Executive Summary: ISG Provider Lens™ Microsoft Ecosystem Partners - U.S. Public Sector 2022

The individual quadrant reports are available at:

ISG Provider Lens™ Microsoft Ecosystem Partners - Dynamics 365 Services - U.S. Public Sector 2022

ISG Provider Lens™ Microsoft Ecosystem Partners - Managed Services for Azure - U.S. Public Sector 2022

ISG Provider Lens™ Microsoft Ecosystem Partners - Microsoft 365 Services - U.S. Public Sector 2022

ISG Provider Lens™ Microsoft Ecosystem Partners - Power Platform Services - U.S. Public Sector 2022

The Microsoft ecosystem is thriving in the U.S. public sector.

As one of the world’s leading enterprise technology vendors, Microsoft plays a pivotal role for many state and local government agencies’ digital transformation strategies across the U.S. The tech titan subdivides its offerings into three main pillars: Microsoft 365, which includes Office 365 and Windows; Dynamics 365, a business application suite; and Azure, a hyperscale cloud platform that operates globally. Power Platform is a more recent addition to the Microsoft portfolio and is a low-code development platform that is designed to extend the capabilities of the existing portfolio by enabling citizen developers to build apps and workflows. The COVID-19 pandemic and the resources made available by the federal government has fueled a rapid increase in digital transformation initiatives. With aging systems and the requirement to serve constituents in a socially distant way

has led agencies to leapfrogging from older legacy technologies to cutting edge cloud and automation initiatives. With Microsoft’s strong technology leadership and market strength in the U.S, there are a multitude of providers for agencies to choose from. Providers offer specialized expertise and employees who can help guide agencies and have the technical understanding to drive Implementation. While many government agencies in the U.S. may be behind their counterparts in the private sector in moving to the cloud, the U.S. has been ahead of other countries in moving to the cloud.

For many agencies, the challenges of navigating, implementing and ultimately integrating the Microsoft suite of integrating the Microsoft suite of technologies can be daunting. Costs, lack of familiarity with the technology, and an aging workforce, among other factors, can be significant hurdles to adoption. Therefore, for support, many turn to the Microsoft partner ecosystem, which is a complex and diverse group of global systems integrators (GSIs), IT providers, independent software vendors (ISVs), and specialist strategy and advisory firms that provide additional services and technology components atop the existing Microsoft platforms. This ecosystem is particularly strong in the U.S. compared to other countries around the globe. Agencies draw on this ecosystem for many reasons. Many are looking to replace systems that have reached the end of their useful life and typically lack the expertise to manage migrations to Azure. Providers are equipped with ready-made frameworks and accelerators to right-size Azure deployments and ease the migration process. In many cases, agencies turn to managed services providers, seeking endto- end support for managing Azure and other clouds. Managed services typically include a range of services such as scaling and provisioning of resources, managing incidents, monitoring and managing licenses, assuring security, automating updates, and ensuring policy compliance and governance. Or simply, they want to update legacy email and messaging systems to the Office 365 platform.

As the cloud begins to mature as a hosting platform, agencies have shifted from just migrating to the cloud to devising strategies to leverage its unique capabilities. This means greater resilience and flexibility with multicloud and hybrid cloud environments. It also means replatforming and refactoring applications so they are optimized to take advantage of the technical capabilities of the cloud, beyond just reduced costs. For example, this can mean moving to modern microservices architectures, using containerized applications and Kubernetes orchestration. The use of automation is increasingly being adopted across IT environments. More innovative IT service providers are also investing in using it to streamline the move of applications and code to the cloud. While public sector entities are moving straight to more advanced technologies, they are still focused on more tactical approaches instead of more strategic projects. Some vendors are capitalizing on these tactical needs and are choosing to focus on “FinOps” or helping customers optimize and manage the cost of cloud deployments. These services are particularly attractive to U.S. public entities that have limited resources.

ISG has observed the rise of low-code, citizen developer initiatives as a major trend across most major technology providers. These services are aimed at empowering the general workforce to create and use their own AI-enabled business apps and automation tools. Microsoft’s Power Platform has helped spur the wider development of lowcode initiatives, providing tools such as Power BI for data visualization and analysis, as well as automation tools such as Virtual Agent and Power Automate. While many agencies are experimenting with low-code initiatives as a way to drive innovation within the workforce and liberate business professionals from the constraints of the IT department, they are doing so cautiously. Low-code initiatives can create significant risks around data access, policy compliance, license usage and overall governance. ISG notes that providers are now developing specific offerings, designed to put guard rails around low-code development and channel such efforts in ways that are safe, productive and meet the compliance needs of the organization. These include the establishment of centers of excellence for citizen development, monitoring compliance and policy, creating templates for app development, establishing bestpractice guidelines, undertaking training workshops, monitoring of data and license usage, scanning code for compliance, generating pre-configured APIs and determining templated release cycles.

With the strong adoption of Azure and Microsoft 365, the tech titan has driven increased focus on Dynamics 365, its suite of cloud-based business applications. There are three discrete constituencies each migrating to Dynamics 365: agencies seeking green field deployments of new capabilities, those agencies migrating from on-premises Dynamics installations and organizations looking to move away from other business applications. The top providers in the market are able to address each of these use cases on a personalized and structured basis, leveraging their expertise to provide quick return on investment. In particular, ISG sees the greatest value possible when enterprises can align with service providers that offer unique, industry-specific solutions. Providers that are more competitive are moving beyond the technology piece of the solution by incorporating business processes and workflow. The ability to provide solutions that have a direct impact on mission outcome enables providers to deliver added value to their clients.

The continued disruption caused by the COVID-19 pandemic is driving demand for the Modern Workplace which has become a must-have for distributed organizations. The changing workforce requirements and the “Great Resignation” are also helping to drive Microsoft to reposition Microsoft 365 away from its original focus on employee communications and messaging, and toward a more rounded platform centered on employee experiences and learning. The introduction of Microsoft Viva is one example. ISG’s research with providers suggests that we are still in the early days of this transition. Most providers and agencies are still grappling with more prosaic challenges around integrating the current Microsoft 365 technologies and getting more value out of the platform. Nevertheless, we do see providers beginning to take a more employee experience centric approach, for example, by incorporating wellness and microlearning elements into the Microsoft 365 platform, or by using digital “nudges” to help employees increase the adoption and usage of the services it offers.

Service providers have correctly focused on enhancing their capabilities with Microsoft Teams, the collaboration software that has taken off with the COVID-19 pandemic. Even agencies that avoided a strong messaging platform culture have been forced into using Teams as a result of co-located work restrictions brought on by stay-at-home orders. As a result, enterprises now have to deal with the sprawling channels and varied usage patterns that come from haphazard adoption. Service providers have invested heavily in deploying bots that users can interact with through Teams, and in some cases have developed services that can help combat sprawling deployments.

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