While it’s difficult to predict with absolute certainty whether the economy will grow, a pair of reports suggest that there is a lot more optimism about IT spending.
The market research firm Gartner is forecasting global IT spending will increase 7.2 percent in 2024, topping $5.3 trillion, and grow an additional 9.3 percent year over year in 2025 to reach $5.74 trillion. After 2025, Gartner forecasts that global IT spending will increase by more than $500 billion annually.
At the same time, a Synergy Research Group report finds global enterprise spending on cloud infrastructure services will reach $84 billion in the third quarter (Q3) of 2024, marking a 23 percent increase year-over-year.
Cloud dominance and growing opportunity for MSPs
Although some workloads have been moved back to on-premises IT environments, the report makes it clear that cloud computing services remain the preferred platform. They are still the top choice for building and deploying application workloads.
Global third-quarter revenues for cloud infrastructure services—including infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), and hosted private cloud—reached an estimated $83.8 billion. Public IaaS and PaaS services remain the dominant components of the cloud market, growing by 24 percent year-over-year.
All that growth, however, doesn’t appear to be changing the allocation of market share. Amazon Web Services (AWS) remains the market leader with a 31 percent share, followed by Microsoft (20 percent) and Google (13 percent), respectively. The top three providers command 68 percent of the public cloud market.
All this growth is IT spending naturally bodes well for managed service providers (MSPs). The percentage of organizations willing to rely on managed services is steadily increasing. As the overall size of the IT market expands, there should be many more opportunities for MSPs to expand the scope of their portfolios from the cloud to the network edge.
Staying ahead of the innovation curve
The challenge is competition will undoubtedly be fiercer. As IT, in general, becomes more automated, the total cost of delivering an IT service will continue to decline. Eventually, some providers of those services will steadily lower their pricing in the hopes of gaining enough market share to eliminate rivals. As a result, the pace of merger and acquisition activity should increase.
Before getting too optimistic about future growth, MSPs should assess their ability to invest in emerging technologies. This includes adopting AI to stay competitive in the market. In theory, AI reduces the total cost of IT by cutting labor costs, making an MSP more profitable. However, the initial investment required today remains significant. On the plus side, the cost of AI should also steadily decline as smaller models are trained to handle specific tasks.
One way or another, the way managed services are provided is going to fundamentally change at a faster pace than ever before. Many organizations will lack the automation resources or expertise needed to make the required investment. As a result, they won’t be able to cost-effectively manage IT services with an internal team.
The challenge and opportunity now lie in staying ahead of the innovation curve as MSPs make similar investments, because, as always, those who fall behind will be left vulnerable to competition.
Photo: ArtRachen / Shutterstock
