Much of the tech boom over the past few years has been attributed to low interest rates and high connectivity demand to support remote work, study and play during the Covid-19 pandemic. In a low-yield world, investors hungry for a return on investment have eagerly funded the most speculative ideas of technology, from cryptocurrencies and irreplaceable tokens to to the metaverse.
As employees return to work, the reversal of some pandemic trends, combined with inflation and growing concern that the global economy could head into recession, has hit earnings. quarterly earnings for many companies and prompts many to prepare for darker days. The parent company of Facebook Meta Platforms Inc. is shedding more than 11,000 jobs after the company lost a quarter of its value in a single day in October following a weak earnings report. Advertising tool aimed at consumers at
Alphabet Group
Google is slowing down. Meanwhile, Amazon.com Inc. is cutting up to 10,000 jobs. Trip sharing company
Lyft Inc.
and payment processor Stripe Inc. are also cutting jobs. Cryptocurrency exchange FTX goes bankrupt.
The market for cloud computing, business software, artificial intelligence and other so-called enterprise technologies has been a relative bright spot. For example, demand for cloud computing has decreased slightly but is still growing strongly at a rate of 30%.
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According to the research firm, the forecast for IT spending to grow 5% to $4.6 trillion next year will hold unless the wheels really leave the economy.
Gartner Inc.
“The [tech earnings] Gartner analyst John-David Lovelock, who expects infrastructure as a service, a cloud-related service, to grow about 32% this year. Gartner expects growth to slow to about 30% next year, with a 5-year compound annual growth rate of around 27%.
However, the demand for enterprise technology is sensitive to the economy and has been changing. “In uncertain economic times, companies are looking for ways that technology can drive growth and create more economic value faster,” Juan Perez saysinformation director at
Sales force Inc.
While the business case for adopting cloud computing and automation is fundamentally sound, the case is not strong for other areas of technology. Sunil Kanchi, chief information officer and chief investment officer of UST, a company based in Aliso Viejo, Calif. assist customers in digital transformation.
An Amazon facility in Appling, Ga. Amazon says it is cutting up to 10,000 jobs.
Image:
Sean Rayford / Getty Images
According to Kanchi, while companies still believe in the importance of investing in such technologies, a slowdown in the economy as a whole can affect their budgets. He hopes customers will continue to invest in areas like automation and code-less or low-code software platforms to reduce the need for programmers.
“The recession has started but hasn’t bottomed out yet and is going to get worse very quickly, probably around,” said Wesley Chan, co-founder of early-stage investor FPV Ventures and former head of technology at Google. the middle of next year”. He predicts a drop in demand for marginal or luxury sectors such as cryptocurrencies, grocery and food delivery services, “new banking” as well as high-end travel and beauty.
Prospects for pharmaceutical and life science discovery, cybersecurity, and companies that help customers solve costly inefficiencies or free up inventory in ways Uber Technology Inc. or Airbnb Inc. also promising, Mr. Chan said. He predicts that “the new Google or Uber of 2023 and 2024 will come out of this recession.”
CIOs and other technology leaders will need to employ different skills as they manage their way in a completely different business environment. Here are a few suggestions.
Pro tips
Prioritize network security. CIO says they’re figuring out which projects are most important to protect in the event of budget cuts and health monitoring of suppliers may be vulnerable during a prolonged economic downturn. An economic downturn may put pressure on IT budgets at some point, but cybersecurity is not the place to save money. “I never go to that hunting ground to save money. If I had a budget challenge, it wouldn’t have come from the net,” he said
Kellogg copper
Global CIO Lesley Salmon.
Focus on efficiency. When budgets are scrutinized, companies tend to focus on short-term solutions that can boost efficiency and productivity, said Salesforce’s Perez. Those solutions can range from simple planning to using automation and artificial intelligence to reduce supply chain bottlenecks that can reduce profits.
Rethink your recruiting strategy. Companies should take this opportunity to rethink the pace of hiring and employ freelancers where it makes sense. Co-founder and CEO Lily Liu said Startup Piñata has stepped up its cost checks. The company, which operates a tenant credit and rewards program, has about 30 employees and plans to hire 15 more this year. Ms. Liu said that due to the economic outlook, recruiting new workers may take longer than planned. In addition, CIOs said they were looking at opportunity to hire valuable workers people who lose their jobs at other companies or renew their technology contracts with more favorable terms.
Look beyond IT. Work with business units and external IT departments to maximize operational efficiency and reduce costs. According to Gartner’s Lovelock, CIOs should think beyond their departments and help the entire company use their resources and expertise to reduce costs and increase efficiency.
Focus on long-term competitiveness. If IT budgets come under pressure during a downturn, help control costs and deploy capital realistically and responsibly when the situation calls for it. However, it is still possible to convince the company’s management that the recession won’t last forever. The company still has to invest in key strategic areas that drive growth and set the company up for success as the economy begins to recover.
Write to Steven Rosenbush at [email protected]
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