Economic signals point to a challenging IT services environment in 2023. But recent industry moves suggest cloud consulting and cybersecurity services may prove active markets.
Gartner last week trimmed its 2023 outlook for the IT services industry from the 7.9% year-over-year growth the market research firm forecast in October 2022 to its current projection of 5.5%. John-David Lovelock, an analyst at Gartner, said the updated outlook reflects a slowdown in enterprise spending. But he noted IT budgets continue to grow and are expected to do so at a higher rate than last year's 3% uptick.
Inflation, meanwhile, remains a macroeconomic factor and continues to surface in IT commodities. Concerns about a recession persist as leading technology companies shrink their workforces, with Microsoft and Google last week disclosing plans to lay off thousands of employees.
Against that backdrop, some IT services companies are expanding their businesses and adding services:
- Logically, a services provider based in Portland, Maine, said last week it will boost its focus this year on cybersecurity as it goes to market as a managed security services provider (MSSP). Logically has promoted Joshua Skeens, the company's COO with a cybersecurity background, to lead the company as CEO.
- Aptum Group, a cloud managed services provider in Toronto, earlier this month acquired CloudOps Inc., a transaction that will expand the company's multi-cloud and DevOps services
- Thirdera, a consulting firm with headquarters in Broomfield, Colo., earlier this month agreed to acquire SilverStorm Solutions, expanding Thirdera's ServiceNow services business in Europe and boosting its workforce to nearly 1,000 employees.
Logically moves forward as MSSP
Logically, which has built a security business over the years through acquisitions and organic growth, is now making cyber its top focus.
"Traditionally, Logically has been an MSP in this space," Skeens said. "With my background and other key strategic hires we have made, we are looking to drive Logically forward in 2023 as an MSSP."
Skeens joined Logically in 2021 through the company's acquisition of Cerdant, an MSSP where Skeens was COO and CTO.
Logically will maintain the MSP side of its operations, but it aims to transform into a "very security-focused business," Skeens said. The company's goal is ensuring more than half of its recurring revenue comes from cybersecurity services in the next two years, he noted. Logically will offer cybersecurity services to customers ranging from SMBs to large enterprises.
Research from Canalys, a market analyst firm based in Singapore, suggests Logically is moving in the right direction. The company forecasted cybersecurity services to expand at a 14.1% clip in 2023 -- well ahead of the growth rate for the IT service sector overall. Canalys said the market for cybersecurity services, which includes consulting, outsourcing, deployment, integration, maintenance and managed services, will reach $144.3 billion globally in 2023.
"Cybersecurity services is growing faster than other areas in IT services due to heightened threat levels and the need for organizations to raise their cybersecurity posture," said Srikara Upadhyaya, an analyst at Canalys.
He said cybersecurity managed services has become a key growth area. Market drivers include the shortage of skilled people, the increased complexity of managing cybersecurity in house, and the need to deploy security operations center (SOC)-based detection and response capabilities.
"Consequently, channel partners are investing in building up their cybersecurity managed services, either investing in their own SOCs or reselling MDR [managed detection and response] type services from third-party providers," Upadhyaya added.
Logically's MSSP offerings include extended detection and response, endpoint detection and response, and MDR; enterprise-level managed firewall services; and cybersecurity assessments, according to Skeens. The company runs a SOC. The company's IT security technology partners include Sonic Wall, Fortinet, SentinelOne, Extreme, Seceon and Blackberry's Cylance business.
Aptum expands multicloud, DevOps services
The cloud consulting business is another IT services field that has been holding up well despite the economy.
Aptum's purchase of CloudOps Inc., based in Montréal, aims to broaden the company's hybrid multicloud services. Such acquisitions help the company fast track its growth strategy, said Susan Bowen, CEO and president at Aptum Group. The company balances M&A with maintaining a pipeline of talent, investing in training, certifications and retention strategies, she added.
Customers continue to tap service providers for cloud assistance, even in a difficult economy, as they look to harmonize the multitude of as-a-service offerings they have deployed since COVID-19.
"In recent years, many companies accelerated their plans to implement the cloud," Bowen said.
But many organizations realized they have a lot to learn, creating an opening for MSPs. Helping customers address multicloud challenges, such as integration, is one such opportunity.
"The reality is that most companies -- unless they are entirely cloud native -- are being forced to use more than one cloud," Bowen said. The CloudOps Inc. transaction puts Aptum in a position to resolve hybrid multicloud challenges more effectively than customers could manage on their own.
M&As will spark the need for linkages among disparate clouds.
"As markets commoditize as a result of M&A, further integration projects are needed to enable multicloud solutions" to co-exist, Bowen said.
The CloudOps Inc. deal also seeks to boost Aptum's DevOps services. Aptum had already been partnering with CloudOps Inc. for its managed DevOps offering prior to the deal. Managed DevOps services let a customer's in-house application developers focus on innovation while the service provider manages and maintains the customer's DevOps environment, Bowen said.
Thirdera grows European ServiceNow footprint
Thirdera's agreement to purchase SilverStorm is its sixth deal in the last two years. SilverStorm offers Thirdera a bigger European presence, with headquarters in Spain and an office in the United Kingdom.
"We recognized we need to be global and need to be scaled and need to be comprehensive across ServiceNow's platforms," said Jason Wojahn, CEO of Thirdera.
Organic growth is also part of Thirdera's strategy, having earlier this year hired several ServiceNow experts in the Netherlands.
European customers, and those elsewhere, are looking to get the most out of their previous investments in digital technologies, having rapidly adopted such offerings following the onset of COVID-19, Wojahn noted. Concerns regarding the potential for a recession have also caused organizations to focus on optimization and efficiency.
"After any major digital transformation, there tends to be a period of incremental change -- continual improvement and refinement -- to gain further efficiencies" he said. "As well, where macroeconomic challenges exist, there tends to be a focus on garnering similar incremental, continual improvement efficiencies."
Thirdera works with customers to identify opportunities for process improvement within their ServiceNow deployments and associated workflows. Continuous improvement methodologies help with this task, Wojahn noted. In addition, data-based approaches using forensics tools like Celonis can also help identify constraints and bottlenecks, he added.
The goal: assess how organizations use ServiceNow today and how they can re-envision the future. Getting to that to-be environment in the current economy, however, calls for a pragmatic approach, Wojahn suggested.
Indeed, some organizations are breaking down digital transformation initiatives into smaller chunks to mitigate risk. But in doing so, businesses need not lose sight of the larger goals of transformation, Wojahn said. An organization can pursue small, strategic performance improvements but still keep in mind the broader context of how those incremental improvements relate to each other and fit into an overarching transformation agenda.
He said customers are sophisticated and understand the spectrum of digital transformation, from small, sprint-based wins to the bigger picture of foundational change.
"That is a much more practical way of approaching it," Wojahn said.