As is becoming the norm, we’ll start the week by reviewing new market data.
According to a Forrester report, the global IT services market is projected to reach $2 trillion by 2028, driven by cloud modernization. Despite near-term challenges, Forrester expects an average annual increase of 16% in enterprise IT services spend through 2028. Hyperscalers like AWS, Microsoft, and Google Cloud are leading the growth, with IaaS spending expected to double in five years.
ETB Technologies has reported a significant increase in the value of GPU sales, with sales more than doubling year on year from 2022 to 2023, reaching over £1.1 million. The rise in GPU sales is attributed to the proliferation of AI and the fluctuating prices due to supply and demand imbalances.
According to Amazon CEO Andy Jassy in the last earnings call, despite AWS’ $100 billion-plus annualized revenue run rate, 85 percent or more of the global IT spend remains on-premises. Jassy believes that AWS’ generative AI strategy will drive companies to transition from on-premises IT environments to the cloud, presenting a significant opportunity for growth.
The 2024 Business Owner Report from Bank of America reveals that a majority of U.S. business owners anticipate revenue growth, with 87% of mid-sized business owners and 65% of small business owners expecting an increase in revenue over the next 12 months. Economic outlooks vary by business size, with three-quarters of mid-sized business owners expecting national economy improvement compared to only one-third of small business owners. Concerns over inflation remain, impacting 90% of mid-sized and 84% of small businesses. Small businesses are increasingly using credit cards, with balances nearly 20% higher than 2019 levels, though inflation-adjusted balances remain lower.
The Russell 2000, a proxy for small business, was only slightly up for the week but was quite a coaster, and The S&P 600, which looks at the smallest companies, mirrored the Russell’s performance.
Why do we care?
Both Forrrester’s data and Jassy’s review point to more shift from traditional on-premises infrastructure to more scalable, flexible cloud solutions.
While a majority in both SMB and mid-market anticipate revenue growth, the difference in their economic outlooks—more optimistic among mid-sized businesses—highlights varying levels of confidence and resilience in facing economic challenges such as inflation. The significant impact of inflation on both segments, alongside increased reliance on credit among small businesses, points to underlying financial pressures that could affect their growth trajectories. Use that as context for your business strategy discussions with owners.