Executive Summary: ISG Provider Lens™ Microsoft Cloud Ecosystem - U.S. 2024

The individual quadrant reports are available at:

ISG Provider Lens™ Microsoft Cloud Ecosystem - Generative AI Services for the Microsoft Clouds - U.S. 2024

ISG Provider Lens™ Microsoft Cloud Ecosystem - Managed Services for Azure - U.S. 2024

ISG Provider Lens™ Microsoft Cloud Ecosystem - Microsoft 365 Services - U.S. 2024

ISG Provider Lens™ Microsoft Cloud Ecosystem - Power Platform Services - U.S. 2024

ISG Provider Lens™ Microsoft Cloud Ecosystem - SAP on Azure Services - U.S. 2024

Microsoft’s Azure and cloud platforms drive clients’ transformation and opportunity for ecosystem partners

As the world and workplaces move more toward cloud computing, the roles and value of IT service providers evolve accordingly. Microsoft provides widespread cloud solutions, including the Azure cloud platform; the Microsoft Office 365 suite; and a range of business, automation and AI applications provided through Dynamics 365, Power Platform and Microsoft Copilot. Microsoft’s significant presence, value and influence in the business realm have created one of the largest and most diverse ecosystems of IT developers and providers. This ecosystem is rapidly and aggressively advancing to empower, support and expand the  capabilities of enterprises, enabling them to benefit from Microsoft’s offerings. This report assesses service providers within the Microsoft cloud ecosystem based on their contributions to the market in support of Microsoft’s cloud offerings and their role in facilitating what enterprises can achieve using these offerings. Below are some of the key trends in this market:

Evolving digital workplaces: As remote and hybrid work models become the norm, Microsoft cloud services such as Teams, Azure Virtual Desktop and Copilot see increased adoption. This drives service
providers’ development of features and functionalities catering to the evolving needs of a dispersed  workforce.

Generative AI (GenAI) integration: GenAI has rapidly entered into Microsoft cloud services. While Microsoft 365 Copilot is a prominent example, GenAI advancement also involves AI-powered document generation, code writing and data analysis. These advancements enhance user productivity and have the
potential to create new service offerings within and alongside Microsoft clouds.

Low-code/no-code democratization: The rise of low-code/no-code development platforms within  Microsoft Power Platform is expected to empower individuals with limited coding experience to build  applications.

This democratization of app development is fueling a surge in custom development within Microsoft clouds, creating new opportunities for service providers specializing in low-code/no-code development and  integration.

Essentially, these trends point toward an increasingly intelligent, accessible and usercentric Microsoft cloud ecosystem, forcing service providers to adapt quickly and innovate appropriately to stay relevant in this evolving landscape. This report examines IT service providers’ responses to these trends in five key aspects of Microsoft’s cloud offerings: Managed Services for Azure, Microsoft 365, Power Platform, SAP on Azure and GenAI. It assesses their approaches and offerings and how well these align with the evolving needs of their customers.

How is Azure Shaping Customer Demands and Provider Services?

Many features native to Microsoft clouds facilitate IT development, impacting both users and Microsoft ecosystem partners significantly. The combination of ubiquity, relatively low cost and seamless integration with existing Microsoft technologies and work environments drives the scale and speed of adoption of
Microsoft cloud offerings. This, in turn, drives a global need for information, awareness and training on  Microsoft cloud offerings and technologies among ecosystem partners and enterprise clients.

Each quadrant in this report delves into the services, features and capabilities needed by service providers to meet the current, emerging and somewhat unpredictable needs of enterprise customers. Below, we briefly examine the key factors and characteristics shaping the continually evolving enterprise IT and business
landscape of each of the five quadrants and how service providers are adapting — or need to adapt — to meet challenges.

Managed Services for Azure

Essentially, managed services providers offer the same types of services for Azure as they do for AWS, Google Cloud or any other hyperscaler. However, Azure brings its own capabilities and requirements to both customers and MSPs in different ways. Key capabilities that Azure MSPs need to leverage include the  following:

● Azure Arc extends Azure’s management and governance capabilities to hybrid and multicloud  nvironments. This allows MSPs to centrally manage and secure resources across on-premises infrastructure, other cloud platforms and the edge — all from the Azure portal.

● Azure Lighthouse is built for MSPs, enabling them to manage multiple customer tenants efficiently through AI-enhanced automation. It provides cross-tenant visibility, delegated access controls and tools to streamline
management and support.

● The Azure Stack family (Azure Stack HCI, Azure Stack Hub and Azure Stack Edge) extends Azure services and consistency to on-premises data centers. MSPs can leverage this to offer hybrid cloud solutions that meet customers’ specific needs.

● Azure Automation drives operational efficiencies for MSPs through cloudbased automation, operating  system updates and configuration services that support consistent management. It lets them automate repetitive tasks, incident response and patch management across multitenant environments, reducing
manual labor costs.

● Emphasis on Security and Governance: Increasingly sophisticated Azure security tools, along with compliance offerings, equip MSPs to offer specialized security services. This is crucial in today’s cybersecurity landscape.

