The position of the traditional juggernauts of the IT services market, Datacom and Spark, is challenged by cloud providers such as Microsoft, which are now emerging as incumbent service providers, reports IDC.\nIDC's New Zealand IT Services Ecosystem Study 2017 reveals that the general preference of the market is now a mix of internal\/external sourcing with a multi-provider strategy.\nThe inclusion of cloud vendors to the assembly of leading IT services providers reflects the changes in not only how firms structure their outsourcing agreements, but also in their approach to external engagement, says IDC.\n"Largely, the desire to engage with multiple parties that includes a cloud provider is driven by the shift of New Zealand organisations towards an Information-as-an-Asset strategy,\u201d says Donnie Krassiyenko, IDC senior market analyst for New Zealand IT services.\n\u201cThrough this approach, the organisation's data becomes a tool for extracting value from digital transformation, allowing it to place the customer in the centre of business efforts," says Krassiyenko, in a statement.\nDonnie Krassiyenko, IDC NZ\nThe desire to engage with multiple parties that includes a cloud provider is driven by the shift of NZ organisations towards an Information-as-an-Asset strategy. Donnie Krassiyenko, IDC NZ\n"As the embedment of data-driven insightsinto the organisation's processes requires a platform, firms are challenged with factors of how, when and where to put their data from a hybrid\/multi-cloud perspective. To achieve this, organisations seek help from cloud providers".\nIDC says despite the overall strong intention to continue external engagement for fulfillment of internal IT needs, outsourcing preference varies across service categories. \nDesktop services for instance, have the highest level of in-house implementation with 47 per cent of New Zealand organisations choosing to do it themselves. Conversely, datacentre services have the highest level of external use with 69 per cent using either a mix of external\/internal or external-only type of consumption.\nIDC says a reasonable rate of market churn associated with market fluidity and a lack of customer service is expected to occur in the next two years as a number organisations are looking to insource or change providers. \nThis sentiment is expressed for networking services (20 per cent), cloud implementation (19 per cent), and security services (17 per cent). \nThus, insourcing remains to be the largest threat to an otherwise thriving service provider market.says IDC.\nNo caption\nThe service provider market is also becoming highly fragmented outside of the large providers, which is an indication of the end-user's willingness to work with niche providers. \nHigher maturity of technology adoption has enabled organisations to become more aware of the provider capabilities as well as what service excellence should look like. \nAs the result, when engaging with service providers, organisations buy based on such characteristics as industry-specific use-cases, strong ecosystem of partners, and professional services. \nHowever, the most sought attribute is the provider's ability to deliver consistently against expectations; and if satisfaction with the aforementioned criteria is reasonably high, it is somewhat underwhelming with deliverability. For the market to reap the rewards in a more coherent manner, there is a need to close this gap, advises IDC.\n\u201cThe challenges do not end there,\u201d says Krassiyenko.\nAs more complex architectures naturally result in a greater exposure to cyberthreat, security is one of the key drivers for choosing a primary provider, he points out.\n\u201cSecurity has the highest stated importance from an investment perspective,\u201d he adds. \u201cThe task for organisations is to have a clear understanding that security is a business risk, not an IT issue.\u201d\n\u201cFirms that recognise the unattainability of absolute security work across both their own organisation and the wider supply chain in order to ensure representation of the most robust security posture. After all, a chain is only as strong as its weakest link.\n\u201cTo be ready for a security threat, it is as crucial to hold the right business conversation about risk as to have security policies and training programmes. The greatest danger lurks where it cannot be seen".\nSign up for CIO newsletters for regular updates on CIO news, views and events.\nJoin us on Facebook.