John Madden, IT Services Practice Leader and author of the report says, “The rate of cloud adoption is quickly accelerating; cloud breaks through in virtually every customer conversation. This accelerated activity applies not only to private or virtual private cloud models which remain the dominant method of deployment, but increasingly public and hybrid cloud management models as well.”

In the new 2014 Trends to Watch report on Cloud Services, the independent technology analyst firm identifies four key trends that will impact cloud services in 2014:

• Cloud services adoption in 2014 will still be cost-driven, but business value and transformation will take higher priority.

• How vendors support cloud services deployments is emerging as an important decision-making factor for customers.

• Customers lagging behind on well-defined strategies for cloud management, governance and compliance procedures need to make investments or face failure in meeting business expectations.

• Hybrid cloud management and service integration will emerge as major differentiators for IT services and outsourcing providers.

Madden says, “More customers in all regions are taking their first steps toward broader cloud services investments, usually with initial forays into infrastructure-as-a-service (IaaS) or software-as-a-service (SaaS) and an eye toward other projects if successful. All signs point to an even more accelerated investment timeline for customers throughout 2014.”

Cloud based solely on cost will in the long run deliver limited benefits for corporate customers, and cloud services investments in 2014 need to be built on a solid bedrock of business values. This cloud-based transformation is increasingly occurring hand-in-hand with changes in how enterprise customers want to engage with IT services providers, as customers in all industries are looking to consolidate the number of strategic suppliers they work with.

In 2014 there will be a noticeable number of acquisitions, partnerships and alliances similar to those seen in the second half of 2013. Some of these deals and partnerships will involve traditional IT services and outsourcing firms acquiring more data center capacity in anticipation of the spike in cloud-based infrastructure outsourcing deals, while others will be outsourcers acquiring niche or start-up cloud players to provide management of hybrid cloud environments.

“When it comes to differentiation, outsourcers and providers want to demonstrate innovative thinking and prove that they have the intellectual property (IP) that can deliver cost and business benefits by leveraging cloud. To that end, we expect more investments and acquisitions from outsourcers in mobility, analytics and social, increased commitment to ecosystems and standards such as OpenStack and an increased emphasis from vendors on how customers should improve cloud security, governance and compliance procedures,” concludes Madden.