It is no secret that the technology industry, like many others, has faced significant challenges in 2022 due to economic uncertainty. One significant impact of this uncertainty has been a reduction in active hiring, with the tech industry seeing a 30% decrease in hiring activity compared to the first three quarters of 2022. This trend is expected to continue into 2023, particularly in the first half of the year, as companies look for ways to weather the storm and preserve their financial stability.
The US remains the primary location for tech-specific hiring, but even this market has seen a decline, with the number of job listings down 25% in Q3 2022 compared to Q2. This trend is likely to be exacerbated by external factors such as the energy crisis and rising inflation, which put added pressure on companies and make it more difficult for them to sustain their current workforce and invest in new hires.
Tech R&D investment will not be prioritized
In addition to workforce reductions, many tech companies are also facing budget cuts that are impacting their ability to invest in research and development (R&D). This is particularly concerning, as R&D is often the driving force behind technological innovation and progress. One example of this trend is Google‘s decision to significantly cut funding for projects in its Area 120 start-up incubator, canceling 50% of projects. Other Big Tech companies will likely follow suit in 2023, further stifling innovation and progress in the industry.
What can businesses in the tech industry do to weather these challenges and come out on top?
One strategy is to focus on cost-cutting measures that do not compromise the quality or effectiveness of products or services. This might include finding ways to streamline operations, or seeking out more cost-effective suppliers. However, many companies will also be looking to invest in digital transformation to help reduce overheads and, in many cases, help them cope with staff shortages due to budget cuts. GlobalData’s 2023 TMT Predictions report anticipates that digital transformation will be a key theme that winning companies will be investing in during 2023.
Digital transformation will be key
In GlobalData’s ESG Sentiment Polls for Q3 2022, 24% of respondents said that digital transformation would be the most important theme impacting businesses in the next 12 months, more than any other factor. Tech companies that offer products and services around cloud, intelligent automation, and AI will support businesses with their digital transformation and process automation and should, therefore, see strong demand. These technologies will form essential components of businesses’ strategies to reduce costs and automate as many processes as possible. The economic uncertainty and budget cuts facing the tech industry are concerning developments that can be challenging for businesses to navigate. However, with careful planning and a focus on long-term industry themes, companies can weather the storm and emerge stronger on the other side.
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