Roller-coaster is the word that perfectly describes what awaits the IT sector in 2023. Towards the end of 2023 and the beginning of 2024 we will switch to a high-speed train.
The US will be the first to emerge from the crisis, as usual, Europe will be slower. The IT industry is almost invulnerable to natural economic cycles and recovers extremely quickly from “black swan” events. We have witnessed bankruptcies, layoffs and the restructuring of large and small businesses as well as entire segments. The overall development is, however, positive including in Bulgaria where, according to BASSCOM, the software sector has grown by 26% in 2022.
The three factors that will have the strongest impact in 2023:
1.Uncertain economic environment
For the first time in years, uncertainty becomes a concern bigger than the shortage of people. It is not the crisis itself, but the unprecedented lack of predictability that makes even medium-term planning practically impossible. In 2022, we observed isolated cases of “stop-go” based on quarterly results and 2023 will be full of them based on the hyper-sensitivity of management and investors. It will be no longer possible to buffer the tension and it will also reach employees, building on the inflationary shock of 2022 which, although milder, will continue into 2023, especially in Europe
The clash of two forces – the crisis in the macro environment and the need for digitalization of the world – is clearly visible. The second prevails and despite the oscillating demand expectations in 2023, towards the end of the year we will reach a new stable growth track. This is also part of the explanation for the paradox of simultaneous fall in the share price of public companies and increase in the valuation of non-public ones, which is observed in the M&A market. A trend that will also calm down and balance in 2023.
For tech startups, 2022 started under the sign of a “path to profitability”, the end of 2022 and the early 2023 will provide us with a spectacle of explosions. Neither the overall economic crisis, nor the stock exchange, nor the final chords of high profile cases such as Theranos, help in attracting capital and confidence. However, money is available, despite the long-awaited natural cyclical correction of the markets. Survivors will continue to be attractive for investors.
In fact, all IT companies with sound business models and the ability to quickly, flexibly implement projects adapted to the ever-changing needs of customers, remain in a strong position. Those who manage to focus on their strengths, cope with an erratic environment, have strong partnerships of trust with their customers and manage to retain and develop their people, will have a wonderful 2023 and enter 2024 with upward acceleration. That means a combination of stability and innovation, financing the best pilot projects with a vision for the future and within budgets. As the IDC analysts summarize: concentrating on the projects with the highest business value and optimizing costs at the same time. That’s also the essence of Gartner’s three mega trend groups: optimize, scale, pioneer.
2. Shortage of people
A few years ago the shortage of people was an exotic problem for the IT industry, now it is everywhere. Recently, an English banker told me that open positions are there, high salaries are offered, but there are simply not enough people. Analysts believe the banking sector is no exception. According to data from N2, 60% believe that wage levels are already unbearable for businesses and 62% believe that they will never have enough IT specialists. The solution: technologies to replace people. Great: more work for the IT sector. But IT companies are also gasping for breath – according to BASSCOM in Bulgaria there is an expected shortage of 34,000 people by 2026 and according to IDC 65% of businesses will not be able to achieve the maximum of investment in cloud, data and automation due to lack of people. Some harbor hopes in the “gig economy” as an expansion of capacity. It is unlikely that they will come true at scale to solve the overall shortage, because they are based on the concept that IT people would like to combine several employers by taking on the additional logistical load. And this is fighting with the stronger than ever tendency to seek work-life balance, supported by high incomes.
Wages will continue to grow and harmonize across geographies. This process has been going on for a long time because of the shortage of people, but it was reinforced by the pandemic when it became clear that physical presence in most cases is neither a necessity nor an advantage. What is more, a N2 study shows the pressures of the rising cost of living on wages. In geographies with lower wages, the pressure is higher. In other words, they are catching up.
In addition to increasing wages, people in the IT sector are looking for development and flexibility. According to a survey by Amazon and WorkplaceIntelligence, 83% of employees put improving their skills in their top priorities for 2023, and 74% would quit their jobs if they did not see development opportunities.
In 2023, it will become crystal clear that attempts to force office work „as before” are either a hypocritical disguise for other goals or a denial of the obvious. Employees seek flexibility and dealing with the lack of commitment is not their direct problem. However, the physical gathering of people in one place has its benefits and successful companies will find mechanisms for it to happen; to build human contact, induce idea generation and ultimately achieve higher efficiency, belonging and loyalty. All of these without pressure and with parallel development of technologies simulating live contact.
