ISG Provider Lens™ Microsoft Ecosystem - Australia 2021 - Managed Services for Azure

Microsoft Ecosystem 2021

Microsoft ecosystem evolving rapidly in Australia

The ecosystem of Microsoft-certified service providers is continuing to gain complexity and value both in Australia and around the world. This is because the Microsoft product set is evolving rapidly across Office 365 and the modern workplace, managed services for Azure, SAP on Azure and Dynamics 365.

The Australian government and the private business sector in the region are ramping up their cloud implementations. In 2020, the government announced its intention to move to a Microsoft Azure-based records management system to modernize digital records management in the public sector and potentially would use other Microsoft suite products, including Microsoft 365.

Competition in managed Azure cloud environment intensifying in Australia

The global cloud market is becoming increasingly competitive as global managed service providers (MSPs) are using high levels of automation to squeeze margins. Thus, continual new investments are required to remain competitive.

The managed Azure market in Australia is highly competitive, with many global MSPs in­tensely fighting for market share. These include Wipro, Logicalis, HCL, PwC, Infosys, Unisys, Accenture, IBM, TCS and DXC. Logicalis, for example, is among Microsoft’s top 1 percent of Azure partners globally and also very strong in Australia, while Wipro has a significantly strong infrastructure and cloud management services practice in the region.

Local service providers account for the growing competition, and many are beginning to challenge their larger rivals. This trend is expected to gain traction significantly over the next five years, further intensifying the competition. Australia-based Telstra, for instance, is now expanding its Microsoft go-to-market (GTM) partnership to deliver a new breed of next-generation solutions to clients, including smart cloud, IoT, 5G, edge computing and AI. Empired was the first Microsoft Azure Expert MSP partner to fully adopt Microsoft Azure Lighthouse, and Data#3 is the only Australia-based Microsoft partner to have obtained both the Azure Expert Managed Service Provider and the Azure Modernization Factory competencies.

MSPs must migrate and manage a growing array of applications, including non-Microsoft software, and make them integrate seamlessly into both Microsoft Azure and other cloud environments. They are also required to enable core business transformation and provide measurable business improvement for clients, acting as both a traditional value-added reseller and a systems integrator. They should also be adaptable and agile.

Enterprises in Australia are under immense pressure to achieve more with fewer resourc­es. They are looking toward implementing applications such as Microsoft Azure to help them become more productive and agile. They also want to be able to pick and choose the parts of their environment that can be managed over the cloud.

COVID-19 as an accelerator for cloud adoption in Australia

The COVID-19 pandemic has caused a slowdown in client spending globally. However, the relative impact has been less on Australian organizations due to the lower number of local cases. In the longer term, there will be more cloud opportunities as enterprises accelerate their digital transformation initiatives.

The virus outbreak has led to numerous challenges for cloud providers in terms of rapid scaling of some Azure projects with the growing trend of remote working. It has acceler­ated the need for Australian customers to become more agile and reduce costs, driving more workloads to the public cloud. The growing concern about ransomware attacks has also driven the acceleration of cloud adoption among some Australian organizations, providing more opportunities for Microsoft Azure providers in the region.

Australian MSPs required to increasingly invest in AI capabilities

Microsoft is continuing to evolve its AI development and implementation strategy across Azure. This is beginning to result in some level of differentiation of Azure implementa­tions by MSPs and accelerate AI for Microsoft Azure platforms over the next few years. Customer expectations and demands with regard to the broader Internet of Things (IoT) landscape and advanced data analytics capabilities are continuing to increase rapidly both in Australia and globally. Over the next few years, MSPs in the region will need to increas­ingly invest in AI-related capabilities and training to retain high levels of Microsoft Azure certifications and partnerships.

There is now a greater focus on app-driven modernization of the cloud within Microsoft Azure implementations as organizations embark on the next wave of this technology. This poses a challenge for cloud service providers (CSPs) to realign their offerings.

The growing proliferation of digital touchpoints and the extension of enterprises into consumer segments such as wearables will provide MSPs with strong opportunities over the next few years.

