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Cloud consultants attract investors, grow revenue

Money keeps pouring into the cloud consulting and professional services market as industry executives cite steady demand for their services in an uncertain economy.

Cloud consultants and professional services firms continued to attract investment and grow revenue into the third quarter, even amid signs of tightening purse strings among enterprise buyers.

Investors and strategic buyers show interest in companies that build offerings around public cloud platforms and SaaS technology, with vertical market expertise also influencing transactions. Service providers and consultants, meanwhile, report significant growth in their managed cloud businesses. The U.S. Census Bureau's quarterly services estimates, released Sept. 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 partner 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 Capgemini last week purchased Aodigy Asia Pacific, a Singapore-based company that specializes in digital transformation on the Salesforce platform. The acquired company's services include sales optimization, customer interaction, 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. Inspirage focuses on vertical market segments within the high-tech, life sciences and manufacturing fields. Last month, Accenture purchased 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 ecosystems sales grew 23% compared with the previous 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 cloud consulting Sept. 22 when it reports its quarterly results.

Growth continues amid shifting priorities

The influx of capital, particularly notable among cloud consultants and MSPs, and top-line growth paint a favorable industry outlook. But other signs point to more cautious cloud spending among IT buyers. Earlier this month, Bret Taylor, co-CEO at Salesforce, noted during an earnings call that some deals take longer to close because executives "are scrutinizing all purchasing decisions."

Workday, another SaaS platform company, takes a similar view. Pete Schlampp, the company's CSO, said he hasn't seen any change in demand for Workday's human capital management and financial offerings but cited the potential for deal slippage going forward. "As we go into more uncertain economic environments, which are likely happening, then typically in those situations, buyers on the financial management side tend to delay those deals a little bit longer."

Cloud platforms' sales prospects ultimately influence the financial health of the consultants, MSPs and integrators that provide offerings around them. At this point, however, service provider executives said they anticipate uninterrupted growth in their cloud businesses.

"I'm not seeing any slowdown in cloud adoption, despite the economic climate," said Brandon Byars, head of technology at Thoughtworks, a Chicago-based consulting firm. Thoughtworks last month reported year-over-year revenue growth of 27.5% during its second quarter, citing demand for digital transformation services.

cloud consultancy characteristics chart
Cloud consultants remain attractive investment targets.

That said, customers may be eyeing cloud spending with a sharper financial focus.

"There are certain priorities that are probably shifting," Byars said. "I think we are seeing a little bit more attention on financial management and FinOps practices earlier in the lifecycle."

FinOps practices aim to boost an organization's financial accountability forcloud services. Their higher priority in the current economic environment contracts with previous years, when businesses were perhaps more tolerant of cloud costs that drifted above their initial expectations.

"A couple of years ago, people would be okay with an increase in cost," Byars said. "But they recognized that [cloud] was a path for modernization, and so they would tolerate it."

Cloud as financial tool

The ability to keep cloud costs in check should loom large in the coming months as service providers promote on-demand IT as a way to weather economic turbulence. Industry executives believe the cloud-as-cost-saver theme will keep demand humming.

"Using more of cloud services has proven to be a good lever organizations can pull to curtail costs," said Vrinda Khurjekar, senior director of AMER business at Searce, a technology consultancy based in Houston.

I'm not seeing any slowdown in cloud adoption, despite the economic climate.
Brandon ByarsHead of technology, Thoughtworks

Economic turmoil compels many organizations to rethink spending, with creative ways of doing the same amount of work at much less cost becoming critical, Khurjekar said. The cloud's pay-as-you-go model will help organizations do just that, she suggested.

"Despite major budget cuts and hiring freezes, the demand for cloud services has and will remain constant," she said. "Going forward, we predict that, at least through the recession, the demand will actually increase as cloud services and AI technology will be needed to help fill some of the gaps created by budget cuts."

Indeed, enterprises continue to launch large cloud initiatives. In the United Kingdom, the Crown Commercial Service, a procurement agency, has been awarding contracts through its multi-billion-pound G-Cloud 13 framework program, which offers cloud services such as hosting, software and cloud support to U.K. government entities.

Xalient, an MSP and IT consultancy in London, was recently approved to provide services through the G-Cloud 13 framework, which launches November 9. Such initiatives suggest cloud investment will carry on despite economic uncertainty, said Mark Cooke, the company's group COO.

IT services growth chart
Hosting revenue continues to grow in the high teens, ahead of other IT services.

"Cloud investments that reduce Capex and can be paid for based on consumption make sense in any downturn," he said.

Government departments, or companies, considering office closures or business divestment can do so quickly and efficiently -- from a networking and security perspective, in particular -- if their IT assets are in the cloud, Cooke noted.

As for specific as-a-service offerings on G-Cloud 13, Cooke said he anticipates Xalient addressing government demand for SD-WAN, cybersecurity and unified communications.

Financial planning, multi-cloud demand

Others cite demand 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 let them model core operational drivers and see how changes to those drivers will affect their organizations.

"I have not seen the caution," Werder said regarding 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 demand, Werder plans to tap the 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 a OneStream implementation. Black Diamond Advisory will also use the funds to continue developing pre-built code offerings designed for particular verticals. Such offerings, sometimes dubbed 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 exploit the multi-cloud approach. Leidos' public sector customers, she said, aim to use edge computing, AI and mixed-reality services to fulfill their missions.

The task for service providers, she added, is to "tame all of the innovation inherent across multiple cloud providers" and keep an eye on cost efficiency, regulatory compliance and quality of service.

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