Microsoft 365 Services

Microsoft 365 has become the core of modern distributed and hybrid workplace enablement, efficiency enhancement, and digital transformation. Providers’ ability to build, support, adapt and protect Microsoft
365 and its users is paramount to customer enterprises conducting business. Key characteristics and  capabilities shaping how service providers develop and deliver value for enterprise client organizations in
Microsoft 365 include the following:

● Microsoft Endpoint Manager (Intune) within the Microsoft 365 suite integrates deeply with Azure Active Directory for identity and access management. This allows service providers to deliver a seamless device management experience across desktop, mobile and cloud-based resources, all orchestrated from a central point.

● The tight integration between Microsoft 365 productivity apps, such as Teams, Outlook and SharePoint, and Azure-based cloud storage and collaboration services transforms workflows. Service providers are offering more streamlined solutions for remote work, data sharing and real-time collaboration, regardless of device location.

● Microsoft 365 and Azure’s AI capabilities are converging with services such as Microsoft Viva and Copilot. Service providers leverage these to automate routine tasks, offer proactive support and gain insights from employee work patterns. This optimizes service delivery and reduces administrative overhead.

● Azure-based security services, such as Azure Sentinel, integrate with Microsoft 365 data and tools. This gives service providers a centralized view of security posture across cloud and productivity environments.
They can provide more holistic threat detection, proactive risk mitigation and compliance management solutions.

SAP on Azure Services

Several Azure developments and capabilities are driving enterprises to consider Azure as the preferred destination for their complex SAP environments, pushing IT service providers to expand their expertise beyond traditional SAP landscapes. This shift necessitates their proficiency in Azure infrastructure, cloud-native services and the complexities of large-scale SAP migrations. Key SAP on Azure technology  developments influencing enterprises and service providers include the following:

● Azure offers highly scalable virtual machines specifically certified for SAP HANA workloads. This allows businesses to migrate massive SAP landscapes to the cloud, opening up avenues for service providers to manage complex, high-performance SAP environments on Azure.

● The seamless integration of SAP with Azure services such as Azure AI, IoT Hub and Data Lake expands possibilities for IT service providers. They can now develop innovative solutions that combine the power of SAP with Azure’s cloud-native capabilities, driving automation, insights and new business models.

● Microsoft’s adoption of RISE with SAP simplifies cloud migrations and streamlines the transition to SAP S/4HANA. This creates opportunities for IT providers to offer strategic consulting, migration and ongoing managed services for RISE with SAP deployments on Azure.

● The SAP and Azure partnership places a strong emphasis on security, governance tools and compliance adherence, instilling confidence in customers. This enables IT service providers to act as trusted advisors,
offering secure and compliant solutions while ensuring adherence to regulations.

Power Platform Services

The distinction between software development and business problem-solving is becoming increasingly blurred. IT service providers must evolve to become enablers of citizen development on Azure while also acting as architects of advanced, AI-driven solutions that leverage Power Platform’s ease of use. Key Power Platform characteristics and developments shaping enterprise needs and IT service providers’ offerings  include the following:

● Power Platform’s low-code/no-code tools foster collaboration between professional developers and citizen developers (business users). This empowers frontline workers to solve problems, accelerating innovation. IT service providers must guide customers in managing this shift, ensuring governance and integrating citizen-built solutions seamlessly with Azure.

● The integration of AI Builder into Power Platform makes AI development accessible for non-experts. This compels IT service providers to expand their service offerings, providing AI consulting and custom model development alongside Azure’s AI capabilities.

● Power Platform connectors now offer access to a wider array of Azure data sources, enabling providers to build data-rich solutions for customers more easily. This means focusing on value-adding analyses and dashboards rather than just raw data plumbing.

● Power Automate’s enhanced RPA capabilities, combined with AI, streamline complex workflows across  Azure and legacy systems. Service providers now offer more efficient automation strategies for clients.

Generative AI Services for the Microsoft Clouds

The most disruptive force in almost any aspect of IT since 2022 has been the extremely rapid advancement of GenAI. The full extent of GenAI capabilities is still being grasped, but this has not prevented enterprises and service providers from developing and introducing a rapidly expanding range of applications to the market. Key disruptive aspects of GenAI with regard to IT and related services include easier access to large language models (LLMs), facilitating the creation of AI solutions even without extensive internal AI expertise; the ability to shift from model development to application development, resulting in innovative solutions tailored to specific business needs; and the ability to rapidly integrate AI capabilities into areas such as customer service, content generation and analytics. Azure plays a significant role in enabling and fostering much of this through the following capabilities:

● Azure OpenAI Service gives providers low-barrier access to the power of LLMs such as GPT-3. This fosters new applications, including code generation, intelligent content creation and advanced conversational  interfaces, all without deep AI expertise.

● Azure simplifies the process of deploying GenAI models via APIs or containers. This allows IT service providers to quickly integrate AI into existing solutions, focusing their efforts on application development and
service delivery rather than managing the AI infrastructure.

● Azure’s integration of GenAI with storage, computing and cognitive services streamlines the development of end-to-end AI solutions. Providers can focus on crafting value additions that leverage Azure’s core
strengths alongside AI models.

Microsoft Azure and its cloud ecosystem are simultaneously enabling and disrupting IT service providers and enterprises alike. Azure empowers providers with tools to build hybrid and industry-specific solutions,
simplifies AI integration and fosters edge computing capabilities. However, it disrupts the landscape by demanding new expertise, mandating adaptation to diverse needs and intensifying competition in the AI  landscape. Enterprises benefit from increased flexibility, access to innovative solutions and enhanced security. Yet, they face challenges in navigating a complex landscape and ensuring alignment with necessary  expertise.

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