Enterprise cloud environments grow increasingly complex as data volumes expand and legacy systems persist. Almost 88% of companies admit that they anticipate cost benefits from managed services deployment, but just 16% have a fully integrated cloud strategy in place.
The gap between expectation and reality is where the trouble begins: excessive infrastructure spending, security vulnerabilities, and innovation stalls under the weight of technical debt.
Management complexity, not cloud technology itself, creates these challenges.
IT teams face three persistent obstacles: controlling costs through resource optimization, maintaining security through proper access configuration, and scaling infrastructure during demand fluctuations (with the main question in mind: will your system handle a traffic surge, or will bottlenecks crash your customer experience?).
This is where managed cloud services (MCS) step in, acting as a force multiplier for your team. By handing off the heavy lifting: cost optimization, 24/7 security monitoring, and elastic scaling to seasoned experts, your business regains focus.
This analysis covers cloud managed services fundamentals, quantifiable business benefits, and seven provider selection criteria.
The Rackspace survey reveals that 27% of enterprises rely on managed cloud service providers, while the majority (73%) utilize other solutions, including cost management tools, customized dashboards, and orchestration tools.
However, only 16% of respondents from the same survey have a comprehensive cloud strategy fully integrated into their business environment. The possible reason could be the overreliance on disparate cloud management tools, which limit visibility and slow decision-making. Without a clear view of their cloud environments, business leaders struggle to spot inefficiencies or determine which applications are ready for migration.
Managed cloud services help compose a tech stack aligned with business strategy, allowing organizations to choose the right service model for their specific needs and use cases. Depending on cloud needs, organizations can select from various types of cloud managed services.
Managed cloud services types
| Service type | What it provides | Typical use case | Example providers | Adoption insights |
|---|---|---|---|---|
| IaaS (Infrastructure-as-a-Service) | Virtual machines, storage, and network components | Enterprises needing flexible infrastructure without owning hardware | AWS EC2, Microsoft Azure, Google Compute Engine, Apache CloudStack | Widely used for hybrid and multi-cloud scalability |
| PaaS (Platform-as-a-Service) | Operating systems, developer tools, databases, and middleware | Teams building, testing, and deploying custom applications | AWS Elastic Beanstalk, Azure App Service, Google App Engine | Popular among enterprises, accelerating software delivery |
| SaaS (Software-as-a-Service) | Fully managed subscription-based applications delivered over the internet | Businesses using ready-to-go apps like CRM, ERP, or collaboration tools | Salesforce, Microsoft 365, Zoom | The most common model, already used by a majority of enterprises |
A suitable cloud strategy amplifies rather than overwhelms a business structure, enabling businesses to achieve numerous benefits.
Benefits of cloud managed services
It may seem that if a third party is in charge of the cloud service management, a business can lose control over their infrastructure, and this outweighs all the potential benefits. However, the key is selecting an experienced managed service provider, and then all the benefits listed below will become a reality, with minimized risks and disruptions to your workflow.
Optimized cloud costs
FinOps practices offered by skilled managed service providers can already be at the “run” stage, delivering fast cost management and monitoring services, while your company can still be at the “walk” or “crawl” stages.
Case in point
AdTech company TrueData has successfully reduced cloud costs by 66% with the assistance of managed cloud services. The company’s focus on rapid business growth led to inefficient use of resources in the AWS infrastructure. In partnership with an MCSP, TrueData shifted from costly instances to more cost-efficient ones and switched from a third-party data warehouse to an AWS-based one.
Cloud cost optimization can also involve optimizing other areas of your IT infrastructure, such as data engineering practices and data pipelines. An experienced provider can help you spot not only obvious cloud management issues but also tie them to other infrastructure components.
Reduced security risks
39% of businesses now prioritize managed services for one reason: security. MCSPs implement advanced cloud security controls, such as:
- 24/7 security monitoring to quickly spot issues and apply mitigation strategies or alert the security team.
- Attribute-Based Access Control (ABAC): Granular permissions based on role, location, device, and behavior (e.g., “Only finance teams can approve payments from EU IPs”).
- AI-driven threat detection: Spots anomalies in real time (e.g., “Why is this user accessing 10x more data than usual?”).
- Built-in compliance: Pre-configured frameworks for GDPR, HIPAA, PCI DSS, and ISO standards, so migrations stay audit-ready.
Hands-on experience with cloud security controls gives MCSPs an edge over in-house cloud teams, which often have to wear many hats and can overlook granular security controls.
Enhanced scaling opportunities
With cloud managed services, you can adjust and optimize your cloud resources for current use as well as future-proof them.
With the help of a managed service provider, organizations can transition to a modern infrastructure, enhancing system scalability and maintaining service availability under varying load conditions through:
- Reactive scaling, which instantly adds resources during demand surges (e.g., Black Friday sales).
