In times of economic uncertainty, additional stresses often divide people and organizations. There are those who see uncertainty as a wake-up call to change, adapt and evolve – and there are those who see uncertainty as a time to step back, reduce risks and wait out the storm.
At AWS re:Invent, AWS CEO Adam Celebski touched on this idea in his keynote. He recommended that leaders not cut costs but rather focus on seizing new opportunities in times of uncertainty.
At TechTarget’s Enterprise Strategy Group (ESG), we conduct an annual study looking at technology spending intentions for the coming year. For 2023, the division is already shaping up. Some organizations have become cost-sensitive, while others are looking to adapt and improve to maximize the potential of their budgets. I’m not a financial advisor, but I’m betting that the latter group will likely be a long-term financial and competitive success.
Each year, the percentage of companies that are digitally mature increases, and those that view IT and cloud computing as cost centers are getting smaller. I anticipate that this will be the last year that any organization with a cost center mindset can continue with respect to technology investment.
With that in mind, here are some projections for 2023 that I expect to unfold, due to the need to accelerate digital operations in our current uncertain economic cycle. These are the ways savvy digital leaders will continue the momentum of modernization without adding undue risk.
1. Increased adoption of local platforms as a service
When uncertainty increases, executives often decide to freeze hiring. However, the demands of digital business will continue to increase. While this will likely lead to faster cloud adoption, it will also lead to a strong increase in on-premises infrastructure-as-a-service adoption across platforms such as Dell APEX, HPE GreenLake, Hitachi Storage as a Service, NetApp Keystone, and Pure’s Evergreen //One. . The past few years have seen increased adoption of pay-per-use, local payment models, as well as service options. I expect, given the additional pressure on internal staff, that we’ll start to see increased adoption of both forms of local infrastructure procurement models. An approach focused on deploying on-premises, vendor-managed private cloud infrastructure services has already shown benefits in reducing operational burdens on internal staff. In addition, the most common advantage of these consumption-based purchasing models (such as service options) is the ability to accelerate digital initiatives by shifting costs into future quarters. I would expect the bulk of companies to explore all options for shifting payments into a quarter or two.
2. Cloud cost optimization tools are becoming mandatory
Cloud cost optimization tools like Datadog, Spot by NetApp, Splunk, VMware or Yotascale show significant and immediate returns, with an average monthly cloud saving of 33%, Our search found. These tools are basically a cheat code for the cost-effective use of cloud services. As budgetary pressures mount and cloud adoption increases this year, more organizations will explore options to save money and get more out of their cloud budgets. An interesting wrinkle is that, in some cases, organizations invest in one or more of these tools, but don’t make use mandatory. I expect this situation to change over the next nine to twelve months. These tools will be, and should be, mandatory.
3. Focus on multi-cloud organizational optimization
In a separate research study earlier this year, ESG found that the most common challenge to supporting multiple public cloud providers is getting all the different cloud teams to collaborate effectively. Many organizations still struggle with legacy-centric organizational structures. When budgets are tight, companies look for talent to enable them to meet growth targets with current staffing levels. It’s time to unite teams and focus on improving collaboration.
4. “This is business buying season
There are likely to be many tech acquisitions in the first half of 2023. We’ve already seen Bought Microsoft Azure Fungible. Some interesting startups as well as some well-established players may be available at a relative discount compared to only a few quarters. Also, when vendors seek to scale innovation and expand their portfolio, it is sometimes easier to acquire existing teams and companies than to expand organically.
2023 will be the year that puts an end to most – if not all – outdated thinking in technology. Ineffective processes, technologies, and organizational structures are unwanted holiday pounds that companies are looking to shed as the new year rolls around.
ESG is a division of TechTarget.