Description
The sector went into a holding pattern or sorts last year as macroeconomic headwinds, supply chains and geopolitics created disruption that had an impact felt across the Internet infrastructure landscape. To a certain extent, these external factors have started to moderate, but the sector continues to work through an uncertain environment.
Despite the challenges, positive indications have emerged that should provide some optimism moving into 2024. Customer optimisations have reached a peak and are dialling down, while customer attrition has tapered off and sales pipelines are gaining momentum. These dynamics reflect in the numbers. Growth deceleration within the public cloud peer group has stabilised and started to move in the other direction, with the corresponding impact starting to take hold across the rest of the ecosystem.
The relatively quick rebound is being driven in no small part by the demand coming from AI, which took off halfway through the previous year and continues to gain momentum moving into 2024. AI demand may not fully materialise in 2024, but progress is being made and a surge is looming on the horizon.
While revenue growth is starting to reaccelerate, other sector dynamics are already picking up the pace. The migration from traditional on-premise installations to outsourced infrastructure is moving faster, uptake in value-add services continues and strategic thinking about cloud is increasingly front and centre.
Recent trends give us optimism that things will continue to push forward. The sector remains on solid footing and the underlying fundamentals have not veered of course. Our long-term outlook for the sector remains unchanged and there are reasons to believe that we can shed some of the cautiousness we had last year as we move into 2024. The rise of AI is a big reason behind the bullishness, but it is what AI will do to impact hyperscale cloud and de- centralisation to the edge that is really going to push the envelope.
