Companies’ reliance on IT Managed Services increases in 2023

IT channel partners selling managed services are poised for robust growth in 2023, with a new forecast predicting global expansion of 12.7 percent, up from US$419 billion in 2022.

  • 2 months ago Posted in

Findings from a global study commissioned by Cisco and conducted by Canalys, reveal 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 percent, reaching a total value of US$472 billion. This growth surpasses the estimated 3.5 percent growth in overall IT spending.


Key Drivers: Cybersecurity, Expertise, Demand for Flexible Consumption Models

A key driver of this demand is the pressing need for cybersecurity, as organizations 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 organizations to turn to partners in managed services for their technology expertise and support. Findings from the study indicate that 56 percent of channel partners expect revenues from cybersecurity managed services to grow this year.


“Customers are integrating more technology into their operations and they expect their IT partners to provide agility, value and flexible consumption models to efficiently manage their growing and complex technology needs,” said Alexandra Zagury, Vice President of Partner Managed Services and as-a-Service Sales at Cisco. “The evolving ecosystem of IT partners selling managed services is adapting to meet customer needs and challenges by finding ways to modularize and package what once were customized solutions. We anticipate more innovation and specialization from channel partners through managed services that offer distinct business outcomes and exceptional experiences.” 


Global Growth

Buoyed by global growth, confidence among channel partners selling managed services has surged significantly. The study reveals that in June 2023, 35 percent of channel partners said they expect growth of at least 20 percent in their managed services business this year. This represents a significant increase compared to the 27 percent reported in 2022 and points to a rapid update of managed services by organizations of all sizes.


“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,” said Robin Ody, Senior Analyst at Canalys.


The study also identified cloud infrastructure management as another key growth opportunity. As organizations digitize 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 percent 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 six in 10 partners (59 percent) believe AI presents a business opportunity, with 39 percent stating it will be “significant” or “tremendous.” Similarly, 57 percent believe customers would be willing to pay a premium for sustainability products and solutions.


“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 organization’s digital business strategy. By specializing 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,” said Ody.


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 Asia-Pacific, the sector is expected to grow to 14 percent from US$95 billion. In Europe, the Middle East and Africa, where managed services revenue is currently US$122 billion, growth is forecast up to 12 percent. Latin America is expected to grow 11-12 percent from US$11.5 billion, while North America will see growth of between 10-12 percent from US$190.6 billion.

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