Executive Summary
The infrastructure services market continues to show resilience through a period of adjustment and unevenness. The sector has gone through a rocky journey since coming out of the pandemic last year. The pandemic played a significant role in the sector’s sustained period of counter-cyclical growth and the conditions and historical precedent were there for more growth and even acceleration. This did not happen as expected and the sector has entered a relative down period. However, there are signs coming out of the quarter that things are stabilizing. Revenue growth deceleration has moderated, customers have slowed optimization and cost reduction initiatives, while the underlying fundamentals driving the infrastructure model remain firmly in place and continue to move forward.
Not only are there signs of stabilization, but a new wave of demand is emerging that could materially reshape the sector. From an infrastructure perspective, AI has always been a bit difficult to grasp, falling under the rubric of HPC, but it is now establishing itself as a standalone category. AI-oriented workloads running on GPUs are being deployed in live scenarios and consuming copious amounts of power that has translated directly into demand for public cloud services and data centre colocation.. There is always the risk of hyperbole at such an early stage, but there are solid early indications that what comes next could actually end up matching or even surpassing what hyperscale and public cloud has done.
The potential implications of this sea change are far-reaching. Data centre builds will have to be reconsidered as advanced cooling technologies will need to be implemented, while capacity planning, provisioning times and capital allocation will radically change. The use of AI with applications will also shape what happens in managed public cloud services. MSPs are driving into the layer above raw infrastructure and the development of AI tools provide so much more to offer end users to enhance and optimize their cloud infrastructure usage.
This report takes a close look at the noteworthy trends and developments from the recent 2Q23 period. A more detailed look at the M&A landscape, APAC region and hyperscale cloud sectors is available to clients in separate quarterly reports.
