Channel's Future Outlook: Optimism & Growth, Shadow IT and Shrinkflation, AI PCs and Cybersecurity

[00:00:02] It's Wednesday, May 29th, 2024, and I'm Dave Sobel. Three things to know today.

[00:00:07] The channel's future market outlook, 90% of partners are optimistic about growth in 2024.

[00:00:13] Small and medium-sized businesses are grappling with shadow IT amidst digital transformation.

[00:00:19] And AI PCs are poised for significant growth, promising new opportunities for tech.

[00:00:25] This is the Business of Tech.

[00:00:27] While a shortened week, do want to catch up on the state of play in IT services.

[00:00:33] According to the Q1 2024 Channel Futures Market Outlook Survey,

[00:00:38] managed service providers are more optimistic about the channel economy than the overall U.S. economy.

[00:00:43] 79% of respondents believe the channel economy is good or excellent, compared to only 44% with the U.S. economy.

[00:00:51] The survey also shows that most MSPs report small increases in total revenue, recurring revenue, and profit in the first quarter.

[00:00:59] Additionally, AI services like chatbots and AI-powered cybersecurity were the top sector for adding vendors.

[00:01:06] Despite increased competition due to tech layoffs, MSPs see positive aspects,

[00:01:11] like a more skilled IT talent pool and expanded service offerings.

[00:01:16] According to a Gartner survey, growth is the top priority for 62% of CEOs in 2024, marking the highest level since 2014.

[00:01:25] AI is a key focus area, with 34% of CEOs believing it a top theme.

[00:01:31] While CEOs believe in the benefits of AI, caution remains regarding operational problems and supply chain issues.

[00:01:38] CEOs are advised to retain a balanced approach to AI integration and let the hype cycle do its work.

[00:01:46] Also, according to Gartner, worldwide end-user spending on public cloud services is expected to reach $675.4 billion in 2024,

[00:01:55] driven by generative AI and application modernization.

[00:01:59] Infrastructure as a service is projected to have the highest spending growth, followed by platform as a service.

[00:02:05] Software as a service remains the largest segment in end-user spending,

[00:02:09] and India forecasts to have a 30% growth in public cloud spending led by infrastructure and platform as a service.

[00:02:16] The Sophos MSP Perspectives 2024 report highlights the growing demand for providers in securing organizations against cyberattacks.

[00:02:24] The report identifies challenges and opportunities for providers, including streamlining partnerships,

[00:02:29] delivering MDR services, and addressing the cybersecurity skills shortage.

[00:02:35] Why do we care?

[00:02:37] On the provider side, the market seems solid. Providers themselves are optimistic.

[00:02:41] Ripe opportunities for growth like AI, cloud, and security. Good news so far.

[00:02:46] Let's talk about customers next.

[00:02:51] With as many breaches and security concerns as I report on this show,

[00:02:55] it should be obvious that cybersecurity is not just about technology,

[00:02:59] but also the human expertise needed to interpret and respond to complex threats.

[00:03:04] Huntress is focused on elevating SMBs and MSPs around the world.

[00:03:09] Huntress has a suite of fully managed cybersecurity solutions powered by a 24x7 human-led SOC

[00:03:17] dedicated to continuous monitoring, expert investigation, and rapid response.

[00:03:22] And the proof is the execution.

[00:03:24] Huntress is the number one rated EDR for SMBs on G2.

[00:03:30] Want to know more about the platform? Visit huntress.com slash MSB radio to learn more.

[00:03:39] As reported in Axios, a top Fed official attributes the surge in economic output last year

[00:03:44] to companies adopting labor-saving strategies due to the tight job market.

[00:03:49] The question for this year is whether the improvement in labor productivity will continue.

[00:03:53] The gains may have room to run if the assessment is correct.

[00:03:57] The increase in productivity is attributed to sector reallocation

[00:04:00] and increased productivity with industries and firms.

[00:04:03] Artificial intelligence is seen as a potential future source of productivity.

[00:04:07] It's too early to determine the exact reasons behind the surge, but it is likely a real one.

[00:04:13] A new paper suggests that the U.S. is better positioned than continental Europe

[00:04:18] to benefit from widespread AI adoption,

[00:04:20] potentially leading to a widening divide in innovation and economic outcomes.

[00:04:25] The paper highlights the U.S.'s lead in AI-related innovations

[00:04:29] and its historically higher rate of job transitions.

[00:04:33] In contrast, Europe has been more cautious in adopting technological innovations.

[00:04:37] The paper estimates that both regions will need millions of people

[00:04:41] to transition to different types of jobs in the next few years.

[00:04:45] Tech chiefs are facing the challenge of shadow IT driven by the adoption of generative AI tools.

[00:04:51] Companies have observed an increase in employees using off-the-books generative AI tools,

[00:04:56] leading to the need for clear tech procurement policies and robust vetting processes.

[00:05:02] While major tech providers work on responsible AI guidelines,

[00:05:06] CIOs must consider adoption costs, AI training, and the chaotic vendor landscape.

[00:05:12] A level of risk tolerance is necessary in the adoption process.

[00:05:17] And talking about shrinkflation, that strategy where businesses offer smaller sizes

[00:05:22] or quantities of goods and services at the same price,

[00:05:25] it's being used by about 12% of small businesses to combat rising costs.

[00:05:30] However, consumers are noticing and are not happy about it,

[00:05:34] with 68% switching brands or companies because of it.

