“Volatile economic conditions” are hitting IT service providers hard, with customers now opting for shorter contracts

IT service providers are concerned that ongoing economic uncertainty will hit their spending over the next year, according to cybersecurity and IT management firm Kaseya.

In its new 2024 Future of IT Survey report, the company found that four-in-ten service providers expect economic pressures to hit spending on software, with 36% saying that hardware spending would be affected, and more than a quarter saying these concerns could impact headcount.

Kaseya said the same worries may be behind a trend towards shorter, more adaptable contract periods with vendors, something that four-in-ten respondents said they were implementing.

“This shift suggests a desire for greater control and agility in responding to emerging challenges and opportunities," the firm said.

When it comes to investment, most respondents are prioritizing AI to increase overall efficiency, with 40% saying they expect AI usage to be the primary budget driver this year.

Indeed, IT automation and AI and machine learning rank among the top five technologies that IT service providers said they plan to pursue, with 37% of respondents considering investing in these technologies, compared with just 20% a year ago.

Three-quarters see AI as beneficial for their business, while only 3% doubt its impact.

"According to the survey findings, there is also a rising trend in the utilization of AI technologies to enhance IT efficiency by 41% and end-user productivity by 40%, demonstrating the increasing reliance on AI to drive operational improvements and employee performance," the firm said.

Cybersecurity is another priority, with 43% of respondents citing it as the biggest challenge for IT departments and 45% of IT service providers saying it's the top area to add or change solutions in the next budget cycle.

This includes investments in security awareness training, cited by 45%, email security, cited by 43%, penetration testing, cited by 36%, and vulnerability scanning, at 35%.

"The cybersecurity investments by IT service providers underscore their proactive approach to identifying and mitigating vulnerabilities," Kaseya said.

"Half of the respondents prioritize increasing their budget for IT security over other areas, such as AI for IT efficiency and end-user productivity, demonstrating the critical importance placed on ensuring robust cybersecurity measures within organizations."

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The report also highlights a focus on automation , with 42% of respondents advocating prioritizing the efficiency of IT processes, a trend that has been steadily increasing over the past three years.

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Almost half of the respondents indicated a strong preference for all-in-one solutions that can manage multiple tasks and processes without requiring multiple tools, and one fifth said they prioritize access to comprehensive IT documentation.

Meanwhile, Kaseya said that the enterprise appetite for integration tools has decreased significantly compared to last year.

This, the company suggested, could be down to companies having reached a “satisfactory level or are adopting more comprehensive solutions that require less integration effort”.