Technology and digital services Q2 2023 saw a 15.3% decrease in IT Services sector deal volume, with 332 deals closed compared to 392 in Q1 2023. However, multiples rose as buyers targeted companies with innovative technology advancements which demand higher valuations. Continued buyer focus on growth buyout deal structures also bolstered valuations. Customer demand has pressed IT service providers to replace legacy infrastructure and modernize systems, primarily security-related ones. Customers now expect 24/7 support, remote monitoring, managed network solutions, and more. Customers have continued migrating critical workloads from on-premise to off-site infrastructure and applications, which requires advanced security. Many cybersecurity threats and breaches have emerged throughout these migrations, resulting in costly disruptions. The government has also continued to reiterate the importance of advancing technology security; the ‘23 U.S. budget for IT at civilian Federal Agencies is up 11% from the previous year.Amidst innovations, AI remains a focus and needed investment, highlighted by its newfound security implications. Accenture reports that 3 out of 4 executives believe their company risks failure if they don't embrace AI within a few years. While economic uncertainty has caused an emphasis on these non-discretionary digital services, workplace collaboration technology R&D remains a focal point heading into Q3. IT service providers expect demand to grow regardless of economic performance as companies focus on technology modernization, presenting a positive sector outlook.