Cloud consultants and professional services firms continued to attract investment and grow revenue in the third quarter, even amid signs of tightening purse strings among enterprise buyers.
Investors and strategic buyers are showing interest in companies making offerings around public cloud platforms and SaaS technologies, which influence vertical market expertise transactions. Service providers and consultants, meanwhile, are reporting significant growth in their managed cloud businesses. The US Census Bureau’s quarterly services estimates, released on September 8, reported sustained double-digit growth for the hosting industry, which includes cloud services businesses.
Here are some data points to consider:
Black Diamond Advisory, a partnership based in Golden, Colo., today received a $25 million minority investment from Tercera, an investment firm specializing in cloud professional services. Black Diamond Advisory provides services around OneStream Software, which offers a corporate performance management cloud platform.
Global systems integrator Capgeminilast week bought Aodigy Asia Pacific, a Singapore-based company specializing in digital transformation on the Salesforce platform. The acquired company’s services include sales optimization, customer engagement, cloud migration and business process automation.
Accenture agreed last week to acquire Inspirage, a Bellevue, Wash., integrator and MSP that provides digital transformation services using Oracle Cloud technology. Inspiration focuses on vertical market segments within the high-tech, life sciences and manufacturing fields. Last month, Accenture bought Tenbu, a Brazil-based cloud data company that works with AWS, IBM Cloud and Microsoft Azure; and Sentia, a cloud consultancy based in the Netherlands.
Deloitte last week cited its consulting operation as the professional services firm’s fastest-growing business, expanding at a 24.4% year-over-year clip for its 2022 fiscal year. The company’s global alliance and ecosystem sales grew 23% compared to last year — the company’s alliance partners include cloud providers such as AWS, Google, Salesforce and ServiceNow.
Accenture, will shed more light on the health of the cloud consulting Set. 22 when it reports its quarterly results.
Growth continues amid shifting priorities
Capital inflows, particularly notable among cloud consultants and MSPs, and top-line growth reflect a positive outlook for the industry. But other signs point to more cautious cloud spending among IT buyers. Earlier this month, Bret Taylor, co-CEO at Salesforce, said during an earnings call that some deals are taking longer to close because executives are “reviewing all purchase decisions .”
Workday, another SaaS platform company, has a similar vision. Pete Schlampp, the company’s CSO, said he saw no change in demand for Workday’s human capital management and financial offerings but noted the potential for the deal to fall through in the future. “As we get into more uncertain economic environments, which is likely to happen, then typically in those situations, buyers on the financial management side tend to delay those deals a little bit longer .”
Cloud platform sales prospects greatly influence the financial health of consultants, MSPs, and integrators who provide offerings around them. However, at this point, service provider executives say they expect uninterrupted growth in their cloud businesses.
“I don’t see a slowdown in cloud adoption, despite the economic climate,” said Brandon Byars, chief technology officer at Thoughtworks, a Chicago-based consulting firm. Thoughtworks last month reported year-over-year revenue growth of 27.5% in its second quarter, citing demand for digital transformation services.
That said, customers may be looking at cloud spending with a sharper financial focus.
“There are some priorities that tend to change,” Byars said. “I think we’re seeing a little more focus on financial management and FinOps practices earlier in the lifecycle.”
FinOps practices aim to strengthen an organization’s financial accountability for cloud services. Their higher priority in the current economic environment contrasts with previous years, where businesses are perhaps more tolerant of cloud costs that exceed their initial expectations.
“A few years ago, people would have been okay with the cost increase,” Byars said. “But they recognized that [cloud] is a path for modernization, and so they can tolerate it.”
Cloud as a financial tool
The ability to keep cloud costs under control should be big in the coming months as service providers promote on-demand IT as a way to weather the economic turmoil. Industry executives believe the cloud-as-cost-saver theme continues to drive demand.
“Using more than just cloud services has proven to be a powerful tool organizations can pull to reduce costs,” said Vrinda Khurjekar, senior director of the AMER business at Searce, a Houston-based technology consultancy. .
I don’t see any slowdown in cloud adoption, despite the economic climate.
The economic turmoil is forcing many organizations to rethink spending, with creative ways of doing the same amount of work at a lower cost becoming critical, Khurjekar said. The cloud’s pay-as-you-go model can help organizations do that, he suggested.
“Despite major budget cuts and hiring freezes, the demand for cloud services is and will remain constant,” he said. “Going forward, we predict that, at least through the recession, demand will actually increase as cloud services and AI technology are needed to help fill some of the gaps created by cuts to budget.”
In fact, enterprises continue to launch large cloud initiatives. In the United Kingdom, the Crown Commercial Service, a procurement agency, awards contracts through its multi-billion-pound G-Cloud 13 framework program, which offers cloud services such as hosting, software and cloud support to UK government entities.
Xalient, an MSP and IT consultancy in London, was recently approved to provide services through the G-Cloud 13 framework, which will be launched on November 9. Such initiatives suggest that cloud investment will continue despite the uncertainty in the economy, said Mark Cooke, the company’s group COO.
“Cloud investments that reduce Capex and can be billed based on consumption make sense in any downturn,” he said.
Government departments, or companies, considering office closures or business divestments can do so quickly and efficiently — from a networking and security perspective, in particular — if their IT assets is in the cloud, Cooke said.
As for specific as-a-service offerings in G-Cloud 13, Cooke said he expects Xalient to address government demand for SD-WAN, cybersecurity and unified communications.
Financial planning, multi-cloud demand
Others cite the need for cloud offerings that support customers’ financial planning and forecasting needs. Randy Werder, co-founder and CEO of Black Diamond Advisory, said customers are interested in dynamic systems that allow them to model key operational drivers and see how changes to those drivers will affect them. that in their organizations.
“I haven’t seen the caution,” Werder said of customer spending on products like OneStream, which offers planning, forecasting and predictive analytics. “They think the value of having that solution in place is greater than the cost. I’ve seen a lot of demand.”
To meet that need, Werder plans to tap a new $25 million investment from Tercera to expand his company’s advisory services. Those services offer expertise in functional areas — from sales to strategic planning — and vertical market knowledge to prepare customers for OneStream implementation. Black Diamond Advisory will also use the funds to continue developing pre-built code offerings designed for specific verticals. Such offerings, sometimes called accelerators, help cloud consultancies differentiate their services.
Another customer focus: multi-cloud offerings that intersect with adjacent technologies.
Lakshmi Ashok — vice president and enterprise service management lead at Leidos, a tech services company based in Reston, Va. — said government agencies want to take advantage of the multi-cloud approach. Leidos’ public sector customers, he said, aim to use edge computing, AI and mixed-reality services to fulfill their missions.
The task for service providers, he added, is to “tame all the innovation inherent in many cloud providers” and keep an eye on cost efficiency, regulatory compliance and quality of service.
