In times of economic uncertainty, extra pressures often divide people and organizations. There are those who view the uncertainty as a wake-up call to change, adapt and evolve -- and there are those who see uncertainty as a time to pull back, reduce risk and wait out the storm.
At AWS re:Invent, AWS CEO Adam Selipsky touched on this idea in his keynote. He recommended that leaders not cut back but rather focus on seizing new opportunities in times of uncertainty.
At TechTarget's Enterprise Strategy Group (ESG), we conduct an annual study that investigates technology spending intentions for the coming year. For 2023, the division is already forming. Some organizations are becoming hypersensitive to cost, while others are looking to adapt and optimize to maximize the potential of their budgets. I am not a financial advisor, but I would bet the latter group will be most likely to achieve long-term financial and competitive success.
Every year, the percentage of digitally mature firms increases, and those that view IT and cloud as cost centers diminishes. I expect this to be the last year an organization can survive with a cost-center mindset regarding technology investment.
With that in mind, here are a few predictions for 2023 that I expect will unfold, due to the need to accelerate digital operations in our current uncertain economic cycle. These are the ways smart digital leaders will continue their modernization momentum without adding undue risk.
1. Increased adoption of on-premises, as-a-service platforms
When uncertainty increases, executives often decide to freeze hiring. Digital business demands will, however, continue to mount. While this will likely fuel even faster cloud adoption, it will also cause a strong uptick in on-premises infrastructure as-a-service adoption via 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 increasing adoption of pay-per-use, on-premises payment models, as well as as-a-service options. I expect, given the added pressure on internal personnel, that we will start to see increased adoption of both forms of on-premises infrastructure procurement models. An approach centered on deploying private cloud infrastructure services on premises, managed by the vendor, has already shown benefits in reducing operational burdens on internal staff. In addition, the most commonly identified benefit of these consumption-based procurement models (such as as-a-service options) is the ability to accelerate digital initiatives by shifting costs out to future quarters. I expect the bulk of firms to explore all options for shifting payments out a quarter or two.
2. Cloud cost optimization tools become mandatory
Cloud cost optimization tools such as Datadog, Spot by NetApp, Splunk, VMware or Yotascale show large and immediate returns, with average per-month cloud savings of 33%, our research found. These tools are essentially a cheat code for cost-effective usage of cloud services. As budget pressures mount and cloud adoption ramps up 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 they don't make usage mandatory. I expect that situation to change over the next nine to 12 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 of supporting multiple public cloud providers is getting all the various cloud teams to collaborate effectively. Too many organizations still struggle with legacy-centric organizational structures. When budgets get tight, businesses look for efficiencies to enable them to attain their growth objectives with existing staffing levels. It's time to consolidate teams and focus on improving collaboration.
4. 'Tis the season for buying businesses
There will likely be multiple tech acquisitions in the first half of 2023. We have already seen Microsoft Azure buy Fungible. Some interesting startups as well as some established players might be available at a relative discount compared with just a few quarters ago. Also, when vendors seek to scale innovation and expand their portfolio, sometimes it's easier to acquire established teams and firms than it is to scale organically.
2023 will be the year that puts an end to most -- if not all -- of the legacy thinking in tech. Inefficient processes, technologies and organizational structures are the unwanted holiday pounds that businesses will be looking to shed as the new year goes on.
ESG is a division of TechTarget.