From Managed Cloud Services to Digital

Integrators: The Evolving Role of Service

Providers in the AI/GenAI Era
Quarterly Call with Orange Business Services

Francesca Ciarletta
Research Manager
European Managed Cloud Services
September 2024
 Agenda

Reduce Overspending in IT
Setting the scene: Industry
01 04 Infrastructure With AI and
and market Overview
Managed Services

What organizations need from

02 Competitive dynamics 05 their Service Providers to
support AI journey

Cloud as foundation of Q&A

03 Generative AI
06

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Setting the scene: Industry and market Overview

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Organizations are shifting from cloud first to cloud value.

What Organizations Are Top 3 Business Outcomes Top Challenges to Value

Looking to Achieve with Most Difficult to Realize Realization
Cloud from Cloud

1 Cost reduction
Cost Reduction
1 Cost reduction
Cost Reduction
1 Skills shortage
Cost Reduction

2 More efficient/optimized
operations
2 Full use of features in
cloud
2 Lack of culture
Cost Reduction

3 Improved employee
productivity, retention 3 More efficient/
optimized operations
3 CostLack of frameworks
Reduction

Source: IDC’s European Cloud Survey (August 2023); N = 1,610

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For many enterprises, the cloud journey is just beginning.

Cloud Maturity in Europe Environments with the Highest Spend of IT budget

Source: IDC’s European Cloud Survey (August 2023); N = 1,610

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Hybrid and multicloud are at the heart of the digital infrastructure of the
future. To get the foundations right, enterprises must master several domains.

IDC’s Future of Digital Infrastructure Framework, 2024

Source: The Future of Digital Infrastructure, 2024: AI-Ready Platforms, Operating Models, and Governance (IDC #US50614724, March 2024)
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Competitive Dynamics

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MSPs Are Challenged by Skills Shortage But Eye AI as a Top Opportunity
MSPs Challenges and Opportunities
Economic Uncertainty Changing Customers Buying
Behavior
Changing Costumers Buying
Behavior Economic Uncertainty

Skills Shortage
Artificial Intelligence
(including GenAI)
New Competitors
Challenges VS Opportunities Vendor Relations

Data Sovereignty
Requirements Data Sovereignty
Requirements

Political Uncertainty Sustainability related

regulations

MSPs Top Investment Priorities

1 Highly Skilled
Talent 2 Industry-Specific
Capabilities and
Offerings
3 Expanding Services
Portfolio and
Capabilities

Source: IDC, European Partner Survey 2023, n=702 [European Partners]; 148 [European MSPs]

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The Competitive Landscape Is Increasingly Interconnected As Co-Opetition
Becomes The Norm
73% of European Partners offer managed cloud services
Source: IDC European Partners survey 2023

EXAMPLES
Cloud Service
Providers

EXAMPLES
Managed Service
Providers

System

EXAMPLE
Integrators
The
Customer
Telco

EXAMPLE
Cloud Specialist

EXAMPLE
Source: IDC, 2024

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Platform-Centric Providers Are Top of Mind for Cloud Management
Preferred Partners for Cloud Projects in Willingness to Switch Provider
Europe Willingness to Switch Provider

Sovereign cloud provider 33%

32% 23% of organizations are looking to switch their current
16% managed cloud service vendor
Software vendor
24%

Global cloud provider 22%

21% Top reasons for Switching Preferred Providers for Switching
Managed cloud services 18%
provider 18%
Improve quality of service
Systems integrator 16% 22%
18%

Consulting company 15%

16% Provides public and private
12% cloud platforms 21%
Hardware vendor
16%
Telecommunications 12%
operator 13% Has a broader portfolio of
cloud services 17%
Local cloud provider 15%
13%
2025
Niche services provider 10%
9% 2023 Q. Primary Reason for Switching Vendors. Please select the primary reason that your
company/organization is considering switching to a new vendor(s) for managed cloud
services.

