We look at the market on Mondays, so let’s dive in.
Inflation in the US appears to be cooling down, with the Consumer Price Index (CPI) being cooler than expected for the second consecutive month. The CPI for May remained unchanged, and the core measure rose at the slowest pace since August 2021. While some categories showed a decline in price increases, rental prices have yet to show a decline. At the Fed meeting last week, the expectation was that there would be only one rate cut this year, not three.
Artificial intelligence and other catalysts are driving the IT market back to growth mode, with IDC revising its global growth forecast from 4.1% to 8%. However, factors such as inflation, AI distractions, AI impediments, geopolitics, protectionist policies, and talent shortages could impede growth in the second half of 2024.
According to the latest PwC Pulse Survey, CEOs believe that competitors who do not change their current business model will be out of business within three years. Executives agree they can execute business model changes at scale, and many have already started or completed reinvention initiatives.
A recent global survey conducted by Channelnomics and Pax8 reveals that small and midsized businesses (SMBs) rely on resellers, integrators, and service providers to support their artificial intelligence (AI) projects. The survey highlights the challenges faced by SMBs in implementing AI, such as insufficient infrastructure and security risks. However, SMBs recognize the importance of AI adoption for their market position and are ready to invest in AI systems and tools.
In a keynote speech at the Pax8 Beyond event, Jay McBain from Canalys outlined five trends shaping the channel’s future. These trends include channel growth, a focus on cybersecurity, millennials driving shifting buying patterns, marketplaces on the rise, and the end of third-party tracking cookies. McBain emphasized the growth of the MSP industry, the opportunities in cybersecurity, the importance of understanding millennial buyer behavior, the significance of marketplaces in the digital-first era, and the value of second-party data owned by the channel.
Why do we care?
Two perspectives to consider. The impact on your own firm, and the impact on customers. For the IT services industry, stabilized inflation means more predictable costs and potentially lower borrowing costs if the Fed opts to hold rates steady or cut them. This can encourage more capital expenditure on IT projects and technologies. However, the persistent high rental prices could continue to strain operating costs, particularly for businesses with significant real estate footprints.
There does appear to be strong interest in AI based solutions, and leaning into customer desires is a smart play.