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Demand Grows for Superior Managed Cloud Services

The rush to move IT applications from on-premises enterprise data centers to public cloud service providers, primarily on the basis of the promise of a low-cost, has once again been challenged by recent market research findings.

In fact, savvy CIOs and CTOs are seeking comprehensive solutions that meet all their expectations, rather than merely a limited subset. Even if it costs more to achieve that goal, the demand for superior hybrid cloud services is gaining momentum across the globe.

As an example, seventy-five percent of respondents to the latest worldwide market study by 451 Research indicate that enterprise IT leaders are willing to pay a premium for enhancements to their server hosting and cloud services.

Cloud Services Market Development

The most desired improvements are guarantees of security (48.7 percent of respondents) and service performance (43.3 percent) with less interest in paying service providers to take on the operational management burden (27.9 percent).

Despite customers citing cost savings as a driver of cloud adoption and using value for money as a metric for evaluating cloud services, 451 Research finds customers are willing to pay extra for cloud and hosting service enhancements. The average premium businesses are willing to pay is around 30 percent.

The highest premium is for enhanced customer service and support (33.3 percent) and the lowest is for the service provider handling operational management (27.9 percent).

Although 451 Research believes higher levels of service will attract those customers willing to pay higher rates, organizations surveyed say that their providers are failing to meet their expectations for service levels in several categories.

As an example, 58.1 percent of survey respondents say that managed services or security services bundled with the infrastructure or application service is an important capability for them. However only 38.8 percent of these respondents say their current vendors meet this expectation.

The largest such gap is the ability to migrate workloads and data from the customer’s data center to the provider’s or another data center, including public cloud. Moreover, 42.9 percent indicate this is important, but only 19.5 percent of these respondents say their current vendors meet this expectation.

Outlook for Cloud Computing Enhancements

"We frequently talk about pricing competition in cloud infrastructure and applications, which leaves many service providers wondering how they can differentiate themselves," said Liam Eagle, research manager at 451 Research.

According to the 451 Research assessment, the good news is that many hybrid cloud service customers tell the analyst that they’re evaluating vendors on total value, rather than cost. That value can reside in services like guaranteed levels of performance, security and support.

"We've found that customers still see shortcomings when it comes to service providers helping them strategize and execute around hosting and cloud," added Eagle. "Service providers focused on adding value should regard these gaps as opportunities they can capture by improving the quality of their own service in specific areas."

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