Cloud Consultancies Shift Focus from Recruiting to Retention; Accelerators, AI and Automation Become Table Stakes
Tercera, a growth-focused investment firm specializing in technology professional services, revealed five trends it believes will shape the cloud professional services market in the year ahead, along with a guide for IT service professionals to more effectively exploit or prepare for these trends.
“2023 is going to test IT services leaders in new ways,” said Chris Barbin, CEO of Tercera. “The current economic climate, combined with big advances in technology and shifting go-to-market models in the cloud’s third wave, is going to require ruthless prioritization. Challenges abound, but so do opportunities. The firms who win in this climate will tackle both.”
Here are five trends that Tercera believes will shape the IT services landscape in 2023. The full list of trends can be found on Tercera’s blog.
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Trend 1: Customers, not talent, become the battleground:
2023 began with more tech layoffs, and while software companies made up the bulk of these, IT services firms haven’t been immune. With talent more readily available, the priority – and budget – will shift to acquiring and retaining customers. Software partners, typically a solid source of leads for services firms, will expect more support from partners and customers will expect more demonstrable return on investment.
Trend 2: Accelerators and automation move from marketing to mandatory
Intellectual Property (IP) has become a must-have, not a nice-to-have. As cash-strapped customers and time-strapped consultants look to deliver results more efficiently, services firms are building out accelerators and assets across the IP maturity pyramid. They’re leaning in on low-code/no-code solutions and more sophisticated tooling of the business. Those that invest here will be in a better position to grow as the headwinds return.
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Trend 3: The Tercera 30 goes vertical
Industry Clouds will continue to be a growth pillar for the software firms in our Tercera 30, with verticals like healthcare and manufacturing moving up the priority list. Customers want to do more than lift-and-shift existing data and processes into the cloud and instead use these platforms to rethink specific business processes or to unlock data trapped in legacy systems. This presents a huge opportunity for service providers that have a point of view here.
Trend 4: Analytics and AI move up in importance and out of their silos
If the cloud was the new black, data is the new cloud. Companies are becoming increasingly reliant on data and AI to automate and optimize spend, to manage the real-time nature of digital interactions and to identify mechanisms to grow faster. The rise of the modern data stack and tools like ChatGPT are pushing data and AI out of the hands of data experts and into every function within a company. More SaaS apps will re-architect on data clouds.
Trend 5: Services consolidation continues, but deals get smaller
Services M&A will ramp back up in 2023 as cash-strapped firms look for a good home and well-funded firms look to fill gaps in their portfolio. As a whole, the valuation for deals has contracted, but differentiated firms with solid unit economics that can bring scarce resources or expertise to the table will continue to earn a premium.