SAP on Azure adoption gaining momentum both globally and in Australia

SAP is aggressively embracing cloud, driving its solutions in the Azure market both in Australia and globally. Much of its core business model, partnerships, development and support, like those of other large-scale enterprise business management software providers such as Oracle and IBM, have been following a similar strategy. The rate of SAP for Azure implementations has recently increased following the company’s announcement that it would end legacy, on-premises development and support.

There is a growing number of global SAP on Azure providers that have a presence in Australia; these include Wipro, HCL, Infosys, SoftwareONE, TCS, Tech Mahindra and DXC. This number is expected to grow further over the next five years as SAP on Azure imple­mentations gain further momentum in Australia. For example, Australia is an important market for HCL, with over 4,000 employees present in Australia and New Zealand (ANZ); SoftwareONE’s acquisition of Australian company Brave New World (BNW) Consulting will strengthen and extend its SAP Technology Services to the region. The SAP on Azure market in Australia is relatively small but could grow over the next five years as more local providers look toward entering this specialized space.

Many Australian clients have already reached maturity in terms of cloud migration due to the relatively high adoption of technologies in the region. Many companies are now positioned to migrate more complex applications, such as SAP, to the public cloud.

The SAP on Azure market is highly competitive and specialized. Australian customers are demanding strong skills and certifications from their cloud partners, especially in this segment.

Challenges in cloud adoption remain

The ”fear factor” held by some Australian companies is one of the biggest challenges in terms of migrating high-impact critical business applications such as SAP from on-premise to the cloud. Cloud providers thus should educate the market on how SAP migrations can be done with ease and simplicity and at low risk.

Microsoft Azure cloud-certified resources and expertise in the region are still lacking at the customer end for certain technologies, such as cybersecurity, IoT and artificial intelligence (AI), as demand continues to rise. Australian MSPs should capitalize on this opportunity.

Global MSPs dominate Office 365 modern workplace landscape

The Office 365 modern workplace comprises traditional Microsoft products such as Office, Excel, PowerPoint and SharePoint and newer collaboration tools such as Teams, OneDrive, Power Automate and Power BI. It also includes enterprise mobility and security and Azure cloud for data storage and backup. This segment is dominated by many global MSPs, such as Accenture/Avanade, DXC, Fujitsu, HCL, IBM, Infosys, Logicalis, TCS, Tech Mahindra, Unisys and Wipro, all of which have strong Australia-based operations.

COVID-19 accelerating modern workplace evolution

Following the reshaping of Australian businesses because of COVID-19, including the large-scale move to the work-from-home (WFH) setup, the modern workplace concept is evolving rapidly. Businesses are moving to strengthen and improve the networked workplaces they deployed as an emergency response to the pandemic. There is a need to strengthen networks, security and work processes and build in more automation. At the same time, businesses that moved more slowly are rushing to catch up. Organizations require advice and support from service providers that have large teams of Microsoft-cer­tified experts.

A 2020 Roy Morgan research report found that 32 percent of employed Australians have been working from home during the pandemic. The survey found that there was a particularly high WFH rate in the finance and insurance, public administration and defense and communications industries. Many MSPs in the region are already highly active in these industries and are cashing in on the numerous opportunities to expand their offerings in this target market.

Numerous companies now have a hybrid workplace experience, with their workforces par­tially spread across office and home. Thus, collaboration solutions are required to bridge the experience gap between the two environments. This would involve reassessing how meetings, information-sharing and application integration are performed and ensuring this integration is done in a seamless fashion.

New virtual and virtual/physical hybrid teams and processes need agile technology deployments to function, and Modern Workplace 365 addresses these requirements, which involve stitching together Microsoft 365 tools and enterprisewide applications and services to support the new normal.

The modern workplace segment is ripe for growth, as the COVID-19 crisis has shown business leaders in Australia and around the world that their companies can run well virtually just as they do in offices. Australian clients are beginning to move beyond enabling their remote workforce and are embracing it as a critical piece of a longer-term strategy to reduce costs and increase productivity. For many clients, this means adopting a continuous improvement model that supports remote lifecycle services. They have seen how adaptable their teams and technology can be and will continue to seek innovations. They are also more aware of the importance of employee experience and how a modern workplace is a primary enabler of employee satisfaction.

Australian clients are now looking for secure networks that support remote-working employees to function in teams backed by collaboration tools and business applications that help deliver an exceptional employee experience.

