Growth in managed services is projected to surpass growth in overall IT spending, fuelled by a rising demand for cybersecurity services and expertise. More than half (56%) of channel partners expect revenue growth from cybersecurity managed services in 2023.
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.
In Saudi Arabia, managed service revenue delivered in 2022, by 1,724 channel partners, grew by 9.2% year-on-year to US$1.3 billion.
Despite global economic uncertainty, the projected outlook for managed services indicates a worldwide growth of 12.7%, reaching a total value of US$472 billion. This growth surpasses the estimated 3.5% growth in overall IT spending.
“Customers across Saudi Arabia are progressively incorporating advanced technology into their operations and, in response to these changing dynamics, have instigated an almost six percent (5.8%) year-on-year increase in the total number of partners delivering managed services in the Kingdom,” said Salman Faqeeh, Managing Director, Cisco Saudi Arabia.
“In the Middle East, expectations for managed services growth remain high in 2023, and with the sector valued at $1.3 Billion in Saudi Arabia, we are confident that the Kingdom will maintain an impressive growth trajectory in the upcoming years. We are proud to be able to meet our customers’ needs as we work to address their expanding and intricate technological requirements.”
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% of channel partners expect revenues from cybersecurity managed services to grow this year.
Global Growth
Buoyed by global growth, confidence among channel partners selling managed services has surged significantly. 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 represents a significant increase compared to the 27% 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% 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%) 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, 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, the sector is expected to grow 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.