Canalys recently published a report in which it identified the most significant changes recorded in the past year and outlined key forecasts for 2023 and for subsequent years.
2022 has presented new challenges for the global economy, including rising interest rates, inflation and the onset of armed conflict in Europe. Tech companies have benefited from digitizationbut 2022 has been a challenge for many of them.
Despite the risk of a recession, the opportunities for IT companies continue to grow and 2023 will be marked by a paradigm shift.
Consumption subscriptions
The subscription era is booming and most of the technology companies are looking to transform their business models. Subscription and consumption models provide a stable base of recurring customers and predictable revenuewith exponential growth potential.
Cloud companies are growing rapidly, while the Hardware manufacturers try to adopt subscription models and consumption. Software companies are also evolving towards the SaaS model.
Most of the business is though still based on a traditional procurement model and the majority of purchases will be made as one-time acquisitions and not as subscription or consumption models. Over the next five years, this market allocation will not change significantly.
The era of ransomware doesn’t seem close to ending and continues to pose a threat to cybersecurity. The majority of cybersecurity spending goes towards building defensesbut these continue to be easily overcome by attackers.
Therefore, response and recovery require significant improvements. Spending on information security products and services will continue to growwith detection and response growing 34% annually by 2026.
Only security vendors with access to Security Operation Centers (SOC) they will be able to take advantage of this opportunity and will need to recruit more qualified analysts and incident response managers, and use automation to reduce alerts and decrease response time.
The bubble could burst
In 2022, there were many IPOs (initial public offerings) in the US, but most of the publicly traded companies were unprofitable at the time of their debut in the bag. This trend is consistent with the last 5 years, where 78% of publicly traded companies had negative earnings.
Investors have been banking on long-term growth, thanks to low inflation and low interest rates. However, with inflation and interest rates rising and the global recession looming, investors demand short-term profitability and they will not be able to sustain negative earnings.
This will lead to a surge in bankruptcies but also to opportunities for healthy companies to acquire assets at a cheaper price.
Semiconductors are ruling the world and the worldwide dependence on these components carries a strategic risk that has long been underestimated. Most semiconductors are made in Taiwan, but the US is trying to change that.
Meanwhile, the transition of many companies, including Apple, towards the use of ARM semiconductors is changing the structure of the industry.
Public cloud providers are also increasingly adopting Arm, and Canalys predicts that by 2026 half of all public cloud services will be based on this technology. In the PC world, many computer manufacturers will have to choose whether to follow the trend towards ARM or risk losing market share.
According to the report by 2026 one third of PCs will be based on the ARM architecturewith a significant change for the sector.
The pandemic has caused a major revolution in the world of work, including a hiring boom in the tech sector. Slowed revenue growth and potential recession are bearing though companies to reduce costs, also going to cut jobs.
Canalys predicts a 9% reduction in headcount in technology suppliers, with at least 190,000 people losing their roles. This means there will be a greater pool of talent in the market, giving companies the opportunity to hire high-quality talent at a lower cost.
Even if there are short-term cost pressures, companies that take advantage of this opportunity will be able to succeed long-term thanks to the employees they hire.
The growth of the cloud
Marketplace clouds have become part of the strategy of many companies thanks to the acceleration given by the pandemic. Cloud markets, led by hyperscalers, are growing at a breakneck speed. Security vendors lead the pack reporting 600% year-over-year growth.
Large cloud marketplaces have lowered fees to 3% to allow for multi-partner bidding. Billions of dollars of development are funded from AWS, Microsoft, Google and Salesforce, and private equity is funding niche markets.
Buyer behavior is changing, prioritizing integration over price and support. One successful example is Tackle.io, a services company that helps vendors gain listings and improve performance in cloud marketplaces, which achieved 7977% growth in three years.
Cloud markets are growing rapidly and this is accelerating changes in the IT delivery industry. With cybersecurity and software vendors looking to leverage hyperscaler marketplaces, distributors are seeing a threat to their business models.
However, end customers still rely on trusted partners to manage purchases on the market. According to Canalys, by 2025, one third of market purchases will be through channel partners. This will lead to greater urgency for legacy distributors to comply.
The growth of infrastructure hardware will be supported by the demand for modernization, but distributors will account for an ever smaller share of sales. Consolidation will be a growth avenue for large regional and global retailers, but they will need to strengthen their value proposition for both the suppliers and the channel.
However, legacy distributors are still locked into outdated business models and financial structures and cannot keep up with advanced demands. Many retailers are investing in higher growth segments, but they are surpassed by more specialized actors and new entrants with professional services and automation capabilities.
These new players can grow quickly, but they don’t have the scale and resources of distributors legacyso the challenge for distributors is to find a balance between growth and stability.
The networking segment
In the near future, the demand for cloud infrastructure services will be a key factor in the growth of the server segment. Digital transformation and the adoption of SaaS and online services will cause data center capacity to increase and increased spending on IT infrastructure.
Most servers will be supplied by a few large manufacturers and public cloud spending will reach $140 billion in 2022. Sales of networking products are overtaking servers as the largest IT infrastructure category.
Networking is booming thanks to Wi-Fi 6 and digital transformation in industries such as education, healthcare and retail. In 2023, wireless LAN and switching will grow by 16%, but the growth will decrease in 2024.
If all goes as planned, Wi-Fi 7 will be available in three years and will boost speeds by up to four times current standards. Even if networking isn’t a trending topic, it will still deliver many opportunities for the channel.
Sustainability is needed
Sustainability has become a priority for companies due of rising energy costs and energy insecurity global. Customer awareness of data center efficiency is growing, and many channel partners have invested in energy optimization expertise.
New servers are much more energy efficient than old ones. This is contributing to increased focus on energy securitywith investments in renewable energy sources.
Big companies are developing theirs sustainability strategies to reduce the production of carbon dioxide and achieve NetZero goals. IT efficiency becomes an important opportunity for customers and partners, with a view to measuring and reducing emissions.
For the region Asia Pacific economic growth is still expected in 2023despite the worsening global economy. Southeast Asia and India are the top two growing economies, while China faces growing challenges.
China has led the region’s economy since 2000, but India will become more and more central in the futurewith a population that has just surpassed that of China many global technology companies are moving to this country.
India has many opportunities to become both a regional and a global IT powerhouse, but it will have to solve several critical issues in terms of bureaucracy, infrastructure and climate change management.
The government is pushing hard on manufacturing, the workforce is growing, digitization is at an all-time high, and many foreign organizations are investing in India. This will bring significant opportunities for channel partners and distributors to try to capitalize on India’s success.
