Surge in Public Sector Cloud Adoption Driven by Unmet Demand in the U.S.

Updated On: December 22, 2024 2:46 am

Public Sector Ramps Up Cloud Migration, Revamping Services After Years of Delay

A new report from Information Services Group (ISG) III shows that the U.S. public sector is making significant strides toward adopting cloud services, shifting away from outdated technologies.

The 2024 ISG Provider Lens™ Multi Public Cloud Services report highlights the increasing uptake of cloud technology by state, local, and educational (SLED) organizations. Despite initial slow progress over the past few years, cloud adoption has gained momentum, bolstered by federal grants aimed at technology modernization. However, challenges related to post-pandemic finances and politics have impeded many agencies from fully launching their cloud strategies.

“Cloud adoption was slower than expected initially, but momentum is growing now,” said Nathan Frey, U.S. Public Sector partner at ISG. He noted that more service providers are joining this market and are tailoring their strategies to suit public agency requirements.

According to the report, many SLED organizations are motivated to move to cloud services because their legacy systems are outdated. As IT personnel retire and budgets tighten, these agencies often find themselves lacking qualified staff to manage either outdated or new technologies.

Heightened expectations from constituents also play a role in this shift. Since 2023, public sector entities have increasingly embraced cloud infrastructure, frequently utilizing large-scale, state-managed cloud solutions.

To tackle the challenges of transitioning to cloud-first or mixed environments, SLED organizations frequently partner with managed service providers, who have adapted their offerings for the public sector. Many of these providers are adopting various forms of AI, including generative AI, to enhance flexibility and support client IT teams.

The global trend of cloud-based ERP platforms has had a significant impact on U.S. public agencies, where SAP holds a leading position. Many agencies are seeking external help to navigate this shift, which often presents challenges like disjointed SAP environments and compliance issues. ISG anticipates that the number of SAP migrations among SLED organizations will continue to escalate until 2027.

Concerns surrounding financial management have intensified as agencies increasingly depend on cloud services, according to ISG. Interest in Cloud FinOps is rising, as it provides a framework to ensure that cloud expenditures align with agency missions, regulatory standards, and budget constraints.

“Agencies need to keep scaling up and adapting cloud usage to meet changing needs and serve constituents,” noted Jan Erik Aase, global leader at ISG Provider Lens Research. “FinOps gives them the visibility and confidence to make those investments.”

The report also examines additional cloud trends influencing the U.S. public sector, including increased initiatives from hyperscalers to cater to sector demands and a growing interest in collaborative contracting across states.

For further insights into challenges faced by U.S. public agencies concerning cloud coordination and provider evaluation, the ISG Provider Lens™ Focal Points briefing can be accessed here.

The 2024 ISG Provider Lens™ Multi Public Cloud Services report assesses 38 providers across five categories: Consulting and Transformation Services, Managed Services, FinOps Services and Cloud Optimization, Hyperscale Infrastructure and Platform Services, and SAP HANA Infrastructure Services.

IBM is recognized as a Leader in all five categories. Kyndryl and Rackspace Technology are Leaders in four categories each, while Accenture, Infosys, NTT DATA, and Unisys dominate three categories. AWS, CGI, Deloitte, and Microsoft shine in two categories, with SAP recognized as a Leader in one.

Additionally, Capgemini and HCLTech are noted as Rising Stars in two categories each. Google and TCS are acknowledged as Rising Stars in one category each.

In terms of customer experience, Persistent Systems has been named the global ISG CX Star Performer for 2024, boasting the highest customer satisfaction scores in ISG’s Voice of the Customer survey under the ISG Star of Excellence™ program.

A customized version of the report is available through Unisys.

The 2024 ISG Provider Lens™ Multi Public Cloud Services report for the U.S. Public Sector can be accessed by subscribers or purchased on this webpage.

About ISG Provider Lens™ Research

The ISG Provider Lens™ Quadrant research series is unique in its approach, combining empirical data-driven research with insights from ISG’s global advisory experts. This resource offers detailed data and analysis to help businesses choose the right service providers. The research currently encompasses providers serving several global markets, including the U.S. and Europe, with plans to expand to additional regions in the future. For more information, visit this webpage.

About ISG

ISG (Information Services Group) III is a prominent global technology research and advisory firm. Serving over 900 clients, including more than 75 of the top 100 enterprises worldwide, ISG assists corporations, public sector bodies, and service providers in achieving operational excellence and accelerated growth. Founded in 2006 in Stamford, Conn., ISG specializes in digital transformation services, including AI, cloud, and data analytics. The company employs over 1,600 professionals globally, recognized for their expertise, market knowledge, and analytical abilities. For more information, visit www.isg-one.com.