Source: 2023 Managed Cloud View, July 2023, IDC

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Managed Service Providers are Critical Cloud Enablers Today, but Focus Must Shift
to Value-Added Services in the Future
The 1st Role of Managed Service Providers to Support Public IaaS

All Europe By Country

Transformation from
29%
legacy to cloud

Integration and
management of IaaS, 25%
PaaS, SaaS

Support in switching from

one cloud provider to 18%
another

Multicloud 14%

Value added capabilities 13%

DACH Bel+NL DK+SWE Pol+CZE UK+IRL France Italy Spain

Q. What are the top two roles, in order of importance, managed service providers play in your organization's use of public cloud infrastructure services, such as IaaS and PaaS?;
Source: IDC EMEA, European IT Services Survey, September 2023 n=700
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Areas of Focus for Service Providers

Business
Model

01

03 02
Portfolio Service
Delivery

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Cloud as Foundation of Generative AI

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Q. What is the top benefit your organization expects to get from your cloud platform strategy? What is the
next most important benefit?

Top Benefits of Cloud platform Strategies

Improved security, governance and compliance of our data and

applications

Improved scalability, uptime and availability

Improved IT staff productivity

Better control over cloud costs

Accelerate integration of AI & automation into business

Faster access to innovative AI technologies

Faster application modernization

No benefits expected

1st 2nd

Q. What is the top benefit your organization expects to get from your cloud platform strategy? What is the next most important benefit?
Source: Future Enterprise Resiliency & Spending Survey Wave 2, IDC, February, 2024, N=213 (Western Europe) Data weighted by IT spend (500+ emp size)​
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Q. Which of the following statements best describes your organization's approach to adopting a cloud platform strategy to
support your AI and digital business efforts in the next 18 months?

Organizations’ primary approach to adopting a cloud platform strategy to support your AI and digital business
efforts in the next 18 months

We are consciously spreading our resources, skills, and development efforts

across several cloud platforms whose offerings address our infrastructure, data, 40%
and application needs

We are committing a majority of our resources, skills, and development efforts

to a primary cloud platform that addresses a wide range of infrastructure, data, 26%
and application needs

We are using cross-cloud solutions based on standard infrastructure and data

technologies that makes it possible for us to use a wide range of cloud 20%
resources

We are aggressively leveraging open-source options to prevent us from being

locked in to any one cloud platform or software provider
8%

Cloud platforms will not play a significant role in our AI & digital business efforts 4%

Source: Future Enterprise Resiliency & Spending Survey Wave 2, IDC, February, 2024, N=213 (Western Europe) Data weighted by IT spend (500+ emp size)​
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Q. Please indicate the ratio in spending across these two areas of infrastructure to support Gen AI
model creation and inferencing in the next 18 months.

Public cloud IaaS Dedicated

hardware/software in our
(e.g., AWS, Microsoft Azure
51% 49% datacenters or at a
AI, etc.,)
colocation facility

Source: Future Enterprise Resiliency & Spending Survey Wave 2, IDC, February, 2024, N=225 (Western Europe) Data weighted by IT spend (500+ emp size)​
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When choosing an IT deployment model for GenAI workloads, data requirements and implications
for cybersecurity and resiliency will orientate organizations selection across on-premise, hosted,
public cloud and edge infrastructure.
Most important Criteria when making GenAI workload and data deployment choices across on-prem, hosted,
public cloud and edge infrastructure options over the next 18 months?

Implications for Cyber security and resiliency 18% 17% 12%

Data volumes, locations and integration requirements 17% 15% 18%

Vendor provided support/managed services 15% 12% 12%

Hybrid and multicloud interoperability 14% 15% 14%

Time to value 14% 10% 9%

Infrastructure costs 10% 13% 16%

Power, cooling, or physical space constraints 8% 11% 12%

Don't Know/ Unsure 5% 5% 6%

1st 2nd 3rd

Q. What criteria are most important when making GenAI workload and data deployment choices across on-prem, hosted, public cloud and edge infrastructure options
over the next 18 months?

Source: Future Enterprise Resiliency & Spending Survey Wave 1, IDC, January, 2024, N=220 (Western Europe) Data weighted by IT spend (500+ emp size)​
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After cloud providers, European executives consider service providers the most strategic partners
for GenAI. Cloud providers are the fulcrum of the AI ecosystem, service providers enable European
firms to properly adopt the technology.
Most Strategic GenAI technology Partner In the Next 12 Months – January and April 2024 view

Cloud provider (e.g., Amazon AWS, Microsoft Azure, Google GCP, Alicloud,
IBM Cloud, Tencent, etc.)
IT Consulting/SI partners (e.g., Accenture, Deloitte, IBM Consulting, TCS,
etc.)
Enterprise Application providers (e.g., Oracle, Salesforce, SAP, Workday,
ServiceNow, Box etc.)