Security now a growing issue that organizations should address in the modern workplace environment

Data security is a rising concern with the growth of the remote workforce. Many organi­zations have moved to a work-from-home model without looking closely enough at this issue. There is a growing opportunity for security services to expand further outside the office and into the home-office setup. This involves balancing the user experience with keeping work data secure on all endpoints.

AI to become increasingly pervasive in modern workplace environment

Although AI has found its way into a range of IT support services, it is still in its infancy with regard to office collaboration tools. AI will be become increasingly embedded into Teams meetings, assisting in information searches and helping employees with common HR and IT tasks. DXC, for example, is incorporating AI-based automation and IoT services into its offer­ings in Australia, while IBM is integrating AI, automation and user experience into Microsoft 365 tools and services. Telstra, over the next one to two years, is building further capabilities to support the growing need for remote working and IoT applications in the region.

Organizations are now looking at new non-intrusive ways to engage with their employees. These include cognitive virtual assistants to keep them updated with developments at the office or home-office setup and to take care of all routine work so they can focus on critical tasks.

Additionally, with more employees returning to the office environment, there is likely to be an expansion in conference room and building services that utilize IoT and wearables. These services will also be integrated further with office productivity tools to help with scheduling.

A rapid evolution of Microsoft’s Dynamics 365 platform is under way

Microsoft’s Dynamics 365 platform is continuing to evolve at a very rapid pace. The market has recently seen the introduction of new products and significant shifts to existing applications under the Dynamics 365 platform. In addition, MSPs are seeing a growing trend toward an amalgamation of enterprise resource planning (ERP), customer relationship management (CRM), Dataverse and digital services on the periphery of Dynamics 365 set that are becoming more modular and seamlessly connected.

The key global providers in the Dynamics 365 landscape in Australia are Accenture/Ava­nade, DXC, HCL, IBM, Infosys and Wipro. However, a growing number of local providers are now emerging, some of which are gaining global recognition. For example, Barhead Solutions is one of nine certified Microsoft Business Applications ISV Development Center organizations globally, while Empired is in the top 1 percent of Microsoft Dynamics 365 partners worldwide, having been appointed to the Microsoft Dynamics 365 Inner Circle.

The customer experience (CX) is a primary driver for Dynamics 365 initiatives as smart businesses seek to offer customers various ways to connect (omnichannel CX), capture customer data at every touchpoint and leverage that data using AI and ML to increasingly personalize it. Service providers in Australia are now integrating technologies such as AI-powered chatbots and robotic process automation (RPA) to continually enhance CX.

Over the next two years in Australia, a range of new value-adds are expected to enter the Dynamics 365 market in areas such as cloud migration, microverticalized Dynamics solutions, customer analytics and insights offerings and the Power App factory.

MSPs are seeing more opportunities in some traditional Dynamics 365 modules. These are evolving with new technologies such as IoT and remote assist for field service, project operations, dynamics marketing and omnichannel offerings in customer service.

Infosys, for example, has established an MBAS (Microsoft Business Apps Services) center of excellence (CoE) that responds to these changes and develops accelerators and frame­works for adding value to client engagements. It is predicted that this trend will continue over the next five years.

MSPs to quickly adapt to the rapidly evolving Dynamics 365 landscape

MSPs offering these services in Australia will need to acquire new skills and technologies to adapt well to these changes. They should also continue investing in this segment to address associated challenges in resource recruiting, retention and training.

There is likely to be a lot of competition for the highly skilled but limited resources avail­able, as the demand for Microsoft Dynamics services is not being matched with enough training of staff, both in Australia and globally. This demand for Dynamics 365 resources puts pressure on both retention and hiring.

MSPs in Australia will need to innovate and develop custom solutions that offer agile and flexible systems to help companies optimize their resources with IoT integration achieve zero downtime in the back office. Also, the addition of Power Platform and Customer Insights requires staff to have new and different skill sets beyond traditional Dynamics 365 offerings.

Service providers are now accepting this challenge. For example, Wipro intends to roll out additions to its current Dynamics 365 offerings during the next 24 months in Australia. These will include cloud migration, microverticalized Dynamics solutions and customer analytics and insights.

Access to the full report requires a subscription to ISG Research. Please contact us for subscription inquiries.