ISG Provider Lens™ Microsoft AI and Cloud Ecosystem - Data Fabric on Azure - Global 2025

A report comparing providers’ capabilities to help decision-makers more effectively source services

Global market dynamics are currently characterized by uncertainty and turbulence, driving organizations to increase their focus on cloud-related investments aimed at improving business visibility, predictability and resilience. Tech spending for 2025, especially related to the Microsoft AI and Cloud ecosystem, is mainly driven by investments in cybersecurity, cloud-enabled (and AI-fueled) innovation, data and analytics, digital transformation and infrastructure modernization, particularly hardware/device refresh initiatives as Windows 10 approaches the end of life.

Enterprises continue to seek opportunities to enhance control over cloud costs, driving ongoing demand for solutions and services targeting increased utilization, measurable business outcomes and value delivery, cost optimization and governance, and end-to-end security on Microsoft Cloud. Business and technology trends are driving Microsoft to evolve its product offerings and prompt providers to keep pace with Microsoft’s advancements. This is particularly true for AI services, FinOps services and data fabric services, all of which are critical to improved business insight, innovation and governance.

Major business trends impacting the global Microsoft AI and Cloud ecosystem include the following:

• A sharpened focus on measurable business outcomes. Given the ongoing macroeconomic uncertainty and the
persistent threat of inflation, organizations are prioritizing projects that facilitate controlled business growth while supporting effective cost management. This focus is driving the demand for more incremental value delivery, accelerators, industry-specific solutions and near-constant justification of spending. Providers must adapt by consistently positioning their services and capabilities around clear, measurable business outcomes, a challenge that many still face.

• Prioritization of employee experience (EX), productivity and retention. Rising labor costs, tech skills  shortages and constantly shifting dynamics of hybrid work drive initiatives aimed at increasing employee retention and improving EX. There is an increased focus on employee productivity and collaboration as key requirements. Providers will differentiate themselves based on how effectively they help organizations access data and insights and scale nascent AI initiatives and capabilities, including Microsoft Copilot, to deliver measurable outcomes focused not only on cost savings but also on augmenting human productivity and capabilities to enable improved business performance.

• Managing and optimizing cloud spend and decreasing time to value. Margin pressures are driving a heightened oversight of IT projects and ongoing spend, in turn fueling the need for cost management, visibility and optimization. Benefiting from cloudbased pay-as-you-go models requires cost optimization and predictability, hence the growing demand for FinOps services. This trend is propelling the adoption of tailored solutions and services that augment Azure cloud cost optimization capabilities, especially in hybrid cloud scenarios, and pushing service providers to deliver services for forecasting and budgeting, measurement and accountability and offer industry- and region-specific expertise in regulatory and compliance requirements.

• Improving business agility and responsiveness. Growing concerns over global supply chain disruptions, heightened by the threat of tariffs, are fueling projects targeting increased process automation, improved visibility and business continuity. They are also driving the demand for more tailored delivery models as clients seek flexible models that balance budgets, priorities and timelines without compromising project outcomes. This is also driving accelerated cloud adoption and pushing service providers to provide capabilities to help organizations embrace and transition to a microservices-based architecture to better isolate workloads and scale specific services on demand.

• Increasing the effectiveness of sustainability efforts. Clients are increasingly looking to improve their sustainability initiatives through a combination of analytics solutions that provide enhanced insights and dashboards
for monitoring and reporting. This focus extends to their internal operations and extended supply chains, including partner and supplier operations, aimed at better measuring, managing and reducing carbon footprints. AI-driven insights, enabled through solid data governance and analytics, are now essential for achieving these sustainability goals.

These business trends are among the key drivers of a changing technology and services landscape, directly impacting the global Microsoft AI and Cloud ecosystem. The following section outlines the key technology trends and their  impact on the Microsoft ecosystem, especially the role of service providers.

• Prioritizing cybersecurity, compliance and governance initiatives. This approach includes not only addressing cybersecurity threats but also optimizing existing threat detection capabilities, improving data governance and  enabling highly effective business continuity processes and approaches. Organizations are increasingly prioritizing security capabilities within the Microsoft 365 suite to combat rising cyberthreats.

When coupled with the growth in hybrid cloud deployments, the focus on cybersecurity has driven an increased emphasis on unified security management, compliance and risk mitigation. This trend is increasingly reflected in Microsoft’s security and compliance offerings, including Azure Security Center and compliance certifications designed to protect sensitive data and ensure regulatory compliance. Organizations are looking to service providers that can help them implement an effective security posture and better leverage tools such as encryption, access controls, threat hunting and compliance frameworks like HIPAA and GDPR.

• Accelerating cloud adoption and modernizing infrastructure. Globally, both enterprises and government organizations are accelerating cloud implementations, accompanied by a corresponding increase in digital  transformation investments to deliver rapid and measurable results. However, digital initiatives are increasingly subsumed within broader AI-centric efforts, which further accelerates the adoption of typically multicloud strategies. This trend impacts application sourcing strategies, IT spending plans and the need for specific skills. Crucially, it is also raising business expectations regarding time to value, business responsiveness and agility, and the pace of technology-driven innovation.

In response, organizations are increasingly adopting cloud-first strategies and migrating complex workloads and applications to cloud platforms. There will be a massive spike in device refresh initiatives in 2025, with Windows 10 reaching the end of life on October 14, 2025. Microsoft has positioned this as an opportunity for organizations to adopt Windows 11 and the Copilot+PC, which are AI-enabled via upgraded processors.

• Moving AI from pilot to production to scale. Microsoft continues to evolve its AI development and implementation strategy across Azure. This is not surprising since the combination of GenAI, agentic AI, ML and AI-enabled capabilities in core tech-enabled functions — including business applications and productivity tools,  cybersecurity, supply chain visibility and optimization, sustainability, disaster recovery and infrastructure management — is poised for substantial growth over the next 2-3 years.

The rapid adoption of GenAI, powered by Azure OpenAI Service and tools like Copilot in Microsoft 365 and Dynamics
365, is already reshaping how organizations approach employee productivity and business innovation. However, organizations are still struggling to move beyond AI pilot phases and into production, driving the demand for services, often industry-specific, to optimize AI-related implementation and adoption. This is particularly evident in areas like predictive analytics, including demand forecasting, supply chain optimization and customer behavior prediction.

• Improving data governance. Any increase in AI usage necessitates improved data governance. In fact, one early benefit of the excitement surrounding GenAI initiatives is that organizations are gaining a clear understanding of the importance of data governance and having a strong data foundation. In the past, data governance focused primarily on structured data in databases and data warehouses. However, the scope is now expanding to include unstructured data from Microsoft applications such as SharePoint, OneDrive, Teams and Outlook.

Organizations are increasingly looking to implement a data fabric to simplify the management of complex data environments through a unified platform. We expect these organizations will turn to service providers to understand the functionalities and implications of platforms like Microsoft Fabric, ensuring robust security measures and  compliance with various standards.

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