Managed services are on the uptick in the Asia-Pacific, due to an urgent demand for cybersecurity. Many organisations are prompted to outsource the management of their technology needs as they deal with a fast-developing threat landscape, combined with a global shortage of cybersecurity and IT talent.
According to a study by Canalys, managed services are expected to grow 14 per cent in 2023, from a revenue base of US$95 billion in 2022 in the Asia-Pacific. Some 89 per cent of partners who responded to the survey expect to grow their managed services business in 2023.
In Singapore, the managed services revenue by channel partners in 2022 grew 14.4 per cent, equating to a total of US$2.7 billion, compared to 2021.
This trend reflects the growth trend globally, where managed services are expected to rise by 12.7 per cent in 2023, reaching a total value of US$472 billion. This growth exceeds the estimated 3.5 per cent growth in overall IT spending.
This growth in managed services is driven by a demand for cybersecurity, cloud infrastructure management, artificial intelligence and a greater emphasis on sustainability measures due to IT expenditures.
“Today, businesses 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 Bee Kheng Tay, president for ASEAN at Cisco.
As businesses digitise their operations and migrate to the cloud, they encounter issues with sophisticated cloud architecture that span private and public clouds, and dispersed applications and services.
As a result, greater demand is expected for cloud infrastructure management and expertise, with 55 per cent of channel partners expecting revenue growth in this area this year.
According to the Canalys report, nearly six in 10 worldwide partners believe AI will present a business opportunity, with 39 per cent predicting it will be “significant” or “tremendous”. Some 57 per cent of customers say they are willing to pay a premium for sustainable products and solutions.
The study also highlighted opportunities where managed service providers can provide organisations, especially small and medium businesses (SMBs), with digital transformation in countries like Malaysia, Indonesia, and Singapore. These are in the areas of basic monitoring, management, network services, backup, and cybersecurity.
In the region, India is poised to take the position of China at the helm of economic expansion. India is one of the world’s fastest-growing economies, strategically positioned to connect APAC to the rest of the globe. With 14.2 per cent increase, the country has the region’s highest number of managed service providers.
Among the Asia-Pacific countries, India sees the greatest growth in the number of managed service providers in the region at 14.2 per cent. It is expected to replace China at the forefront of economic growth.
A separate report by the Information Services Group (ISG) concurred that there is strong demand for traditional managed services in the Asia-Pacific. While the demand is strong in the second quarter of 2023, there is however a dip in cloud services spending.
The Asia Pacific ISG Index, which measures commercial outsourcing contracts with annual contract value (ACV) of US$5 million or more, shows that demand for managed services rose significantly. The Q2 ACV increased by 30 per cent, to US $1.1 billion, from 2022.
“Enterprises in Asia-Pacific are increasing their spending on traditional IT and business services outsourcing as a lever for cost optimisation in an uncertain economy,” said Scott Bertsch, partner and regional leader at ISG Asia Pacific.
“The cloud sector, meanwhile, continues to suffer a reversal of fortune. Enterprises that scaled up quickly during the pandemic are now rationalising their cloud costs and postponing discretionary cloud spending,” he added.