MSP reliance on the rise as server market complexifies

MSP reliance on the rise as server market complexifies

Server spending in Australia to reach approximately US$1.3 billion by 2025.

Credit: Dreamstime

Australian enterprises are finding themselves more dependent on managed service providers (MSPs) as the deployment of server infrastructure becomes increasingly complex.

According to forecasts by analyst firm GlobalData, Australian spending on managed server services is set to grow at a compound annual growth rate (CAGR) of 8.4 per cent over 2020-2025.   

This outweighs the IT server spending itself, which is predicted to grow at a CAGR of 6.3 per cent to reach US$1.3 billion (A$1.75 billion) in 2025, led by the ongoing enterprise digital transformation and modernisation efforts. 

However, according to GlobalData technology analyst Saurabh Daga, there is demand for MSPs and other third parties to manage this infrastructure, prompted in part by the COVID-19 pandemic. 

“While most enterprises in Australia have come out of the COVID-19 induced slowdown, the need to keep their IT spending in check will prompt them to consider third party management of their server environment,” he said. 

“Additionally, growing complexity of deploying and managing advanced server infrastructure in-house is also likely to encourage enterprises to choose managed service providers.” 

Australia’s post-COVID-19 economic recovery and its current digital transformation push is driving the growth in its local server market. 

In September 2020, Australia announced its A$1.2 billion Digital Economy Strategy, which GlobalData claims will boost the adoption of digital technologies such as cloud, 5G, blockchain and stimulate the demand for key IT infrastructure components such as servers and storage. 

Server hardware will account for the largest share of the overall enterprise server spending opportunity through the forecast period. Within the hardware segment, low-end servers will contribute the largest share of the total market value followed by mid-range and high-end servers respectively. 

“While the large enterprise segment will account for the largest share of the total enterprise server spending in Australia through the forecast period, the combined spending of micro, small and medium enterprises will increase at a marginally faster CAGR of 6.4 per cent over the forecast period,” explained Daga. 

“The federal budget’s provisions for setting up of a National AI Centre and four AI and Digital Capability Centres to accelerate the adoption of transformative digital technologies among SMEs will be the key driver for growth of server spending in this segment.” 

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