GenAI Model/Tool vendors (OpenAI, Anthropic, AI21, Co.here, etc.)

Digital infrastructure providers (e.g., Cisco, Dell, HPE, Huawei, IBM, Inspur,
Lenovo, etc)

Business Consulting partners (McKinsey, Bain, BCG, etc.)

GenAI startups (LangChain, Inflection, Jasper, Glean, Primer, etc.)

Semiconductor vendors (NVIDIA, Intel, AMD, Qualcomm, Samsung, etc.)

April '24 Jan'24

Q. Which of the following type of vendor will be your most important strategic GenAI technology partner in the next 12 months?
Source: Future Enterprise Resiliency & Spending Survey Wave 1, IDC, January, 2024, N=220 Data weighted by IT spend (500+ emp size)​
Source: Future Enterprise Resiliency & Spending Survey Wave 4, IDC, April 2024, N=220 Data weighted by IT spend (500+ emp size)

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Reduce Overspending in IT Infrastructure
With AI and Managed Services

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Efficient IT infrastructure is the backbone of digital businesses. Inefficient infrastructure
management practices and excessive technical debt are the two main causes of overspending
among European organizations.

Two Most Important Factors Forcing Organizations to Overspend on Digital Infrastructure

49%
Inefficient infrastructure management 46%

Excessive tech debt/cost of keeping older apps

44%
running

Of European
organizations are Lack of business aligned infrastructure strategy 39%

expecting to Too many uncoordinated infrastructure

overspend on purchasing centers
37%

digital
Public cloud spending poorly managed 26%
infrastructure
Other 1%

Source: IDC's Future Enterprise Resiliency & Spending Survey — Wave 3, March 2024 (n = 220 respondents from Western Europe)
Data weighted by IT spend (companies with 500+ employees)
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In 2025, European firms will be prioritizing cyber-resilience and AI for infrastructure spending.
Surprisingly, reducing technical debt ranks low on the list despite being a major factor driving IT
overspending.

Top Digital Infrastructure Priorities to Achieve Business Goals in the Next 18 months

Increase cyber resilience and security 39%

Develop a strong business case for AI infrastructure spending 31%

Reduce power, cooling and carbon to meet sustainability goals 29%

Modernize storage & data management 23%

Move more aggressively to public cloud 19%

Create/enhance Center of Excellence for better governance 19%

Consolidate servers and data centers 17%

Reduce tech debt 15%

Q. Considering your digital infrastructure priorities for the next 18 months, which of the following is the most
important for achieving your business goals? Which is the second most important?

Source: IDC's Future Enterprise Resiliency & Spending Survey — Wave 3, March 2024 (n = 220 respondents from Western Europe)
Data weighted by IT spend (companies with 500+ employees)
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Most Disruptive and Most Positive Impact of Gen AI on IT Operations Areas (%) in Europe

IT & Cloud Infrastructure Automation & Support

Application Performance Optimization

Data Management

Cybersecurity & Compliance

FinOps for IT Cost Optimization

Code creation & DevOps

0% 5% 10% 15% 20% 25% 30%

Most Distruptive Most Positive

Q. Most positive - Thinking about the organization in which you work, in which IT Q. Most disruptive - Thinking about the organization in which you work, in which IT
technology/operations area do you think GenAI will have the most positive impact on team's technology/operations area do you think GenAI will have the most positive impact on team's
efficiency and effectiveness in the next 18 months? Where will it have the most disruptive impact? efficiency and effectiveness in the next 18 months? Where will it have the most disruptive impact?

Source: IDC's Future Enterprise Resiliency & Spending Survey — Wave 4, April 2024 (n = 220)
Data weighted by IT spend (companies with 500+ employees)​
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Regarding IT operations, over the next 18 months, European organizations will prioritize GenAI use
cases that focus on enhancing data and storage management to protect data and optimize data
storage, followed by infrastructure performance and observability and infrastructure automation.
GenAI-Enhanced IT Operations to be put Into Production in the Next 18 Months
#1 By country
Data and storage management (automation and
optimization of data storage capacity, protection, 44%
backup, recovery, etc.) Infrastructure
automation 40%
Infrastructure performance and observability analytics
(root cause analysis, noise reduction, dynamic 39%
baselining, anomaly detection) Data and storage
management 52%
Infrastructure automation (infrastructure as code run
book generation, workload deployment and migration, 38%
configuration drift mitigation, etc.) Data and storage
management 50%
Service desk user experience (ticket deflection, routing,
knowledgebase search & summarization, virtual agent, 30%
etc) Data and storage
management 42%
FinOps (cost data ingestion, analysis, optimization
21%
recommendations, predictive capacity management)

Q. Considering messages and announcements related to use of GenAI to improve people, process and tools supporting
infrastructure operations, which GenAI-enhanced IT Operations use cases will you put into production in the next 18 months?

