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News & Articles

January 18, 2023 |

2023 Tech Preview: Channel Pros Defy Trends

In a year likely to be marked by recession for most businesses, IT businesses should see growth instead.

2023, SADLY, IS SHAPING UP to be right at home in a decade so far most closely associated with a global pandemic, soaring inflation, and war in Europe. Economists polled by Reuters see a 60% chance of recession ahead in the U.S., and even the comparatively upbeat Federal Reserve anticipates GDP to rise an anemic 0.5% this year. Coupled with the Fed’s stated plans to keep interest rates high until 2024, all signs point to a rough year ahead for the economy.

But not for channel pros, however. Gartner expects global IT spending to grow 5.1% this year, in fact, up from 0.8% in 2022.

Elizabeth Parks

Elizabeth Parks, president of analyst firm Parks Associates, shares that generally optimistic outlook. 2023, she contends, will be a good year for the tech sector not despite economic turmoil but because of it.

“While there may be a lot of companies that aren’t able to make it, the companies that do are likely the ones that are going to be leaning heavily into technology for the future of their business,” Parks says. “If you’re not doing a digital transformation for your business, you’re not future proofing it in a way that will be sustainable.”

Other experts feel the same way. Hard times often inspire more IT spending versus less, they note. Despite a wide range of painful problems, 2023 should provide further evidence.

Managed Services

Recession or no recession, the future looks bright for managed services. Fully 95% of respondents to Datto’s latest Global State of the MSP Report said it’s a good time to be a managed service provider, and spending by SMBs on remote IT services in the U.S. alone will jump over 11% to $40 billion this year, according to Analysys Mason.

That’s no surprise to Jeremy Blanton, senior director of research for managed services at the Technology & Services Industry Association. A former MSP himself, Blanton racked up some of his best growth in some of the worst economic times by showing customers how IT could help them spend less and make more.

“Selling doesn’t help. Helping sells,” he says. “My advice is not to lose sight of the opportunity that brings when you can go to your customer base and provide a solution that actually helps” with tough business conditions.

On the other hand, Blanton continues, persistently high interest rates are likely to curb growth in the mergers and acquisitions market somewhat. “We’ll see some headwinds in 2023 that we haven’t seen in the past,” he says.

That’s consistent with guidance from S&P Global Market Intelligence, which says that global M&A deal value across verticals declined more than 35% year over year through the first nine months of 2022 and is likely to hold steady in the year to come.

Cloud Computing

Slowing GDP should be friendlier to the market for cloud solutions, however, according to Ed Anderson, vice president and distinguished analyst at Gartner, who notes that many companies regard cloud services as a useful way to conserve cash in a shaky economy by converting big-ticket capital investments into more manageable operating expenses.

“Cloud becomes one of those tools people use in times of economic uncertainty,” he says. “We saw this during the early days of the COVID pandemic and we’re certainly seeing that during these fears about potential recession.”

Gartner, in fact, expects global end-user spending on public cloud computing to rise 20.7% this year to $591.8 billion. Outlays on infrastructure as a service specifically will climb an even steeper 29.8% to over $150 billion. Unlike generic SaaS solutions, Anderson notes, IaaS platforms support “fit for purpose” applications customized to specific use cases and verticals. Developing and deploying those applications can be a rich source of revenue for channel pros whose clients view cloud-based apps as a way to be more efficient and more competitive at once.

“Smart organizations will use this as an opportunity to invest in the cloud and digital technologies that will help them move into the growth period as time goes on,” Anderson says.

Wringing more efficiency from existing cloud environments, by shutting down idle resources and switching to more cost-effective virtual machines, for example, should also be in vogue among penny-pinching businesses this year. “There will be a lot of activity to optimize cloud usage as part of broader IT optimization initiatives,” Anderson says.

“Cloud becomes one of those tools people use in times of economic uncertainty.”—Ed Anderson, VP and Distinguished Analyst, Gartner

Unlike in years past, he continues, security fears won’t stall cloud projects either. “For most organizations it actually is more of a driver than an inhibitor,” Anderson says of cloud safety. “People perceive that cloud and the cloud environments are likely to be more secure than what they can do in their on-prem environments.”

Security

Jayson Ferron, on the other hand, sees continuity ahead in 2023 for security more broadly.

“Ransomware is going to continue, and stupid people are going to continue,” says Ferron, CISO/CEO of Maspeth, N.Y.-based consultancy Interactive Security Training. As a result, he continues, SMBs will continue to make teaching end users to spot malicious emails an IT priority too.

“SMBs who don’t are going pay the price,” Ferron says. “It’s a cost of business now.”

Jayson Ferron

So is cyber insurance, increasingly—if you can both get it and afford it. Rates in the U.S. were up 54% year over year last July, according to the latest figures from broker and risk adviser Marsh. On the plus side, Ferron notes, trends like that should inspire many businesses to take security best practices more seriously this year.

“Cyber insurance is, if it’s done right, going to require organizations to clean up their houses,” he says.

Providing a blueprint for that process in the form of documented policies and procedures, moreover, is a recurring revenue opportunity of sorts for channel pros. “I build it for the first company. I sell it to the second company. I sell it to the third company,” Ferron says. “All of a sudden I have a repeatable solution.”

2023 will be a landmark year as well for CMMC, the new regulatory mandate defining how organizations that serve the Department of Defense on weapons-related projects protect data. The Pentagon is scheduled to publish final CMMC rules this spring and begin imposing them 60 days later. Anyone who serves public sector clients would be wise to pay close attention, advises Ferron, who like other experts has a strong hunch that federal agencies across the board will eventually adopt CMMC guidelines.

