Economic headwinds spark consolidation in the IT channel

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Economic headwinds spark consolidation in the IT channel

Hosted solutions are becoming the go-to option for enterprises reevaluating their IT infrastructure as rising costs put a strain on budgets.

Published on 25th June 2024

The once-robust IT channel, teeming with diverse vendors and self-hosted solutions, is facing a reckoning. Economic pressures – inflation, recessionary fears, and global supply chain disruptions – are forcing businesses to re-evaluate their IT infrastructure.

This shift will likely lead to a significant increase in consolidation, with enterprises seeking cost-effective, streamlined solutions through hosted services. In 2021, Gartner predicted that 85% of organizations will be cloud-first and it looks like we could be on track.

Rising costs for hardware, software licenses, and IT staff salaries are putting a strain on business budgets. Every dollar spent on maintaining a fragmented, self-hosted infrastructure translates to less capital available for core operations and growth initiatives. Consolidation offers a path forward, allowing businesses to optimize their IT spend by reducing the number of vendors, licenses, and internal resources needed to manage disparate systems.

Economic uncertainty breeds caution. Businesses are hesitant to invest in large-scale IT projects, particularly those with upfront costs like hardware purchases and software deployments. Hosted solutions, often delivered through a subscription model, offer a more attractive proposition. They require minimal upfront investment, minimizing financial risk and allowing businesses to scale their spending as needed.

The global supply chain continues to experience disruptions, leading to extended lead times and component shortages. This poses a significant challenge for businesses seeking to deploy new hardware for on-premises IT infrastructure. Hosted solutions, on the other hand, leverage the provider’s infrastructure, eliminating the reliance on a volatile supply chain for business continuity.

The rise of hosted solutions

Cloud-based solutions are no longer a novelty. They offer a multitude of benefits for businesses seeking to optimize their IT environment. Hosted solutions are:

Cost-effective: Reduced infrastructure management overhead translates to cost savings
Scalable: Businesses can easily adjust their service level based on changing needs
Secure: Leading cloud providers invest heavily in data security
Reliable: Guaranteed uptime and redundancy ensure business continuity
Accessible: Cloud-based solutions offer anywhere, anytime access to applications and data

The new IT channel landscape - the future is hosted

As economic pressures mount, we can expect to see increased collaboration between established IT vendors and cloud providers. Traditional resellers may transition to offering managed services for hosted solutions, leveraging their existing customer relationships and expertise. This shift will create a more streamlined IT channel, where businesses can access a wider range of hosted solutions from trusted partners.

While consolidation presents challenges, particularly for businesses reliant on legacy systems and internal IT expertise, the long-term benefits outweigh the short-term disruptions. Enterprises that embrace hosted solutions will find themselves better positioned to weather economic uncertainties and be better prepared for future technological innovations. They will benefit from agility, scalability, and cost-effectiveness, ultimately allowing them to focus on core business objectives.

This shift towards hosted solutions will not spell the end of the IT channel. Instead, it will usher in a new era of collaboration and innovation. As businesses prioritize cost optimization and agility, the IT channel must adapt by offering a wider range of hosted solutions with robust managed services. This new landscape will incentivise partnerships between traditional resellers and cloud providers, fostering a more streamlined and efficient ecosystem for businesses seeking to optimize their IT infrastructure in an era of economic uncertainty.