The State of the Tech Industry in 2023
In the month of November 2022, layoffs, hiring freezes, and restructuring have been in the headlines as tech industry titans such as Twitter, Meta, Salesforce, and Microsoft have made significant cutbacks. Companies have tightened their belts, letting go of employees in unprecedented numbers as they brace for a potential recession. The tech industry has lost $7.4 trillion over the last year following rapid hiring during the pandemic.
With 2022 coming to a close, what do these changes mean for the new year as tech companies continue to navigate the growing pains of the hiring surge and the economic downturn? Keep reading as we break down our outlook for the tech industry in 2023.
The Job Market
Data shows that top tech companies have laid off nearly 25,000 employees over the past few weeks. Despite the mass layoffs, experts believe the current market still favors tech professionals. Highly skilled professionals will have the upper hand, and hiring companies will need to meet their terms to draw them in. Additionally, within the information security sector, jobs are expected to maintain stable growth and increase by 35 percent over the next decade –– a much faster increase than any other industry.
Frederic Girion, Vice President of Forrester, predicts that companies will have to be more strategic in creating talent pools. This includes turning to freelancers, vocational schools, and even automating processes.
In our opinion, we expect companies will still feel the impacts of attrition and high employee turnover from 2022. This could be especially true for those who are still struggling or intending to make a meaningful reduction to their workforce. In the long term, strategic acquisition risks could influence growth companies who fail to properly manage employee communications during layoffs or overreact to market conditions.
New Year, New Tech Upgrades
Speaking of automation, IT modernization will continue to be a key focus for tech companies in 2023. Although spending cutbacks are high on many organizations' lists, large enterprises will continue to focus on their digital transformation initiatives. Spending on new technologies is predicted to hit $1.3 trillion in 2023. Additionally, 51 percent of companies expect to increase technology spend by an average of 21 percent through upgrading their hardware, software, and cloud and managed services to keep pace with the remote-work environment and competing demands.
Solutions such as cloud computing, IoT (Internet of Things), AI, and machine learning will support their internal infrastructure needs and business opportunities.
Changes for Growth Companies
In the new year, we anticipate that growth companies will still feel the need to bring profitability and break-even operating plans to the forefront of their strategies –– potentially leading to slow hiring or workforce reduction. For example, in 2021, many companies raised capital at inflation valuations. But now, as reality hits and they struggle to grow into those valuations and fail to or can’t raise additional capital, they’re likely to conduct layoffs in 2023 to cut expenses.
Tech Companies and Their Comfort Zones
At the onset of the pandemic, companies focused on the "business as usual" mindset. From office and business closures, the shift to remote work, and a scarcity of goods, they tried to ensure business continuity in the wake of the unexpected. However, now it may take more than usual to keep up. It may be necessary for tech companies to step out of their comfort zones to satisfy the evolving needs and demands of customers.
Regardless of the industry, companies and their various departments seek better solutions to support and enhance their operations. Whether the goal is to improve security, streamline business processes, or upgrade their technology to remain competitive, tech providers must identify new ways to appeal to potential customers and their specific needs.
The Changing Workforce Dynamic
2022 has been filled with talk of the Great Resignation, quiet quitting, and remote and hybrid work. Yet, the current workforce dynamic is nothing like it was three years ago. The current workforce feels more empowered by their abundance of job options, work environment flexibility, and more. They’ve brought new values and expectations to the table that have significantly impacted company cultures.
Recent studies show that 58 percent of the workforce has the opportunity to work from home at least once a week. Additionally, 38 percent have the option of a telecommuting work model. Along with this shift to remote work, there has come a need for greater cybersecurity measures to protect sensitive company information. Furthermore, the need to ensure that employee output remains up has led to an increase in the adoption of employee-tracking software, which ties back to the previously mentioned increased investment in technology. Some organizations are now having to ensure that employees are doing their jobs and taking breaks, but without infringing on their privacy rights.
Collaborating will also be top of mind going into the new year. In remote and hybrid settings, teams must find ways to collaborate with their coworkers. Whether they're relying on Google Meet, Slack, or Zoom, technology plays a significant part in maintaining a collaborative work environment.
Lastly, flexibility is a major component of the current and future work dynamic. Countries such as Sweden, Belgium, and England have recently implemented trial periods for four-day workweeks. In 2023, we could see the same happening in the U.S. as companies aim to attract and retain employees by improving incentives and benefits.
The Return to the Office
Despite many workers demanding flexibility in their working arrangements and a good work-life balance, a recession could lead to remote workers having to return to the office. While the current economy and labor shortages have given workers the upper hand in deciding how and where they work, a recession could put them in a less favorable position.
The Road Ahead
With rapid growth on the horizon for the tech industry, it will be interesting to see how things shape up amid the impending economic conditions and changes in the job market. Despite the recent layoffs and restructuring, specific roles and skills — particularly IT-related — will remain in high demand. As organizations prioritize cloud operations and cybersecurity solutions, the need for server administration, networking, and storage roles will rise.
As a result, we can expect countless opportunities opening up within the tech field for both business growth and careers. For tech-job seekers, now is the time to start planning their approach by focusing on strategic and technical skill development to give them a competitive advantage. For businesses, now is the time to assess operational and technological needs and budgets to ensure they can adapt to the changes within the tech industry.
When it comes to your recruiting needs, eHire is here to find top talent to fill your open roles. Our expert team is ready to connect you with the best talent and the information you need to enhance your hiring process. Contact us today to learn how we can get your 2023 off to the right start.