Industry Insights

5 Market Predictions for 2023 —What You Need to Know

By Ideas @ AppDirect / January 30, 2023

As we embark on a new year, it's a perfect opportunity to discuss key predictions for 2023 and outline how those forecasts may impact you and your customers.

The December 2022 State of the Union event welcomed several important speakers and guests, including Dave Wallace, President of NXTSYS, and Nicolas Desmarais, Co-Founder & CEO, AppDirect, and AppDirect’s Christopher Shubert, Vice President of Advisor Sales. The discussion was moderated by Emanuel Bertolin, Chief Revenue Officer at AppDirect.

Tune into our State of the Union episode to hear from these folks directly at minute 1:35 in the video.

Prediction # 1 - Recurring revenue models continue to attract attention

The conversation started by diving into how the growing liquidity in the market in 2022 impacted the global M&A market outlook. As Nicolas explained, because liquidity was abundant, this created a hot M&A environment across many sectors. This also created renewed interest into recurring revenue models because these areas are resilient. Telecom annuities have performed particularly well, for example.

While banks tend to shy away from investing in recurring revenue models, private equity firms have moved into the space. To meet this need, AppDirect continues to offer flexible funding options to grow recurring revenue businesses through AppDirect Capital. Nicolas explains the company plans to launch a second financial fund that’s twice as big as the first to give advisor businesses the opportunity to scale, expand into new areas, or to start new ventures.

Dave Wallace at NXTSYS has taken advantage of AppDirect Invest, a flexible funding option that provides non-dilutive capital and allows Dave to maintain full ownership of his business. This enabled him to buy out an investment partner and invest more in the business overall. As a result, his company has grown 50 percent in profit in the last 18 months.

Prediction # 2 - Specialization becomes a bigger focus

The second market prediction revealed that many companies—including many technology providers—will become hyper-focused on specialization in 2023. It’s easy to feel uncertain in the face of inflation and high-interest rates, but Nicolas prefers to be optimistic. He sees a number of providers that want to ‘lean in’ on the channel opportunity. His prediction is that more providers will continue to move to the channel market because it’s relatively insulated from market fluctuations.

Looking to the year ahead, Dave also predicts that we will see greater specialization in the market as well. It’s his view that many providers have been trying out various product areas that are outside of their areas of expertise. After this period of experimentation, he believes many providers will weed out the ‘fluff’ and zero-in on technology areas where they can deliver the most value and that are the most profitable.

He sees this trend extending to the advisor community as well. Dave suggests that advisors look at this period as an opportunity to focus on what businesses do really well.

Prediction # 3 - Cloud marketplaces gain even more traction

From Nicolas’ perspective, he also believes there will be growth in spend management, especially cloud spend management and the general SaaS world.

He says that cloud marketplace spending has grown exponentially and equates it to “putting a vending machine into an enterprise environment.”

Nicolas believes the beauty of cloud marketplaces is that they save money because businesses pay a lower price than buying directly, and cloud marketplaces deliver more control, in part because they use SLAs. Using a cloud marketplace avoids the need to go through the procurement process for each technology purchase.

According to Tackle.io Inc cloud marketplaces are growing at triple-digit rates and are on track to generate $15 billion by the end of 2023 and $50 billion by the end of 2025. Nicolas cites a report by Bessemer Venture Partners LP that estimates that transactions in those venues grew 70%, to $4 billion, in 2021, or three times as fast as the growth of the public cloud overall.

Tune into our State of the Union episode to hear from Nicolas directly at minute 25:00 in the video.

Prediction #4 - There’s still a lot of revenue to be made with the XaaS (anything as a service) model

A lot of time, energy, and money have been focused on Unified Communications as a Service (UCaaS) over the last several years. Many insiders, including Dave, predict that in 2023, we’ll see continued growth in the UCaaS market, but that change won’t necessarily come from new subscribers. He asserts that UCaaS revenue is generally a safe bet because it's typically hard to remove when a customer installs a UCaaS product. And most often, the revenue for the account grows over time because customers add on functionality and products such as headsets and mobility options. Customers can typically make these additions using self-service options, meaning advisors earn more revenue for that account without spending additional time supporting that customer.

In the Contact Center as a Service (CCaaS) space, Dave also sees growth as that market starts to push down into a smaller license basis. Dave recommends advisors talk to their smaller customers who already have UCaaS, demonstrating the additional benefits of CCaaS. This approach may open up significant CCaaS opportunities.

Another growth prediction is in the area of spend management, or what Nicolas calls Infrastructure as a Service (IaaS). This is because a primary focus of IaaS solutions is cost optimization, which is a significant trend recently as businesses try to ride out high inflation, supply chain issues, and other post-pandemic challenges.

Prediction # 5- Artificial Intelligence (AI) moves beyond the ‘hype’ phase

Shifting gears from the cloud industry, it’s hard to mention growing markets without mentioning AI. During the discussion, the guests talked about how AI has started to move past the ‘hype’ stage into an everyday part of our business workflows. While automation has been central in tech and industrial contexts for a while, it’s starting to expand further with tools such as GPT3 – which reached over a million users in its launch week.

Nicolas’ advice for businesses is to think about how AI could change your sector. For example, GPT3 can write code and blog posts, which could affect people in technology, software engineering, or marketing spaces.

Dave even sees the emergence of AR and VR in the digital communication space. Perhaps one day, VR could replace our traditional collaboration tools as the go-to method for remote business communication.

Attacking the market

While no one can predict the future, 2022 has sparked a lot of food for thought on which business areas will see growth in 2023. While the threat of a recession and high-interest rates put a great deal of uncertainty into the market, it’s good to know that many industry leaders are still optimistic about all of the opportunities available in 2023.

To round off our webinar, Vice President of Advisor Sales at AppDirect, Christopher Shubert, gave some parting advice about the year ahead.

“Pick the providers and partners that you want to attack the market with in 2023, and shore up your defenses with some solid account management strategy.”

For more insights into market trends, the economy, and technology in 2023, register for our webinar series to hear more State of the Union discussions.