3.Digital Transformation
There is a visible stable and comprehensive digital transformation of everything, which is accepted as one of the solutions to exit the crisis; a tool for survival and growth. IT spending, especially software, will continue to increase in 2023, despite the expected belt-tightening in the economy. According to a study by N2 & CIONET, global technology spending growth for 2023 is expected to be in the top 3 over the past 15 years. More than 52% of digital leaders expect their technology budget to increase in 2023, this in the context of 87% expecting the overall economic crisis. The reason is, there is an understanding and acceptance, especially of the already established technologies, not only by IT managers, but also by the boards. There is confidence in the need of technologies to address post-Covid transformations, uncertain futures, and building competitive advantages – growth, customer proximity, cost reduction, process optimization.
Three Leading Technology Trends That Are No Surprise
- Connectivity.
Fixed and mobile broadband, wi-fi and satellite connections are at the heart of the entire digital world and continue to evolve. As an illustration of scale and penetration, a few examples from CCS insight and Forester data: by the end of 2026 more than 25 million people will be using the Internet with a mobile phone directly connected to a satellite; by 2025 at least 25 telecom operators will offer “connected car” services in addition to standard 5G customer plans; by 2028, the “blockchain of you” will allow developers to create digital twins of people that will support personalized services; by 2030, intelligent wireless body monitoring will enable personalized healthcare; by 2024, commercial collaboration tools will add “immersive” spaces that will help replicate the feel of a physical office.
2.Cloud
Precisely because it is not new, Cloud is a top trend. There is already a maturity of the concept and technology, a mass understanding of the essence and concrete meaning and, accordingly, a sense of sustainability of the Cloud. As a result, companies are approving significant investments. The underlying technologies are changing and maturing, but the overall trend is here and will not be off the agenda anytime soon. According to ZDNET, 63% of digital leaders have already invested and continue to invest in large cloud projects, believing that this will bring them competitive advantages in the next 12 months. Here, we are talking specific, measurable results. Previously a cost, technology is increasingly becoming an accelerator. At the same time, many organizations continue to have systems which can take 5-10 years to be transitioned to the cloud. To some extent, this focus reduces the budgets for emerging trends – everyone (boards, employees, customers) needs a period of getting used to the changes before embarking on new adventures.
3.Data and working with it: Big Data; Analyses; Artificial Intelligence; Machine Learning
Cloud provides a new base, investments in artificial intelligence and robotics will make businesses more efficient and allow them to eliminate some of their daily costs. Data volumes grow exponentially, and their extraction and usage become critical to the success of any business – knowing your own organization and customers, quickly analyzing and responding to changes in the environment, predicting the future and rapidly adapting models. According to a survey by ZDENT, only 21% of digital leaders believe that they are using data effectively to achieve better business results, and according to N2, 64% believe that big data and analytics can bring them a competitive advantage. This is where the complexity of the matter and the shortage of experts come in. Despite the huge growth, there is still some retention of investment until technology matures and the necessary skills are built. In other words, the boom is coming, we are still in the growth curve.
Bonus: Sustainability
Ensuring the balance of “profits – people – planet” is high on the agendas of analysts and consultants, as well as the management of companies and governments. There seems to be saturation at individual and organizational level, supported by legislative changes, which provides a long-term trend that also affects technological solutions.
And the special categories
Biggest “hype”: Metaverse
Metaverse experiments are ahead of their time, they are insufficiently merging in the environment and ultimately failing to gain the trust of the mass audience. However, in 2023 everyone will talk about the metaverse, although still without serious budgets all around.
The biggest expectation: Crypto
After the spectacular crypto crash in 2022, we have all stockpiled popcorn and await to see what will be born from the ashes.
The biggest fake news: “Greenwashing”
“Greenwashing” involves making an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly or have a greater positive environmental impact than they actually do. Such claims are becoming a business risk, including in IT.
The biggest risk: Technology as a panacea
Technologies can do a lot for the business, but not if the concept is lacking and people are not engaged.
In conclusion
2023 will be a year of fading waves of rise and fall, a year of journey towards balance and growth. Unless we are surprised again by another black swan.
Sources: Amazon; CCS insight; CIONET; Gartner; Forester; McKinsey; N2 (Nash Squared); WorkplaceIntelligence; ZDNET; BASSCOM; Aricoma Group; Musala Soft
The original article is available in Bulgarian here: https://forbesbulgaria.com/2023/01/10/bulgaria-it-forecast/