[00:05:38] Small businesses should consider other strategies like careful budgeting

[00:05:42] or raising prices slightly, using shrinkflation being up front with customers

[00:05:47] to potentially help retain loyalty.

[00:05:50] Affluent Americans are benefiting from soaring prices for stocks and houses.

[00:05:55] Lower-income Americans are facing challenges with credit card debt, high rents, and slower wage growth.

[00:06:01] This divide in economic conditions impacts sentiment about the economy

[00:06:05] and is a concern for Federal Reserve officials.

[00:06:08] Delinquency rates for credit cards have increased, particularly among maxed-out borrowers.

[00:06:13] Public opinion data also shows a shift in sentiment,

[00:06:17] with low-income households becoming more pessimistic about the economy

[00:06:21] compared to higher-earning counterparts.

[00:06:24] Now why do we care?

[00:06:26] Here's where things are less optimistic.

[00:06:28] The labor market itself is tight, with growing productivity.

[00:06:32] The U.S. looks better positioned than Europe,

[00:06:34] and all that AI is causing a lot of shadow IT as it boosts productivity.

[00:06:39] Consumers themselves are pushing back against companies,

[00:06:42] and there will be a distinct difference in spending depending on the customer base.

[00:06:47] And this data is what you use to understand your customers' perspectives.

[00:06:55] Google's AI tool, known as AI Overviews,

[00:06:57] has purportedly provided inaccurate and potentially harmful information to users.

[00:07:02] Social media and news reports have highlighted instances

[00:07:05] where the AI suggested eating rocks, adding glue to pizzas,

[00:07:09] and using chlorine gas to clean washing machines.

[00:07:13] The tool, which uses the Gemini AI model,

[00:07:16] has caused concern as it's generated summaries using satirical websites like The Onion

[00:07:20] and comedic Reddit posts as sources.

[00:07:23] Google has acknowledged the issue

[00:07:25] and stated that it is taking action to address violations of its policies.

[00:07:30] In a report from MIT Technology Review,

[00:07:32] data integration is the top priority for AI readiness,

[00:07:36] as agreed by 82% of senior executives.

[00:07:39] This challenge involves handling data volume,

[00:07:42] enabling real-time access,

[00:07:44] managing changes to data,

[00:07:46] and moving data from on-premises to the cloud.

[00:07:49] A significant 83% of surveyed executives

[00:07:51] have identified multiple data sources that must be combined for their AI initiatives.

[00:07:57] They are seeking scalable solutions that are not tied to specific use cases,

[00:08:01] with 82% prioritizing future-proof solutions.

[00:08:05] Additionally, data governance and security are a major concern,

[00:08:09] especially in regulated sectors, indicated by 44% of respondents.

[00:08:14] A TechIsle study suggests that AI PCs have a promising market potential

[00:08:19] among SMBs and mid-market firms.

[00:08:22] About 77% of SMBs and 86% of mid-market firms are already familiar with AI PCs.

[00:08:29] The study also reveals that 32% of SMBs and 64% of mid-market firms

[00:08:34] are planning to purchase AI PCs.

[00:08:37] This technology is expected to impact the PC market significantly within 3 to 5 years.

[00:08:42] However, while 14% of SMBs view AI PCs as a crucial upgrade,

[00:08:47] another 12% are considering a strategic shift towards them.

[00:08:51] A considerable portion, at 24%, sees no compelling reason to adopt this new technology.

[00:08:57] Moreover, 58% of SMBs report that their employees actively request AI PCs,

[00:09:04] revealing a potential disparity between management and employees' perceptions of AI technology benefits.

[00:09:10] The study identifies content creators, tech-savvy departments,

[00:09:14] and executives as potential early adopters,

[00:09:17] with creative and design professionals at 45%, IT development at 27%,

[00:09:22] and sales and marketing teams 26% expected to benefit most

[00:09:26] from AI PCs' enhanced processing power and AI-powered features.

[00:09:31] WholePilot is recognized by over half at 54% of SMBs

[00:09:35] and a majority, 89%, of upper mid-market firms.

[00:09:40] Why do we care?

[00:09:42] Google's doing its best to damage consumer confidence.

[00:09:45] Now, there's value in a long-term approach to AI.

[00:09:49] I mentioned it as an opportunity.

[00:09:51] Note that AI readiness is the first step and data integration comes at step zero.

[00:09:56] Plus, with all this buzz about AI PCs, well, that's 3 to 5 years away.

[00:10:01] So focus on the now, which is helping customers with their data.

[00:10:07] Are you ready to spot opportunities by aligning IT with your clients' business strategies?

[00:10:12] GetInSync equips MSPs and IT professionals with the tools, methods,

[00:10:16] and training to deeply understand client strategies,

[00:10:19] ensuring IT investments directly support key business objectives for tangible outcomes.

[00:10:25] With GetInSync, you gain critical insights that empower decisive actions,

[00:10:30] enhancing your competitive offering.

[00:10:32] This solidifies your role as a trusted advisor

[00:10:35] and supports your clients' strategic needs, bringing greater success.

[00:10:40] Test your readiness to become a certified GetInSync trusted business advisor

[00:10:45] with our free online assessment.

[00:10:47] Accept the challenge and discover if you have what it takes

[00:10:50] to become an indispensable strategic partner for your clients.

[00:10:54] Begin your journey with GetInSync.

[00:10:56] Visit getinsync.ca slash mspradio to learn more.

[00:11:04] Thanks for listening.

[00:11:05] Today, National Alligator Day.

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