Written by Mark Benson, CTO, Logicalis UK&I
Sharp economic crash. Endless interest rate hikes. High inflation. All of this has led to market conditions that favour spending cutbacks and workforce reductions—all business leaders are pondering this thought as they plan for the year ahead. 2023 will probably be a sobering year for business leaders, and trying to look ahead during a storm is tricky. While the turn of the year presents an opportunity to take a fresh look at business strategy and streamline business pillars, it’s hard to distinguish trends from hype. This is especially true for the tech space.
Despite the looming recession, Gartner has forecast worldwide IT spending to grow 5.1% in 2023. Recessions give businesses a lot of opportunities, with some specific industries doing very well and others falling to the side – retail and the financial services sector are always the first ones to catch a cold, recovering once people start spending again. But retail will have to look at digitisation—we’ve seen throughout the pandemic how bricks and mortar alone won’t work anymore. Even though we know there’s going to be a recession and businesses will try to spend less, there will be a projected increase in tech budgets. Organisations cannot afford to sit on their hands any longer.
Cloudy with a strong chance of meeting targets.
As we go into the next year, we will continue to see greater adoption of cloud services. Gartner forecasts that public cloud services spending in Europe, the Middle East and Africa will grow from $111 billion in 2022 to $131 billion in 2023, an increase of 18.2% year over year. Business models should mature in the coming year as SMBs continue to rely on the cloud to drive efficiencies, boost productivity and increase innovation. The bottom line is the cloud market is very healthy.
However, businesses must understand which workloads operate most efficiently in different cloud environments. Companies want choice, and with this comes a further drive for collaboration between the big providers. The key differentiator between 2023 and 2022 will be custom solutions rather than one-size-fits-all offerings from individual providers, which will increasingly become the norm. A business will seek to understand its specific cloud needs better and tailor their strategy to fit those needs.
The market response to Oracle’s partnership announcement with Microsoft was incredibly positive. We’ll also see the development of additional industry cloud propositions—like IBM financial cloud. Organisations want to consume technology relevant to their industry, not just a broad-brush approach. Businesses desire intelligent knowledge pertinent to them.
The FinOps effect
The pandemic created the perfect storm for technology and digital transformation, leading to the proliferation of “as a Service” capabilities and features that have made cloud convenient and expensive when not carefully managed. FinOps, a data-driven approach to cloud cost management, incorporates strategies and technologies that enable companies to track and optimise spend in complex hybrid multi-cloud ecosystems—and with hyper-scalers competing for market share, they’re offering customers a growing menu of features.
Looking at feedback from analysts like IDC, FinOps is going to play a clear role for many organisations in 2023. IDC projects that around 40% of European organisations will look to develop a FinOps practice to increase spending transparency. Moreover, FinOps will be used to control Cloud costs, aiming to free up around 15% of business spending. Cloud costs have become a significant concern for many organisations, especially throughout the economic downturn, and FinOps will help ease these concerns. Companies will be looking at ways to recession-proof themselves, and FinOps can help with this.
The increased agility that comes with FinOps means that organisations can often better respond to market changes and opportunities. As a result, those who adopt a FinOps mindset can keep pace with the competition and even outpace them in certain areas. If you’re not already practising FinOps in your organisation, today’s uncertain economy highlights that now is the time to consider starting. The potential benefits are too great to ignore, and the longer you wait, the more difficult it will be to catch up to your competition.
2023 closing thoughts
2023 will be the year that ends the one-size-fits-all approach to tech – and business leaders will finally begin to understand what they specifically need from their continued digital transformation. Inefficient processes, technologies and organisational structures will be the unwanted weight businesses will be looking to shed as they plan for the year ahead.