A recent study commissioned by technology giant Cisco and conducted by Canalys has uncovered a significant surge in the demand for managed services in South Africa’s IT sector. This surge, marked by a year-on-year growth rate of 17.7% in 2022, has catapulted the country’s IT channel partners to deliver services valued at an impressive $1.2 billion (approximately R22.93 billion).
The Shift to Managed Services Study, which surveyed 4,120 partners in South Africa, including managed service providers (MSPs) (12.1%), resellers, system integrators, and other channel partners (87.9%), delved deep into the evolving landscape of managed services. In 2022, the survey noted a 0.5% year-on-year increase in the total number of partners providing managed services, alongside a notable 6.4% year-on-year increase in the number of MSPs.
Hayward Rose, Partner Channel Lead for Sub-Saharan Africa at Cisco, commented on the study’s findings, emphasising the growing importance of MSPs in modern business activities. He stated, “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’s becoming critical for modern-day business activities.”
One remarkable revelation from the study is the global outlook for managed services, which points towards a remarkable growth trajectory of 12.7%, reaching an estimated total value of $472 billion. This projected growth significantly outpaces the estimated 3.5% growth in overall IT spending, signifying a substantial shift in how businesses are approaching their IT needs.
Key factors driving this surge in demand for managed services include the ever-increasing need for robust cybersecurity solutions. Organisations worldwide are grappling with an evolving threat landscape, exacerbated by a global shortage of cybersecurity and IT talent. As a result, many organisations are turning to managed service partners to leverage their technology expertise and support. The study highlights that 56% of channel partners expect revenues from cybersecurity managed services to continue their growth trajectory this year.
Alexandra Zagury, Vice President of Partner Managed Services and as-a-Service Sales at Cisco, emphasised the changing dynamics of customer expectations. She stated, “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.”
Furthermore, buoyed by global growth, confidence among channel partners selling managed services has reached new heights. The study reveals that, in June 2023, 35% of channel partners expected growth of at least 20% in their managed services business this year, a significant uptick from the 27% reported in 2022. This suggests a rapid adoption of managed services by organisations of all sizes, with the highest growth expected in emerging markets like Asia-Pacific and Latin America, as well as North America and Europe, Middle East, and Africa (EMEA).
In EMEA, where managed services revenue currently stands at US$122 billion, the region’s managed revenue is forecasted to grow by 12% between 2023 and 2025.
The study also identifies cloud infrastructure management as a key growth opportunity. As organisations increasingly digitise their operations and transition to the cloud, they face complex challenges in managing cloud infrastructure spanning private and public clouds. This complexity has amplified the need for cloud infrastructure management and expertise, with 55% of channel partners expecting revenues in this segment to grow in the current year.
Emerging technologies like AI and the growing emphasis on sustainability measures driven by IT investments are also poised to boost revenue for MSPs. The study found that 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.
In essence, managed services are becoming indispensable in helping organisations extract maximum value from their technology investments. As new technologies continue to emerge, managed services play a vital role in an organisation’s digital business strategy. MSPs, specialising in specific verticals, technologies, or geographic areas, are aiding customers in overcoming IT challenges, simplifying complexity, and delivering outcomes that drive business growth.
The study commissioned by Cisco and conducted by Canalys highlights the remarkable growth and transformation of the managed services landscape in South Africa and beyond. The data underscores the pivotal role that MSPs play in modernizing businesses and addressing the evolving needs of the global IT industry. With cybersecurity, cloud infrastructure management, and emerging technologies at the forefront, managed services are set to reshape the IT landscape for years to come.
