Channel Partners to Drive More than 70% of IT Spending in 2023

There is excellent news ahead for channel partners. Partners will drive more than 70% of IT spending in 2023 — outpacing direct IT sales.

Partner-delivered IT technologies and services will exceed $3.4 trillion in 2023. That’s more than 70% of the global total addressable IT market, according to Canalys research.

At the same time, IT spending via channel partners will grow 3.7%, outpacing direct spending between customers and vendors.

Canalys’ Matthew Ball

“There’s an exciting future ahead for this industry,” said Matthew Ball, chief analyst at Canalys.

Ball said the sector will nearly double in size over the next 10 years, comprising “hundreds of thousands of vendors and millions of channel partners.”

“Given the importance of the channel, the success of vendors will increasingly rely on their resell, co-sell, co-marketing, co-retention, co-development and co-innovation strategies.”

The forecast comes as more vendors adopt a “partner-first” strategy.

Mega-Trends Drive Growth For Channel Partners

Canalys forecasts the total addressable IT market to grow 3.5% to reach $4.7 trillion this year.

Ball said long-term technology mega-trends will continue to drive growth opportunities for both vendors and partners in 2023.

“Digital transformation, cybersecurity, compliance, sustainability and the emergence of generative AI will underpin IT services engagement, the adoption of new software and infrastructure refresh.

“But there are still major headwinds for the industry to navigate. The threat of recession, rising interest rates, high inflation, trade disputes and extreme weather events will continue to cause much disruption and affect confidence.”

Opportunities In Cybersecurity, Networking, Public Cloud And AI

The research shows cybersecurity will remain a key growth opportunity for channel partners, increasing by more than 11%, to $79 billion. This reflects the heightened demand for securing data, systems and people against rising threats.

Network infrastructure will reach record highs, as fulfillment of campus switch and Wi-Fi 6/6e access point order backlogs boost spending by almost 14%, to $72 billion. Price hikes, renewals and the upselling of subscriptions will grow cloud application software spending by more than 19%, to $215 billion.

Optimization of public cloud spending, cybersecurity posture transformation and business adoption of generative AI will create further consulting opportunities and contribute to IT services spending expanding by 7.5%, to $1.5 trillion. Managed IT services alone will become a $500 billion business.

On the other hand, Canalys expects sales of servers, storage and client devices to suffer negative or flat growth. This comes after strong demand fuelled by accelerated data center buildout by cloud service providers and enablement of remote workers during the COVID-19 pandemic. But AI servers will be a bright point.

Investment In Technology Refreshes

Spending in North America will grow a little less than 3% this year, down from 8.5% in 2022, accounting for nearly 38% of the total addressable market. The slowdown in cloud service provider capital expenditure in the first half of the year and a decline in telecoms services spending are key factors.

Canalys forecasts Asia Pacific to grow 4.5%, EMEA 3.4% and Latin America 3% in 2023.

But despite greater scrutiny of IT spending in the first half of 2023, there are early signs of a gradual easing of budgetary constraints for the second half.

The research firms says to look for growth to rebound next year, fuelled by businesses and governments accelerating their investment in technology refresh, said Canalys. These organizations are pushing ahead with delayed projects and new initiatives. Initial forecasts for 2024 expect more robust growth of nearly 7% overall, with IT spending hitting $5 billion for the first time.