U.S. Public Sector Grows Up Fast With Cloud Transformation

State, local and educational organizations quickly adopt cloud to maintain services under post-COVID realities, ISG Provider Lens™ report says

Most state and local governments in the U.S. are shifting critical software to the cloud and outsourcing IT operations, a major shift in strategy caused by pandemic-related disruptions and other recent changes to the public sector, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2022 ISG Provider Lens™ Public Cloud — Solutions and Services report for the U.S. public sector notes that state, local and educational organizations are finding they must serve constituents better at less cost or resort to delivering lower levels and fewer types of services. Legacy IT systems are nearing the end of life, IT staffing challenges are growing and organizations face shrinking budgets. As a result, most state governments, many schools and several major cities are moving from early cloud environments to cloud-first strategies, ISG says.

“The public sector in the U.S. can no longer ignore the cloud, because they are under so much pressure to do more with less staff and funding,” said Nathan Frey, partner, ISG Public Sector. “ISG expects a wave of cloud adoption that will continue through 2025.”

The COVID-19 pandemic was the trigger for much of this change, the report says. The shift to working from home and the wave of resignations that came with the disruption of work affected the public sector more than most. Falling tax and licensing revenue during the pandemic made the situation worse. Then, in late 2021, special funding from the federal government made rapid digital transformation a mandate at organizations that had not modernized IT in decades.

Because they are far behind most private enterprises in using the cloud, U.S. public sector institutions are often uneasy about cloud transformation, ISG says. Many lack expertise in budgeting and procurement for cloud services or perceive the cloud as not secure enough for their needs. A small number of service providers have the experience and knowledge of the public sector to offer consulting services that help these clients plan and carry out cloud projects.

Hyperscale cloud operators, along with their service provider partners, are developing offerings tuned specifically for the public sector, the report says. Agencies adopting cloud services typically engage with more than one platform, which can make cloud operations even more complex. These organizations commonly engage with managed public cloud providers to make their cloud environments function reliably and efficiently. ISG expects demand for managed public cloud services to keep accelerating as public sector cloud environments mature.

“Consulting and managed services are making public sector cloud migration possible,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “The leading providers now recognize the need and potential in this market.”

The report also examines other public cloud trends in the U.S. public sector, including the rise of cloud-based business process outsourcing (BPO) and the role of providers in helping agencies migrate SAP implementations to the cloud.

For more insights into the cloud challenges faced by U.S. public sector agencies and advice on how to choose a service provider, see the ISG Provider Lens™ Focal Points briefing here.

The 2022 ISG Provider Lens™ Public Cloud — Solutions and Services report for the U.S. public sector evaluates the capabilities of 35 providers across four quadrants: Consulting and Transformation Services, Managed Public Cloud Services, Hyperscale Infrastructure and Platform Services, and SAP HANA Infrastructure Services.

The report names IBM as a Leader in three quadrants. It names Accenture, AWS, Deloitte, Infosys, Microsoft, Rackspace Technology and Unisys as Leaders in two quadrants each and Kyndryl, SAP, Tech Mahindra and Zensar as Leaders in one quadrant each.

In addition, CGI is named as a Rising Star — a company with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant.

A customized version of the report is available from Unisys.

The 2022 ISG Provider Lens™ Public Cloud — Solutions and Services report for the U.S. Public Sector is available to subscribers or for one-time purchase on this webpage.

About ISG Provider Lens™ Research

The ISG Provider Lens™ Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of detailed data and market analysis to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe, as well as in the U.S., Canada, Brazil, the U.K., France, Benelux, Germany, Switzerland, the Nordics, Australia and Singapore/Malaysia, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit this webpage.

A companion research series, the ISG Provider Lens Archetype reports, offer a first-of-its-kind evaluation of providers from the perspective of specific buyer types.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 800 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.

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