelerate these projects to address evolving business outcomes. Service providers should consider how their offerings are fit to address new challenges that have surfaced as a result of the pandemic. For example, enterprises may be interested in technology solutions like IoT to enforce physical distancing in the workplace, and might require support from service providers to design and implement this type of project.

The pandemic has fundamentally altered how and where we work as budgets for travel and physical office space are slashed and collaboration tools become a top spending category. However, long-term digital transformation becomes even more complex as enterprises move beyond collaboration tools and eye more strategic cloud migration of applications while struggling with access to the talent required to execute these projects at scale. Service providers that have been trusted partners in supporting customers in the immediate aftermath of COVID-19 are well-positioned to address long-term outcomes for customers, but to do so they must examine their own priorities in order to ensure portfolios meet requirements that may have shifted as a result of COVID-19.


When service providers and enterprises achieve a path of alignment, the benefits are mutual – service providers have a competitive offering that delivers outcomes for customers, and enterprises have a trusted adviser that they can rely on to identify strategic areas of growth and digital transformation. By clearly defining the intended business outcomes at the outset of an engagement, both parties can ensure a partnership delivers innovation and resiliency in the face of uncertainty.