“Five years from now, if you want to do any work with the government, you’ll follow CMMC,” he predicts. “I may be 100% wrong, but I don’t think so.”

Storage and BDR

Good news for anyone who sells storage. “There’s no such thing as a data recession,” says Greg Schulz, founder and senior adviser at consultancy StorageIO. Slowdowns happen, but there’s always more information to house, process, analyze, and protect. Indeed, IDC expects the global “DataSphere” to grow over 21% in 2023, from 101,349,000 petabytes to 122,819,000.

That said, IDC also foresees 2.5% growth in worldwide spending on external storage infrastructure next year, down from a projected 5.8% this year and less than half the analyst’s forecast for IT spending growth overall. The winners in that soft market, according to Schulz, will be vendors—and by extension channel pros—with a wide enough range of data center, edge, and cloud-based offerings to meet demand wherever it appears.

“One size doesn’t fit all,” he notes. “You’ve got to have that diverse product line.”

Greg Schulz

Rising sales of cloud storage (set to climb at a 24% CAGR through 2029 to over $376 billion, according to Fortune Business Insights) should create robust demand for data protection solutions in particular, Schulz continues. “If you have data on-prem, it should be protected to the cloud. If you’ve got data in the cloud, it should be protected to somewhere else.”

Channel pros can make good money on consulting engagements helping cash-conscious businesses cost-optimize their data protection strategy. “Start rethinking what you’re protecting, how you’re protecting, how often,” Schulz advises. “If you’ve got data that’s not changing, why are you protecting it?”

Archiving little-used data or moving it onto slower but cheaper hardware could be appealing to clients this year too. “There’s going be spending challenges, but there’s also going to be purchasing opportunities,” Schulz says.

Internet of Things

Thanks to COVID-19, people have spent more time at home than usual the last few years and snapped up a lot of smart home gear as a result. Indeed, shipments of smart lights, smart TVs, smart thermostats, and similar products rose 11.7% in 2021 to some 895 million worldwide, according to IDC, and will keep rising at a 10% CAGR through 2026.

Shipments of home monitoring and security systems specifically, however, are set to soar at a 23.6% annualized rate over that same time frame. Parks expects 2023 to be the year satisfied buyers of those consumer devices start installing them at retail sites and offices as well. Hardware makers aren’t the only ones that stand to gain from that trend either, she predicts.

“It’s a great opportunity across the board,” Parks says, because businesses will need help installing and maintaining those systems. “There are a lot of things that have to be done on the network,” she notes. “Then you’ve got all the technology that’s getting put into the cameras that’s leveraging AI and machine learning and all of those things that can help understand what’s going on in the environment,” she notes.

Spending on security in remote work settings will be up this year as well, Parks continues, as businesses belatedly begin recognizing that connecting to the office from homes full of IoT gear on unsegmented networks is a risky proposition.

“There are a lot of threats out there,” she says.

Hardware

Despite those threats, IoT gear and edge infrastructure will be among the few bright spots for hardware this year, according to Roger Kay, president of technology market intelligence company Endpoint Technologies Associates. Commercial buyers in particular, he predicts, will continue deploying such devices in hospitals, factories, and other locations in a bid to streamline critical workflows.

Growth in PC shipments, however, is significantly less likely. “Given the economic headwinds, I’d probably more talk about a steady state through the year, which is to say lower than it was last year and kind of grumbling and stumbling along.”

That’s the view as well at IDC, which was forecasting an 11.9% decline in global sales of PCs and tablets in 2022 as of last month and sees a further 5.6% dip coming in 2023. A weak economy will be far from the only issue responsible for those numbers too.

“There’s both demand and supply issues in that market,” Kay says. On the demand side, users are still coming off a two-plus year buying spree set off by the coronavirus pandemic. On the supply side, the stubborn persistence of that pandemic in the world’s biggest source of PCs and PC components continues to disrupt hardware supply chains.

“China is coming apart at the seams right now,” observes Kay, who sees a silver lining in those overlapping trends even so.

“The lack of demand will help the supply issues, because [manufacturers] don’t have to get somebody parts,” he says. “The market will probably come back in balance.”

“There’s no such thing as a data recession.”—Greg Schulz, Founder and Senior Adviser, StorageIO

Conditions should be strong in select parts of that market even sooner, adds Kay. Hardcore gamers, for example, crave new computers no matter how old their current rigs are. “They buy on a cycle that has no relationship to replacement,” Kay says. “It’s just buy stuff.”

Digital Signage

Demand will be similarly strong for digital signage technology, according to Alan Brawn, principal of Brawn Consulting. “2023 will be another strong year and grow at nearly 10% yet again,” he says, with direct view LED displays, interactive solutions, and content management software growing even faster.

Retailers won’t be the only people purchasing all that tech either. “Digital signage began as a retail advertising medium but has evolved far beyond that,” Brawn says. Stores and quick-serve restaurants remain the biggest market segments, but corporate offices, education, and healthcare are the fastest growing.

“Digital signage has become an intuitive mainstream communication medium,” Brawn says, with use cases no other technology can address. “This need is not impeded by recessions.” In addition, he continues, the shortages plaguing other hardware categories haven’t been as big an issue in signage.

“Displays, mounts, and media players are in good supply,” Brawn says.

Though breakthrough innovations aren’t likely, he continues, users can look forward to incremental improvements in existing functionality segments, like business intelligence.

“Analytics will become more of a necessity not just for proof of ROI in digital signage but to quantify exactly who is looking at a screen, for how long, and in what zone,” Brawn says.

What many channel pros will be looking at, in digital signage and beyond this year, should be worth smiling about.


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