Two reports issued last week lend additional weight to apparent trends in the partner ecosystem: continued IT services growth, despite the economy, and the uninterrupted pace of mergers and acquisitions.
The Institute for Supply Management’s Services PMI — an index closely watched by investors, business and other financial professionals — grew an unexpected 1.4% in July compared with the association’s June survey. The index, based on a poll of purchasing and supply executives, tracks activity in a number of services sectors, including professional, scientific and technical services, which includes consulting and computer services. Other sectors represented in the index run the gamut from mining to financial services.
While the rise in the Services PMI ran counter to economists’ expectations, the index seemed on track with IT services providers’ general optimism and the continuing growth of cloud services. However, the S&P Global U.S. Services PMI, also released last week, underscores the uncertainty surrounding the current market. The index reported the sharpest decline in the U.S. services sector since May 2020. S&P Global tracks 400 services companies in sectors such as consumer (excluding retail), finance, real estate and information.
Another measure of IT services activity, M&A deals, continues to expand. Drake Star, a New York-based technology investment bank, reported “steady” transaction growth in what it terms the digital services sector. Digital services include managed IT services, digital transformation and business process outsourcing.
Drake Star reported more than 375 M&A deals in digital services for the second quarter, totaling $70 billion in value. The number of deals already outpaces first-quarter volume by 19%, putting transaction volume and value on pace to surpass 2021 levels, according to Drake Star.
M&A transactions in a shaky economy could indicate an increase in companies forced into fire sales, but that doesn’t seem to be the case with IT services. Buyers have been focusing on MSPs due to business models based on recurring revenue and attractive cash flows, according to industry executives.
Individual IT services companies in Ukraine have reported revenue growth this year despite the Russian invasion, and economic data suggests the sector, on the whole, is showing resilience.
Computer services export volume for the first half of 2022 reached $3.74 billion, a 23% year-over-year increase, the National Bank of Ukraine reported. Ukrainian consultancies and software developers provide much of their services to enterprises in other countries that seek skilled developers and lower costs through outsourcing. That export increase, while significant, compares with a growth rate of 43% before the war began.
Konstantin Vasyuk, executive director of the IT Ukraine Association, which represents more than 110 companies, said he is moderately optimistic about the industry’s prospects, noting that global demand continues to grow. The continuing war and the recessionary environment complicate the outlook, however.
“The times are very challenging for everyone,” he said. “That is why we are not speaking about a fantastic forecast.”
Businesses specifically seeking to work with Ukrainian IT partners in order to contribute to the nation’s economy have helped boost export growth, Vasyuk noted. “A lot of companies want to support Ukraine by contracting with our development centers,” he said, citing the recent example of a large Japanese company interested in hiring an IT provider in Ukraine.
Overall, Ukrainian companies see growing demand from industries including retail, automotive, logistics, banking and fintech, and in technologies such as AI, he added.
IT services firms in Ukraine help mitigate the risk of disruption through resiliency plans and multinational operations. N-iX, a provider of software development outsourcing services, has operations in Ukraine and Poland and is a member of the Software Development Association Poland.
“We still have a good flow of new business, even though the war did impact our company like many other businesses in Ukraine, Poland and other countries,” said Sviatoslav Kavetskyi, director of industry affairs at N-iX.
The company earlier this year forecast 50% growth for 2022, but has since revised that figure to around 30%, according to Kavetskyi. “We aren’t signing as many new clients as we expected, but we have still partnered with almost 20 new clients since February,” he said.
Clients have been supportive during the war, Kavetskyi said, noting that the company’s business continuity planning and risk management have kept service delivery levels above 95%.
IT leaders believe application modernization is important to their businesses, but 93% of them run into challenges when pursuing such projects.
That’s a key takeaway from a survey of 150 IT managers and senior executives conducted by Asperitas, a Chicago-based consulting firm. Respondents ranked identifying the right tools/technologies and finding staff with the right experience as the top obstacles. Other issues included choosing external partners, training users on new systems and obtaining management support.
More than 80% of IT leaders polled cited upskilling of internal staff and improving “antiquated processes” as extremely important to application modernization, according to Asperitas.
“Process reengineering is a critical part of application modernization,” said Cameron Hatten, executive vice president at Asperitas. To make that transformation happen, organizations must assess, design and implement change across several key areas. Those include testing, code management, governance, operations and security defense, he said.
The effects of economic contraction on businesses’ application modernization priorities will depend on the organization, Hatten said. Application modernization involves optimizing velocity, reliability, processes and resources. When successful, such optimizations drive ROI through process automation, productivity gains and technology savings, he noted.
“In this way, application modernization helps in times when there may be financial constraints,” Hatten said.
There have been several episodes of attacks in the software supply chain world, and MSPs in general are feeling the heat
Acquisition will give the channel player more depth around management, protection and compliance
The channel does not take the summer off, and the personnel moves continue to stack up as we move into August
The U.S. Treasury Department issued sanctions against Tornado Cash, a cryptocurrency mixer accused of helping North Korea’s …
From Kali Linux to Mimikatz to Metasploit, learn about 10 open source penetration testing tools organizations can use to …
The majority of incident response professionals surveyed for VMware’s ‘Global Incident Response Threat Report’ observed lateral …
Seagate continues its partnership with Phison through the release of the X1, a customizable SSD controller that promises higher …
MinIO revoked Nutanix’s open source license, which could mean customers would have to work with Nutanix on how to best use its …
Scaling up and scaling out are both approaches to increase storage capacity. To decide which approach to take, consider short- …
With help from AI and machine learning, Wi-Fi sensing detects movement in the Wi-Fi environment. While it sounds promising, the …
Log analysis and wireless management are common AI use cases in networking. Future applications could include chatbot alerts, …
Executive Todd Nightingale will step away from Cisco after a decade. Cisco plans to combine the enterprise networking and cloud …
Microsoft’s Azure Advisor service offers recommendations based on five categories. Learn these categories and the roles they play…
Microsoft Azure revenue extended its rocket rise in the latest quarter — but a variety of industry and geopolitical issues put a…
Logs can reveal important information about your systems, such as patterns and errors. Learn how to search logs with CloudWatch …
The co-creator of the open source project at Facebook reflects on 10 years of growth as he helps lead one of its resulting tools …
Cloud advancements are changing how chief data officers approach cloud data management as they juggle security, privacy and other…
The CEO of the data streaming vendor discusses the direction Hazelcast is heading in as it launches a serverless platform for …
Data visualization literacy is a crucial element of analytics that helps communicate findings. These eight steps can help improve…
Using the BI vendor’s platform, the sporting goods retailer has reduced staff needed to attend to data, decreased time to build …
The longtime independent vendor’s latest platform update features tools to help system administrators and application developers …
All Rights Reserved, Copyright 2006 – 2022, TechTarget
Privacy Policy
Cookie Preferences
Do Not Sell My Personal Info