2024 will see IT budgets constricted further

  • Businesses’ use of hyperscalers are being dialled back as the economy falters, explains MD of Routed, Andrew Cruise.
  • This creates an opportunity for those in the local cloud and sovereign cloud space.
  • As for AI, it’s not something Routed is investing heavily in, choosing to focus instead on other areas that benefit more businesses locally.

Let’s be frank, 2023 has been a rough year for customers and businesses alike and those hoping the state of the world’s finances will get better, may want to prepare for worse in the year ahead.

According to local VMware Cloud Verified provider and VMware Principal Partner, Routed, 2024 will see IT budgets at businesses getting smaller rather than bigger.

“While this is not specifically a South African thing, or even unique to IT, there does appear to be a general negativity in the market. One area where this may be playing a role is in the uptake of cloud, as the tightening of the belts is to the detriment of the hyperscale cloud providers, who are now beginning to appear expensive,” explains managing director at Routed, Andrew Cruise (pictured).

It’s not just the tightening of belts that is negatively impacting the hyperscaler’s coffers though. As Capgemini reported in 2022, 79 percent of companies experienced a cloud data breach and with laws now in place in most of the world regarding cybersecurity and data protection, businesses can’t afford to leave their data in the cloud, lest it is accessed by ne’er-do-wells.

However, Routed’s MD says that while other businesses turn away from the cloud, enterprise customers aren’t abandoning the cloud, but instead looking beyond hyperscalers.

“At the same time, however, the enterprise’s outlook on the cloud is maturing, as are the actual cloud offerings out there, so while hyperscalers may be impacted, it also becomes clearer that when it comes to cloud, there’s a hat for every head, so to speak,” says Cruise.

In that regard, Cruise says that he sees positive trends when it comes to local cloud and sovereign cloud providers. It seems then that hyperscalers gave folks a taste of what cloud can offer, but now that there is a firm grasp on the concept, businesses need something that caters to its specific needs. This makes sense as you wouldn’t want your bank using the same sort of cloud infrastructure as your favourite fast food brand.

But what about artificial intelligence? Surely the most hyped up technology of the year is driving the uptake of AI platforms, warranting a need for providers such as Routed to invest in the technology moving into 2024? Not exactly.

“When it comes to a radical new technology like this, it’s easy to be caught up in the hype, simply because your competitors are doing it. However, it is my feeling that currently, AI is mostly hype. I believe it will be very important at some later stage, but certainly not in the next year or two, as everybody else seems to think. For one thing, with AI, we can see that the market is very badly affected by the lack of technical ability, relevant technology skills, and overall competence. For this reason especially, we are cautious about over-investing too soon,” says Cruise.

Note that Cruise isn’t saying that AI is a fool’s errand but rather that Routed is taking a cautious approach to investing in the technology, advice we believe all business owners should take to heart.

This is especially true in the face of an ever-worsening economy. This is even more pertinent in South Africa where many business-owners need to transact in foreign currency such as dollars which adds a premium to many services and platforms a business may use.

“There is a general inflation caused by the fluctuating exchange rate that ultimately affects all IT, although in the case of the cloud, it probably delivers benefits. After all, local cloud is usually priced in local currency, and local cloud providers will try and smooth over the currency fluctuations for their customers. Purchases from the hyperscalers, on the other hand, will likely be dollar-denominated,” explains Cruise.

“While the more developed nations have already experienced the growth that comes with the cloud, I think there are still enormous opportunities in Africa. However, I don’t believe 2024 will be the year where Africa becomes the next big frontier. Ultimately, markets are based on the availability of money, and that is one thing Africa still lacks. Where the opportunities really lie in Africa in the near future is in the provision of fibre optic cable infrastructure, to deliver reliable, cheap, and fast Internet. This is, after all, the foundation on which the cloud is built,” the MD concludes.

2024 then, is looking to be the next in a series of rough years so it may be best for businesses to take stock of their products, platforms and services, as well as how much they spend before flipping the calendar.


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