Source: IDC's Future Enterprise Resiliency & Spending Survey — Wave 2, February 2024 (n = 225 respondents from Western Europe)
Data weighted by IT spend (companies with 500+ employees)​
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Managed services are organizations' preferred GenAI infrastructure sourcing
option to reduce concerns over GenAI infrastructure technical debt

Preferred Sourcing Options to Reduce Concerns Over GenAI Infrastructure Technical Debt

Managed services with contractual guarantees to avoid tech

23%
debt

Using a mix of public cloud and dedicated infrastructure as-a-

22%
service solutions

Dedicated infrastructure as-a-service solutions with vendor

19%
provided lifecycle updates included in the subscription

Public cloud services that are constantly updated by the

19%
service provider

CapEX based infrastructure purchasing paired with vendor

17%
support contacts that provide tech refresh services

Q. Which of the following GenAI infrastructure sourcing options would most reduce concerns related to technical debt?

Source: IDC's Future Enterprise Resiliency & Spending Survey — Wave 2, February 2024 (n = 225 respondents from Western Europe)
Data weighted by IT spend (companies with 500+ employees)​
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Key Takeaways

1 2 3
Inefficient IT leaders will focus Managed services are
infrastructure on applying GenAI to the preferred sourcing
management practices IT operations to strategy to reduce
lead to overspending, increase security and concerns over
resulting in lost efficiency. technical debt
opportunities for associated with GenAI
innovation. infrastructure.

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What Do European Organizations Need from
Service Providers to Support Their AI Journey

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Partnering with Service Providers for AI Brings Many Benefits to Organizations
Top Benefits of Partnering with Service Providers for AI
Overall benefits of partnering
Better value realization: Focus on proving ROI, tying AI to with Service Providers for AI
19% 11%
quantified business outcomes

Better adoption: Managing

Faster development: Skilled talent and rapid delivery
16% 11% key internal stakeholder
methods, tools, and platforms needs and enabling end users

Better solutions to specific problems: Expertise across our

16% 18% Earlier access to innovation:
industry, functional, and technical needs Leverage technology provider,
startup, and research
Greater risk awareness and mitigation: Access expertise in ecosystem
14% 20%
secure, responsible, and sustainable AI use
Better solutions to specific
problems: Expertise across our
Earlier access to innovation: Leverage technology provider, industry, functional, and technical
13% 15%
startup, and research ecosystem needs

Greater risk awareness and

Better adoption: Managing key internal stakeholder needs mitigation: Access expertise in
12% 12%
and enabling end users secure, responsible, and
sustainable AI use

More cost-effective: Global delivery, automated services, and

10% 13%
flexible contracting

1st 2nd

Q. Which of the following do you consider the most important benefit of partnering with external services providers to execute AI initiatives, compared to
relying on internal resources? And which will be the second most important benefit?
Source: Future Enterprise Resiliency & Spending Survey Wave 1, IDC,; n=220
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 AI Consulting and Strategy and Staff Reskilling are the areas where organizations most require support from
Service Providers.

Most Important Business-Focused Area related to AI initiatives for Most Important Business-Focused Area
Support from Service Providers - Europe for Support from Service Providers –
By Country
AI strategy, maturity assessment, and
Consulting 21% 16%
operating model
and
strategy Use case discovery, prioritization, and ROI AI strategy, maturity assessment,
19% 12% and operating model
analysis

AI strategy, maturity
Staff reskilling and change management 16% 16% assessment, and operating
model
1st
Business process/workflow re-engineering 15% 15%
2nd Persona-based user experience
and interface (UX/UI) design/ AI
Responsible AI policy development or strategy, maturity assessment, and
14% 22% operating model
refinement

Persona-based user experience and interface

13% 14% Staff reskilling and change
(UX/UI) design
management

Don't Know/ Unsure 4% 5%

Q. Most Important Area - For which of the following business-focused areas related to your AI initiatives will support from external services providers be most
important in the next 18 months? And, which will be the second most important area?
Source: Future Enterprise Resiliency & Spending Survey Wave 1, IDC, January, 2024; n=220
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European Executives Will Undertake Different Strategies to Leverage External Service Providers for their AI
Skills Needs But Traditional Outsourcing Engagements Will Become Less Relevant.

