Prioritizing Tech Investment
Uncertain. Turbulent. Fragile. These are words that analysts and news outlets have used to describe the global economic outlook in 2023. And of course, it’s been hard to miss the news of sweeping layoffs in the tech industry. Undeniably, there is a sense, among businesses and consumers, of a need to tighten belts, at least for this year.
However, this news distracts from a key trend that’s important for businesses to recognize: despite economic unpredictability, technology spending is holding steady in companies across virtually every sector—and it’s not expected to decline.
Last week, in an article entitled Beyond Silicon Valley, Spending on Technology Is Resilient, the New York Times reported:
“In recent interviews and surveys, the same theme was struck again and again. The economic outlook is uncertain. Contingency plans are in place. Some initiatives are being trimmed back or slowed down. But business investment in technology remains remarkably resilient, and that trend appears likely to continue in 2023.”
In a recent IDC poll, referenced by the Times, 82% of corporate tech managers said they were expecting a recession, yet 62% said that tech spending at their organizations would stay on par with 2022 levels, or increase in 2023.
Other recent polls and studies have made similar findings. According to the Digital Leadership Report, [a survey of 1800 companies by Nash Squared,] global tech spending is expected to grow at the third-fastest rate in 15 years. The Metrigy 2023 Technology Spending Forecast indicates that while 50% of businesses plan to trim overall spending this year (only a quarter will increase it), 50% of polled businesses plan to increase their tech spending by more than 25%. In October, Gartner projected corporate tech budgets will increase to a global total of $4.6 trillion in 2023, a 5.1% increase over 2022.
To understand why tech budgets are rising in the current economic climate—and why investment in digital transformation is a prudent choice for this moment—let’s give the news some context.
First, the layoffs among Silicon Valley giants are complex, and have numerous root causes, but, at least in part, they reflect a retreat from the pandemic-era hiring frenzy that was driven by the need to manage a lightning-speed transition to a new landscape of work and consumer activity. And, says Business Insider, even after recent cuts, “big tech firms still have headcounts that are well above their pre-pandemic levels, reflecting a trend that started well before the pandemic turbocharged their hiring.” As such, these cutbacks are not indicative of a decline in the value of—or demand for—crucial business technology and modernization tools.
Next, in terms of the relationship between technology and the current economic outlook at companies more generally, it’s important to recognize some significant distinctions from the previous economic downturns of this century, including 2001, following the notorious burst of the dot-com bubble, and the financial crisis of 2007-9.
Simply put, today, technology is much more central to the routine operations and big goals of mainstream companies than it was during the last two recessions.
“Business spending on software, including software developed by companies for their own use, more than doubled over the last decade,” the Times said, based on analysis from the Technology & Policy Research Institute at the Boston University School of Law.
What technology does—and what it means for corporations—has evolved dramatically. Whereas even a decade ago, technology was largely back office support (a “utility,” as the Times called it), today it is a key driver of revenue, the structure and support of the way we work, the cornerstone of customer experience and satisfaction, our main mode of measuring success and learning what we can do better, and the way we keep our most vital resource—data— secure.
The reality is, we’re not going backward from here. Whatever fluctuations are on the economic horizon, the trajectory of technological advancement—and its absolute indispensability to growth and profitability for businesses—is quite steadily forward and upward.
A precarious economic forecast only magnifies this need.
Near the end of last year, Gartner published its “Top 10 Strategic Technology Trends for 2023.” According to Frances Karamouzis, Distinguished VP Analyst, “To enhance their organization’s financial position during times of economic turbulence, CIOs and IT executives must look beyond cost savings to new forms of operational excellence while continuing to accelerate digital transformation.”
Key technological investments—from comprehensive digital transformation initiatives to cloud computing, advanced data analytics tools, artificial intelligence, automation, and custom software—can help your organization:
- Streamline processes
- Increase efficiency
- Become more agile and flexible
- Cut costs
- Improve security and compliance
- Boost employee satisfaction and retain talent
- Deliver superior customer experience
In other words, strategic technology spending can help your company cope with economic uncertainty and gain a crucial competitive advantage in this challenging business environment.
At Lukasa, our veteran business and technology experts take a partnership approach with every client, working side-by-side with your team to gain a comprehensive understanding of your organization’s goals, needs, and pain points. We specialize in process analysis and helping enterprise leaders zero in on the most powerful and cost-effective modernization tools to keep their company growing and thriving in today’s economy—with a focus on the future.
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Lukasa is a business and technology modernization firm focused on process analysis and improvement, system and data unification, cloud migration, tailor-made software and implementation—maximizing efficiency and growth.