SA demand for managed services is growing

Issue 6 2023 News & Events, Infrastructure

A global study commissioned by Cisco and conducted by Canalys shows that South Africa’s IT channel partners increased managed services revenue in 2022 with a year-on-year growth rate of 17,7%, delivering services valued at $1,2 billion (about R22,93 billion).

The Shift to Managed Services Study surveyed 4120 partners in South Africa, including managed service providers (MSPs) (12,1%), resellers, system integrators, and other channel partners (87,9%). In 2022, there was a 0,5% year-on-year increase in the total number of partners delivering managed services in South Africa and a 6,4% year-on-year increase in the number of MSPs.

“As this study shows, South African organisations see the value of MSPs. Going it alone is difficult when investing in enterprise IT and infrastructure. Instead, organisations are accessing partners that are committed to meeting their technology needs and taking their operations to the next level. In turn, managed services become a profitable venture for channel partners, helping to grow a sector that is becoming critical for modern-day business activities,” said Hayward Rose, Partner Channel Lead for Sub-Saharan Africa at Cisco.

Despite global economic uncertainty, the projected outlook for managed services indicates worldwide growth of 12,7%, reaching a total value of $472 billion. This growth surpasses the estimated 3,5% growth in overall IT spending.

Key drivers: cybersecurity, expertise, flexibility

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 managed service partners for their technology expertise and support. The study indicates that 56% 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 modularise and package what once were customised solutions. We anticipate more innovation and specialisation 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. The study reveals that in June 2023, 35% of channel partners said they expect growth of at least 20% in their managed services business this year. This is up from the 27% reported in 2022 and points to a rapid uptake of managed services by organisations of all sizes.

The highest growth is likely to be seen in less mature markets such as Asia-Pacific and Latin America, but North America and Europe, Middle East and Africa (EMEA) will experience significant increases as well. In EMEA, where managed services revenue is currently $122 billion, the region’s managed revenue is forecast to increase by 12% between 2023 and 2025.

“Managed services are 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 identifies 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% of channel partners saying they expect revenues in this segment to grow in the current year.

Emerging technologies like AI and the increasing emphasis on sustainability measures driven by IT investments are also likely to grow revenue for MSPs. According to the study, nearly six in ten partners (59%) believe AI presents a business opportunity, with 39% stating it will be ‘significant’ or ‘tremendous’. Similarly, 57% 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. 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, MSPs are helping customers solve their IT challenges, remove complexity, and deliver outcomes that drive a business forward,” explained Ody.


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