The APAC Channel Needs to Prepare for Smaller Deals

Recent financial results and data from the Asia and Pacific (APAC) channel suggest that weaknesses in the U.S. market are starting to have global ramifications. However, for APAC organisations, the good news is that a shift in spending intentions will be to their benefit. They’ll need to recalibrate to adjust to smaller scope projects to take advantage of the opportunity, however.

The Banking Sector Highlights Global Trends

Global services giant Accenture reported forecasts below Wall Street expectations, and consequently saw its stock price drop by more than 5%. Meanwhile, Indian services giant Tata Consultancy Services blamed the North American market for a “weaker than expected” quarter in April.

However, in Australia, Gartner reports some robust spending intentions. Though banking is cited as one of the reasons that the North American market is underperforming for those global services providers, IT spending by Australian banks is expected to increase by 7.3%in 2023, according to the analyst firm.

The nature of that spending is shifting, Gartner noted. Banks are disengaging from tangible assets and capital expenditures (CapEx) spending in favour of services and operating expenses (OpEx) spending instead. This is a big opportunity for managed service providers (MSPs) to partner more deeply with banks; however, as Gartner notes, they should also be prepared for smaller-scope projects.

“To deal with the current economic climate, banking and investment services CIOs are now prioritising more conservative objectives that support resilient and sustainable growth, such as a better customer experience (CX) and more efficient operations,” Pete Redshaw, vice president analyst at Gartner, said. “This is a change from previous years when outright growth — new territories, new customers, new lines of business — was the primary objective of banking CEOs.”

Interest Rates Inhibit Ambitious Spending

The behaviour of the banking sector is in line with most other industries and markets. IDC data in April revised down forecasts for overall global IT spending, but still expects overall growth of 4.4%for the year. “Tech spending remains resilient compared to historical economic downturns and other types of business spending, but rising interest rates are now impacting capital spending,” Stephen Minton, vice president at IDC’s Customer Insights & Analysis group, said.

Those interest rates are a challenge that the local MSPs will need to contend with. In Australia, interest rates are tipped to continue to rise, further deepening their impact. The challenge isn’t so much that budgets will be constrained, but rather the scope of the projects will shift. Organisations will focus more on navigating the current macro-economic volatility in the short to medium term rather than building ambitious long-term strategies.

In short, the data suggests that the MSPs that will benefit from this challenging environment will be the ones that offer quick wins to their clients, with a focus on both rapidly improving the customer experience and helping to shift the cost centres to a more efficient model for the enterprise.