Undoubtedly, 2023 has been a challenging year across the economy and in the technology sector. The year has been marked by the effects of high inflation and interest rates, the ongoing energy crisis and cash flow challenges for many businesses. On top of all of this, cyber threats, dominated by ongoing ransomware attacks, have remained an ever-present issue. As we reflect on the year, it’s an ideal time to look ahead to what challenges and opportunities we anticipate 2024 will hold.
More channel players to use specialists for managed services
The managed services model will become increasingly attractive to traditional VARs in 2024, as more businesses look to buy cloud and IT services on a usage basis. But transitioning from a traditional VAR to an MSP is not easy. It’s not that VARs aren’t capable of diversifying, it’s just that the switch requires a fundamental shift in the way VARs do business. These large organizations aren’t built for this new world model. The in-house build and integration of new technology and go-to-market models takes too long and is too expensive to implement. VARs simply don't have the people, the flexibility or the know how. With the economic headwinds as they are, Opex is king and no-one has the Capex or the appetite for big in-house builds.
VARs are struggling to provide a large portfolio of products and services to the standards customers demand. Which are driven by market speed and reliance on data. Channel businesses are struggling to deliver what their customers want, whether it be on-premises or in the cloud. VARs need to clearly understand what they can deliver themselves, and what they need to outsource. Outsourcing, white labelling, is a great way to deliver a high quality and diverse portfolio to customers.
More businesses to spend upfront for managed services to beat inflation
Businesses are becoming more cost conscious as prices for cloud and SaaS services keep rising in line with inflation. When large vendors and hyperscalers pass on costs to the customer, CFOs and finance directors ask IT the question, ‘where can we cut costs?’ This creates a dilemma for IT teams, who are left wondering how to keep the lights on and execute new digital and cloud strategies, on a smaller budget? This is driving a switch to an OPEX model that covers core capabilities, including DR and backup, based on a monthly instalment consumption model. This has allowed them to cut CAPEX, operate on a per TB model.
We expect more businesses to adopt the utility-based model that MSPs offer for cloud-based data management. It lightens the load on teams, while reducing risk and guaranteeing uptime and business continuity in the event of a disaster, data breach or ransomware attack. We’re also seeing a trend towards companies paying for services upfront, locking costs in for up to 6-12 months, or longer, to protect themselves against inflation. This makes financial sense, especially if you're cash rich now and want to ensure your data is protected over the long term when market volatility can affect prices elsewhere. We expect this to become the norm in 2024.
Scope three emissions compliance set to drive uptake of disaster recovery managed services
Increasingly, the technology sector is being held to account for its carbon emissions. Until recently, organizations have mostly had to concern themselves with two key emission calcifications: scope one - emissions the organisation is directly responsible for, and scope two - indirect emissions, such as electricity. Now though, we’re seeing the impact of scope three emissions being felt. That is, all other emissions associated with an organisation’s activities, including its supply chain. While scope three emissions aren’t yet legally enforceable, they are being widely adopted by large organizations, as legislation is inevitable and there’s a widespread desire to get ahead of the issue. This is filtering down to smaller organizations.
This is an issue for the DR sector and organizations that are leaders in sustainability - they are recognizing the challenge and the value of outsourcing this function to an MSP. By eliminating the need for data backup via a second site, which are costly to operate, don’t always utilize the latest power efficient hardware, and are responsible for significant carbon emissions, ESG compliance is a lot more manageable. There’s also recognition that this isn’t simply offloading the problem because MSP DR solutions achieve economies of scale by servicing multiple organizations via a shared facility, making them carbon efficient for customers. Given the rate at which scope three is permeating, we expect to see more organizations adopt outsourced DR services. Both existing and future and existing business for MSPs depends on helping customers and partners achieve ESG compliance.
Looking ahead to 2024
Specialist service providers that are able to work closely with VARs, MSPs that have the know-how to use utility based models effectively, and those that have the foresight to build ESG compliant products and services are the ones that will succeed the most in 2024. At Assured, we’re across all these aspects of the industry. We’re growing at a rapid pace, we have the experts in the space to deliver services tailored for the vendor, customer and end user and have the team to execute immediately.
