Insight

Channel pragmatic about facing current economic headwinds – report

Despite the current and predicted long-term economic turmoil facing businesses, UK tech firms are optimistic about the health of the industry going forward.

This may come as a surprise, but the new CompTIA IT Industry Outlook 2023, released this week, reveals that businesses in Britain rated the health of the sector at 6.4 out of 10. This suggests that even with current uncertainties and societal issues, the industry remains in a robust and confident mood.

However, despite the largely positive sentiment, the UK, along with other European regions (DACH - 6.4/10; BENELUX - 6.4/10), were the least optimistic surveyed, with the U.S. (6.8/10), Southeast Asia (ASEAN - 7/10) and Australia and New Zealand (ANZ - 7/10) feeling more encouraged about future prospects.

This positivity also was reflected in the UK channel, with 53 percent of partners optimistic about their firms’ prospects for 2023. Only 23 percent are feeling uneasy about the year ahead. At the same time, many channel firms are bullish when it comes to their growth potential, with 27 percent saying they expected their revenue and profitability numbers to exceed those of 2022 if the tech sector flourished. A more cautious 45 percent said they expect stable results on par with the previous year, while roughly 24 percent said they still expect a decline in revenue and profitability even if the tech industry performs well. 

 This was somewhat surprising to see, given challenges partners are experiencing relating to the current geopolitical situation, inflation, chain problems and exchange rates. Many of the conversations we’ve seen have been focused on building a resilient business model.

We asked Carolyn April, senior director, industry analysis, CompTIA what she thought was behind the latest findings. She pointed out that there is a natural tendency toward optimism when any survey respondent considers the prospects of their particular industry, and specifically when they are asked about their own company or workplace.

“That’s a human nature caveat upfront to consider,” she explained. That said, Carolyn said many channel firms that survived – and the not-insignificant number that thrived – during the pandemic view the current rocky road ahead in the context of some earned confidence based on weathering that storm.

“Infrastructure sales attributable to the remote work migration and an uptick in the need for MSP services both kept many in the channel in decent stead during the last few years of Covid,” she said.

“Now, with the current economic conditions in place that you mention, I would describe the outlook data as reflecting ‘cautious optimism’ by the majority of the UK channel. Respondents said the number one thing that has them concerned about negative outcomes in the year ahead is inflation, so this is not a group blissfully ignorant of the challenges they face. Smart channel firms recognise that the headwinds they are up against are largely out of their control (macroeconomic in nature) so they instead are doubling down on what they can manipulate: working on operational and process efficiency to rein in costs, hiring and/or training workers in the skills that remain in demand today (think cybersecurity or data), and making sure that they are cash flow positive, have access to credit, and otherwise in fighting shape to withstand a downturn.”

This certainly explains a lot when you factor in the channel’s apparent pragmatism combined with optimism. As we prepare to enter a new year, it will be interesting to see how much – if at all – this standpoint changes.

Said Carolyn: “A mid-year 2023 check-in with this same group of respondents could spell out a different outlook in either direction: much more optimistic, or much less.”

You can read the report here.

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