ISG Provider Lens™ Public Cloud - Solutions & Services - Nordics 2020 - Consulting and Transformational Services for Midmarket

Public cloud spending continues to surge in Nordic enterprises in the coming years as demand for computing and Agile cloud-native technologies drive growth and enterprises’ ambition to expand their businesses globally. The market is driven by companies’ digital transformation initiatives and the need for more Agile IT delivery, which calls for infrastructure modernization and the use of next-generation cloud technologies such as containerization, cloud-native applications, microservices, artificial intelligence (AI) and machine learning (ML).

Enterprises expect that system integrators will have matured cloud services capabilities in their portfolio. Public cloud demand in the Nordics is driven by an interest in productivity gains and efficiency enhancements, more available solutions, and the transformation of customer engagement and experiences. Software-as-a-service (SaaS) spending continues to propel the market, especially with the advancements in device and data management
and analytics. The AI market is boosted by substantially expanding adoption as enterprise clients strive to optimize and improve processes through AI-enabled automation.

Public cloud services have become mainstream solution in the Nordic market: The Nordic IT market has always been one of the most progressive markets in Europe. Although many large organizations continue to run their applications in a legacy operation model, there is substantial growth over the last two years in the number of companies that are taking a more standardized digitization approach. This shift has increased the cloud spending of enterprise clients and SMBs, across all industries, on adopting public cloud services. Sweden, which is well diversified in manufacturing and exports a majority of its output, spends much more of its IT budget on research and development (R&D) than its neighboring Nordic countries. Denmark, Finland and Norway have a great focus on the food and beverages and oil and gas sectors. Overall, Nordic enterprise IT spending has increased, especially spending on public cloud, cloud-native and the transformation of exiting IT infrastructure.

Finance, manufacturing and retail have shown a surge in public cloud services consumption: The public sector has shown positive growth in its average strategic cloud maturity, but it continues to report low strategic and operational maturity from a public cloud perspective. The main factor behind the comparatively low scores has been the lack of in-house capabilities and expertise. In the private sector, financial services, with its long history of IT-driven services, leads the way. Information processing and the need for information classification helps it address the “what” and “where” of cloud services. In the last couple of years, the manufacturing sector has seen the largest compound annual growth rate in both strategic and operational maturity. It has shown a surge in cloud adoption as IT has become a strategic necessity for business growth and manufacturing processes are becoming increasingly digital. Integrating manufacturing execution systems with Internet of Things (IoT) technology creates the need for processing large quantities of data while creating new possibilities for cost savings and increased efficiency. Cloud services are seen as enablers in this change and many surrounding areas, and ISG expects that the overall growth in Nordic cloud maturity will continue to increase adoption with substantial pace.

System integrators and hyperscalers strategic announcement: With CXOs focusing on IT outsourcing engagements and, in particular, the spending and digital innovation aspects of these engagements, it is extremely important for IT service providers to become joint investment partners with Nordic enterprises in outcome-based engagements. It is essential that providers get certified and achieve greater competencies from AWS, Azure and GCP. Over the last few quarters, the Nordics born, and global system integrators have increased their overall cloud accreditation.

Integrated, cognitive, intuitive, AI-led cloud management platform: As many Nordic enterprises embark on a multi-cloud journey, they are seeking various ways to manage the multi-cloud workload and ensure that cost and governance are in place. To address the need of enterprises, IT services providers have built their own intellectual property (IP), cloud management platform (CMP), and numerous accelerators and frameworks. Most of the CMPs that are either developed or offered are cloud-agnostic and a vendor-neutral platform. They have a robust security layer overarching all the features and services provided. IT service providers are offering CMP as a part of bundled solution, with a very few of them selling it as a standalone product. We believe that this segment will continue to mature from the one-point governance and finance front.

Nordic CXOs prioritize innovation and transformation: To ensure that the business derives maximum value from IT investments, innovation and transformation are becoming increasingly important. Across the Nordic region, including both enterprises and public sector entities, there is a pressure to lower traditional IT outsourcing. Capital is being spent consciously on the core business systems from a transformation and digitization front. This has resulted in a multi-cloud journey that can include cloud adoption, migration and transformation. Nordic clients are consuming their services from the three big public cloud providers — AWS, Microsoft Azure and Google Cloud Platform (GCP) —based on the solution and multi-year strategy defined by the offices of the chief technology officer (CTO) and the chief information officer (CIO). To address the need of Nordic enterprises and the public sector, AWS, Azure and GCP have already committed to the Nordic market by setting up availability zones, enabling SMBs and enterprises to build cloud-native solutions.

Substantial adoption of SAP HANA infrastructure services: SAP HANA cloud infrastructure services have shown a reasonable surge. Nordic enterprise clients are not moving their SAP HANA workload to cloud infrastructure, due to numerous data sovereignty and security concerns. The pandemic has brought the attention of CXOs back to cost reduction and workload optimization. However, banking, finance and retail clients have started moving SAP HANA workloads to public cloud infrastructure in a proof-of-concept model. The growth in SAP HANA deployment on public cloud is subject to how the global and Nordic markets react to COVID -19 business slowdown.

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