The 2023 outlook for consultants, integrators, and managed service providers is diverse and, at times, even conflicting.
Indeed, there is a wide variety of macroeconomic signals. Even if inflation is at a rate not seen in decades, recent data from the United States government indicates that the upward trend may be slowing. Rising interest rates have prompted widespread fear that a recession is on the horizon. The Bureau of Economic Analysis now reports a 2.9% growth in GDP for the third quarter. Despite layoffs and hiring freezes at certain companies, opportunities in high-demand fields like cybersecurity continue to expand. Businesses will be more cautious about spending money on technology, but they still intend to upgrade their essential digital infrastructure.
Those influences — possibly economic crosswinds rather than headwinds — will impact IT services market trends next year. So, here are projections that you should think about.
Avoiding capital expenditures affects IT budgets.
The current economic climate will have a significant impact on IT decision-making and planning. This will knock on IT budgets and change how departments prioritize projects.
In addition, he said that the rise of cloud services will largely continue at its current pace because many businesses would want to reduce their capital expenditures on technology in favor of more stable operating costs.
Williamson also noted that such as-a-service solutions have decreased in price and increased in accessibility, making them a good fit for mid-market businesses.
Technology consultancy firm Hexaware Technologies of Iselin, New Jersey, also highlighted Capex avoidance in the cloud. When asked about the tipping point for SaaS, IaaS, and container adoption, Chirag Khanijau, vice president of cloud services at Hexaware, pointed to clients’ need to “optimize ruthlessly” to free themselves from expensive on-premises systems. In October, Hexaware became an AWS Migration Competency Partner.
More focus is being put on FinOps.
Service providers anticipate growing interest in FinOps in 2019 as the drive to optimize extends into the Opex-oriented world of cloud computing.
FinOps was mentioned by EY’s digital tech transformation and cloud leader Paul Sussex as one of the most often subjects brought up in conversations with clients. “one of the notable lessons learned was around cost overruns and financial management,” he said of the widespread cloud adoption.
Warily, the digital revolution presses on.
Despite economic concerns, business clients plan to advance with digital transformation and IT modernization in 2019.
PwC’s Pulse study of 657 U.S. executives during the third quarter indicated that 81% expect a recession to begin within the next six months. Business executives such as the CFO, COO, and CIO were surveyed by the consultancy, and 82% of them said they were confident in their capacity to maintain momentum with their transformation programs.
Businesses that want to stay competitive must embrace digitalization and those that haven’t yet face serious questions about their future. According to Juan Orlandini, chief architect of Insight Enterprises’ cloud and data center transformation division, your competition will quickly overtake you if you don’t have a digital presence for your company.
Modernization initiatives might take two distinct ways.
Some company leaders anticipate a split in the managed IT services packages market between projects focused on optimizing existing systems to squeeze more profit out of them and modernization initiatives aimed at future-proofing firms.
A slowdown in mergers and acquisitions
While M&A activity in the IT services industry continued at a high clip in 2022, it may cool off somewhat in 2024.
New York City-based private investment firm VSS Capital Partners managing director Trent Hickman speculated that the deal-making pace in specific subsectors of the MSP sector could slow down.
Even the cloud professional services industry may have a year of ups and downs in 2019. Mature partner ecosystems surrounding cloud providers, such as Salesforce and ServiceNow, will see consolidation and contraction, Barbin added. Smaller enterprises operating in ecosystems with thousands of partners will either be acquired by larger ones, pushed to band together to achieve scale, or compelled to diversify into supplementary ISV ecosystems like Snowflake, Databricks, and Datadog.
Sub-scale partners focused on a mature or highly competitive SaaS ecosystem and heavily concentrated in a sensitive field like high tech are at risk of going bankrupt or being bought at below-market multiples, as pointed out by Barbin.
For professional services organizations in dynamic ecosystems like those surrounding cloud software leaders like Atlassian, BigCommerce, and Tanium, the M&A storyline will take a new turn. Here, Barbin predicts that partners, under pressure from ISVs to specialize, will look to either acquire industry skills in the domestic and international markets or develop such expertise organically at the business process and management consulting layer.
Consulting for sustainability makes slight progress.
It is unclear how much focus will be placed on sustainability measures next year due to the state of the economy. However, leaders in the sector largely believed that ESG would develop into a consulting services and technology potential in the future.
The sustainability boom might hit as soon as 2024, but IT service providers are already planning for it. In October, EY and Microsoft collaborated to develop ESG data management capabilities for clients’ decarbonization and net-zero ambitions. Carbon reporting and monitoring of the supply chain are both a part of the working partnership.
According to Ozdemir, a wide range of sustainability consulting services are beginning to emerge.