- Scheduled scaling to prepare for the planned spikes in user demand (e.g., every weekday evening, a new product launch).
- Predictive scaling, which uses AI/ML to forecast needs (e.g., “Your e-commerce site will need 20% more CPU next Tuesday”).
- Technical debt reduction through modernizing outdated systems to improve performance and reliability.
Improved performance and reliability
Another benefit of cloud management services is an increase in system performance and reliability, as you iteratively migrate most time-consuming and costly workloads to the cloud and establish comprehensive monitoring of the cloud resources. For instance, a software provider for fire service operations successfully reduced round-trip times (RTT) from 251 milliseconds to 165 milliseconds by optimizing memory allocation in the SQL server and implementing GPU updates.
Seven criteria to choose the best managed cloud service provider (MCSP)
To ensure managed cloud services meet your functional and non-functional requirements, you should thoroughly evaluate each MCSP candidate by these criteria:
#1. In-depth experience with cloud-native and legacy systems
A mature provider should be able to not only develop highly-efficient cloud-native solutions but also know how to migrate legacy systems or set up integrations between cloud solutions and on-premises ones.
What to ask:
“Show us a case study where you modernized a 10+ year-old system while keeping it integrated with newer cloud apps.”
“How do you handle hybrid environments (e.g., cloud + on-premises)?”
For instance, the Xenoss team created a cloud-based virtual flow metering solution designed to generate real-time predictions seamlessly integrated into legacy SCADA systems.
#2. Focus on cloud security and compliance
Understanding industry-specific security controls and compliance requirements is also essential for a cloud managed service provider, as security concerns are among the most common reasons businesses hesitate to migrate their workloads to the cloud.
What to ask:
“What’s your approach to zero-day vulnerabilities?” (Listen for AI-driven threat detection and automated patching.)
“Can you show us a compliance framework for [your industry, e.g., HIPAA, GDPR]?”
A strong MCSP will have pre-built compliance templates for regulations such as ISO 27001, GDPR, or PCI DSS, saving you months of audit preparation.
#3. Access to advanced technologies and an expert talent pool
The ability to blend an advanced tech stack and skilled cloud engineering experts differentiates an efficient provider from an incompetent one. In particular, AI-enhanced cloud managed services are gaining traction, with 84% of enterprises integrating AI into their cloud strategies.
What to ask:
“How do you use AI/ML to optimize costs, security, or performance?”
“What’s an example of a custom tool or automation you’ve built for clients?”
#4. Proven FinOps expertise
FinOps practices include accurate forecasting, rightsizing resources, and implementing chargeback or showback models to align cloud spend with business objectives.
What to ask:
“What’s the average cost savings you’ve delivered for clients like us?”
“Do you have certified FinOps professionals on staff?”
Demonstrated case studies and certified FinOps professionals prove that the provider can deliver measurable cloud cost savings.
#5. Expertise with private, public, hybrid, and multi-cloud environments
To help businesses avoid vendor lock-in, balance costs, and select the best-fit services for each workload, cloud managed service providers should be flexible enough to work with various environments. For instance, by efficiently combining both managed public cloud and private cloud environments, organizations can strike a balance between scalability and costs.
What to ask:
“Can you manage workloads across AWS, Azure, and GCP, without bias?”
“How do you help clients avoid lock-in?”
A good MCSP will help you use public cloud for scalability (e.g., AWS for bursty workloads), keep sensitive data in private cloud (for compliance), and avoid overcommitment with pay-as-you-go models.
#6. Experience composing a cloud center of excellence (CCoE)
A CCoE helps organizations shape an enterprise-wide cloud strategy that aligns with both short- and long-term business goals. With support from a cloud managed services provider, a cloud center of excellence becomes a practical cross-company framework for cloud governance that strengthens decision-making, reduces risks, and ensures cloud investments deliver measurable value.
What to ask:
“How do you help clients set up a CCoE?”
“Can you share a governance template we could adapt?”
#7. Recognized certifications and partnerships
Certifications can be a valid proof that a vendor easily navigates the complex environment of public cloud providers (AWS, Azure, GCP).
What to ask:
“What tier are you in AWS/Azure/GCP’s partner program?” (Higher tiers = more expertise.)
“Can you share a client reference in our industry?”
For instance, Xenoss is a proud AWS Select Tier Services Partner, demonstrating that our engineers possess long-standing expertise in building cloud-based software solutions on AWS infrastructure. Additionally, we have successfully partnered with other top-tier cloud and data engineering companies.
A combination of these basic success criteria can help you choose the most suitable provider who can find a unique approach to solving your cloud management challenges.
