Customer relationships key to service provider opportunity in the cloud

REDMOND, Wash. — May 11, 2016 — Organizations now rely more on digital IT infrastructure than physical, a tipping point that suggests the cloud has become the go-to model for most customers. In addition, 95 percent of customers intend to renew their contract with their primary cloud and hosting provider, indicating a high degree of loyalty despite the inherent flexibility of the cloud model. These and other findings are according to The Digital Revolution, Powered by Cloud, a Microsoft Corp.-commissioned study conducted by 451 Research LLC, released Wednesday, that illustrates the opportunity for cloud service providers and highlights the important role that developing deep and lasting customer relationships will play in capturing it.

As organizations prepare for major business and technology changes, they will depend more on digital platforms to deliver products and services. According to the findings from the study, 57 percent of organizational infrastructure will be digital, compared with physical in two years, up from 51 percent today.

In addition to extremely high renewal rates, over 80 percent of customers have an annual or longer term contract with their primary cloud and hosting provider, with 43 percent having a contract of two or more years. Thirty-eight percent of customers indicate they will increase spending with their primary cloud and hosting service provider upon contract renewal, further emphasizing the importance of solidifying customer relationships.

“These findings underscore the opportunity for service providers to drive organic business growth by nurturing long-term customer relationships,” said Aziz Benmalek, vice president, Hosting and Cloud Service Provider Business, Microsoft. “By adapting and servicing customers through their entire cloud life cycle and keeping turnover low, cloud service providers will avoid costs associated with churn and new customer acquisition, while benefiting from increased stability and more projectable revenue streams.”

In addition, the study reiterated that the opportunity for service providers extends beyond infrastructure hosting, as 71 percent of customers’ cloud and hosting budgets are now allocated to managed services, application hosting and security services. This aligns with the trend of customers increasingly investing in the cloud to help achieve proactive business goals, with growing revenue, improving the quality of offerings and reducing costs cited as top priorities.

“Cloud adoption is a key driver in the digital transformation for organizations of all sizes, and service providers can benefit from adopting a more complete approach to the customer life cycle to help them throughout this process,” said Michelle Bailey, senior vice president, Digital Infrastructure and Data Strategy, 451 Research. “Trustworthiness, product quality and technical expertise are key differentiators that can enable cloud providers to retain customers and grow their business.”

“Our strategy is to combine the world’s leading expertise and Fanatical Support powered and delivered by Rackspace with industry-leading technologies from companies like Microsoft,” said Odus Wittenburg, senior vice president, Rackspace. “We absolutely see the value of creating long-term relationships with our customers who are transforming their IT by migrating critical workloads to cloud models.”

Cloud service providers can tap into infrastructure solutions such as Windows Server, Microsoft System Center, Microsoft SQL Server and Microsoft …read more