I’m clearing the decks of stories I’m tracking as we go to the holidays. Some last market condition reviews to consider.
Jay McBain posted some data about partner profitability. In the cloud era, traditional channel VARs and MSPs are examining the business models of systems integrators. Surprisingly, despite revenue and employee growth, the massive cloud opportunity has not resulted in higher profits for systems integrators. On the other hand, major resellers of hardware and software have seen increased margins.
Most cloud customers prioritize security, compliance, reliability, and technical capabilities over lower costs and purchasing convenience. Forrester’s research shows that organizations value the operational expenditure model of the cloud and are reluctant to switch providers due to egress fees and other challenges. While satisfied with their current cloud provider, many companies plan to adopt multi-cloud strategies as cloud spending increases. Large companies are now shopping for specific features and capabilities, considering options for future migrations. The focus on the cloud is driven by speed, scale, and agility rather than cost savings.
Axios posted some analysis on the job market I wanted to highlight. The labor market in the US is showing signs of a slowdown, particularly for white-collar workers, despite the overall low unemployment rate. Job openings and hiring rates have decreased, and specific professional sectors have experienced job losses. These cracks in the labor market could indicate a weakening job market and potentially lead to a recession in the near future. Additionally, employers are resorting to quiet layoffs and providing advance notice to affected employees. Inflation in shelter costs, a significant component of the Consumer Price Index, is slowing down. These subtle signs suggest a cooling off in the job market and potential economic implications.
A study find IT leaders need help finding qualified AI and ML talent, with 43 percent rating their teams’ skill sets as low. However, only 37 percent of IT professionals report receiving training when their employers invest in new technology. The study highlights the need for organizations to prioritize skill development, especially in AI, to stay competitive. Soft skills such as team communication and interpersonal communication are also seen as important but are often overlooked. Quality content, hands-on practice, and multiple learning methods are key features desired in training programs.
Why do we care?
McBain is highlighting a shift in profitability from traditional channel VARs and MSPs to systems integrators and major resellers in the cloud era. This indicates a pivotal change in the IT service industry’s landscape, where cloud opportunities while driving revenue and employee growth, are not necessarily translating to higher profits for all players. This could suggest that while cloud adoption is increasing, its costs and complexities may be impacting profitability margins.
Layer Forrester on that. Security, compliance, reliability, and technical capabilities are taking precedence over cost and convenience. This reflects a maturation in the cloud market, where operational efficiency and strategic flexibility are valued over mere cost savings.
Finally, talent is going to be tight.
Companies should reassess their business models. This might involve exploring more efficient operational methods, diversifying service offerings, or investing in partnerships to enhance cloud service delivery and profitability. IT companies should prepare for potential economic challenges. This might involve strategic budgeting, cautious hiring practices, and developing contingency plans for a possible recession.