A global study commissioned by Cisco and conducted by Canalys, revealed that IT channel partners focusing on managed services are expected to see significant growth in 2023. Despite global economic uncertainty, the projected outlook for managed services indicates a worldwide growth of 12.7 per cent, reaching a total value of $472 billion. This growth surpasses the estimated 3.5 per cent growth in overall IT spending.
For the Asia Pacific (APAC) region, managed services revenue currently stands at $95 billion, and is expected to experience a growth rate of 14 per cent. In India, the managed services revenue delivered by channel partners in 2022 showed impressive growth, rising by 16.1 per cent compared to the previous year. This surge amounted to a total of $ 7.4 billion.
A key driver of this demand is the pressing need for cybersecurity, as organisations across the globe contend with a rapidly evolving threat landscape. This challenging landscape, in addition to a global shortage of cybersecurity and IT talent, has prompted many organisations to turn to partners in managed services for their technology expertise and support. Findings from the study indicate that 56 per cent of channel partners expect revenues from cybersecurity managed services to grow this year.
Commenting on the study, Panish PK, managing director, Partner Business Group, Cisco India and SAARC, said, “In the digital era where technology plays an increasingly critical role across industries, customer expectations and requirements in the IT landscape are evolving significantly. Organisations are now turning to their partners for solutions that not only provide agility and value, but also offer flexible consumption models to efficiently manage their ever-expanding and intricate technological needs. It is promising to witness the substantial growth of managed services in India, with 19.4 per cent year-on-year increase in Indian partners providing these services. This growth reflects customers’ evolving IT needs, as well as a major shift in how partners are addressing them.As we move ahead into India’s techade, we see significant opportunities for channel partners to innovate and capitalise on this opportunity by helping companies adapt to emerging technologies and enhance their IT investments to achieve better business outcomes.”
Buoyed by global growth, confidence among channel partners selling managed services has surged significantly. The study reveals that in June 2023, 35 per cent of channel partners said they expect growth of at least 20 per cent in their managed services businesses this year. This represents a significant increase compared to the 27 per cent reported in 2022 and points to a rapid update of managed services by organisations of all sizes.
Meanwhile, Robin Ody, senior analyst, Canalys, said, “Managed services are the force driving the global IT industry’s adaptability and growth. Our research underscores the substantial potential for companies selling managed services, opening up diverse avenues for them to thrive in a post-pandemic era.”.
The study also identified cloud infrastructure management as another key growth opportunity. As organisations digitise operations and move to the cloud, they face challenges with complex cloud infrastructure spanning private and public clouds, along with distributed applications and services. This has increased the need for cloud infrastructure management and expertise, with 55 per cent of channel partners saying they expect revenues in this segment to grow in the current year.
Revenue growth for managed service providers is also likely to accelerate with emerging technologies like AI and the growing emphasis on sustainability measures driven by IT investments. According to the study, nearly 6 in 10 partners (59 per cent) believe AI presents a business opportunity, with 39 per cent stating it will be “significant” or “tremendous.” Similarly, 57 per cent believe customers would be willing to pay a premium for sustainability products and solutions.
Further, Ody added, “At their core, managed services are about businesses getting the most from technology investments, and as new technologies emerge, managed services are vital to an organisation’s digital business strategy. By specialising in specific verticals, technologies, or even geographic areas, partners in managed services are helping customers to solve their IT challenges, remove complexity and deliver outcomes that drive a business forward.”
The study showed that revenues for partners delivering managed services are poised for global growth between 2023 and 2025, with double-digit compound annual growth rate (CAGR) figures anticipated across all regions. In Europe, the Middle East and Africa, where managed services revenue is currently $122 billion, growth is forecast up to 12 per cent. Latin America is expected to grow 11-12 per cent from $11.5 billion, while North America will see growth of between 10-12 per cent from $190.6 billion.