Organizations Strategies to leverage External Service Providers to address AI Skills Needs by 2025

Engage selectively for specialized skills and expertise on a flexible, as-needed

21%
basis

Training/reskilling services for our internal staff to support our AI initiatives 20%

AI-enabled automation services to augment our internal staff 18%

Advice and support to establish our own internal AI Center of Excellence (CoE) 17%

Leverage provider-managed AI Center of Excellence (CoE) on an ongoing

15%
basis

Traditional outsourcing/staff augmentation contracts 8%

Don't know/Not applicable 2%

Q. Which of the following best describes how your organization primarily plans to use external services providers to address AI skill needs in the next 18 months?

Source: Future Enterprise Resiliency & Spending Survey Wave 1, IDC, January 2024; n=220
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Considerable infrastructure upgrades will be required for organizations to leverage
AI.

Most Important Technology-Focused Area related to AI initiatives for Most Important Technology-Focused Area
Support from Service Providers - Europe related to AI initiatives for Support from
Service Providers – By Country
Infrastructure modernization and
20% 10%
implementation Security, privacy, and trust of
data and AI systems
Security, privacy, and trust of data and AI
19% 20%
systems
Infrastructure modernization
Data/intelligence architecture design and and implementation
17% 16%
engineering

Custom AI model development (build, train, 1st

16% 17%
tune, optimize) 2nd Infrastructure modernization
and implementation
AI model governance and lifecycle
13% 18%
management

3rd party technology selection, Security, privacy, and trust

13% 17% of data and AI systems
implementation, and orchestration

Don't Know/ Unsure 3%3%

Q. Most Important Area - For which of the following business-focused areas related to your AI initiatives will support from external services providers be most
important in the next 18 months? And which will be the second most important area?
Source: Future Enterprise Resiliency & Spending Survey Wave 1, IDC, January, 2024; n=220
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European IT leaders seek to Consume AI-Enabled services mainly via Workflows or Platforms.

Preferred ways to select and consume AI-enabled services from external services providers

Workflows - orchestrated, AI-enabled business or IT processes 29%

Platforms - access to our provider's array of proprietary AI

23%
assets and frameworks

Personas - collections of AI-enabled tools that align to job roles 19%

Assistants - individual AI-enabled tools that perform discrete

15%
tasks

Don't know/Not applicable 9%

Indirectly - we want our provider to use AI to deliver services to

5%
us, rather than use the technology ourselves

0% 5% 10% 15% 20% 25% 30% 35%

Q. Which of the following would be your organization's preferred way to select and consume AI-enabled services from external services providers?
Source: Future Enterprise Resiliency & Spending Survey Wave 4, IDC, April 2024

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Industry and public cloud expertise stands out, although many requirements matter to IT leaders
based to the level of managed cloud services maturity.
What do Managed Services Providers need to offer to support your organization's cloud requirements? – By level of managed cloud services use

Considering Use in Will

WillBegin
beginUsing
to Useinin Using Some Using Extensively
2024 2024
2024

Specialization in one main public cloud

platform 25% 27% 19% 25%
Specific Industry expertise/capabilities 22% 22% 25% 25%
Specialization with at least two global
cloud services providers 20% 27% 23% 22%
Private cloud capabilities 17% 18% 19% 22%
Automated/AI cloud capabilities 14% 16% 16% 20%
The full life cycle of services 22% 21% 22% 20%
Multicloud/Cloud management platform
to manage IT/cloud resources 18% 16% 16% 19%
Digital sovereignty expertise/capabilities 18% 19% 25% 18%
Differentiated solutions to support
innovation 13% 20% 17% 16%
Local proximity and/or in-country
capabilities 20% 15% 17% 16%
Command centers to operate all
IT/cloud resources 14% 14% 13% 14%
Partnerships with local cloud providers 11% 13% 10% 12%

Source: IDC European Cloud Survey, August 2023

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Key Takeaways

1 2 3
The role of
Building the Getting ready
Service
Gen AI for AI
Providers is
foundations
Critical

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Thank you!
Q&A

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