Tech sector layoffs, generative AI (GenAI) and digital optimization are the three big trends generating excessive confusion and fear in a macroeconomic climate that has already been befouled by inflation smog and a potential debt default. Let’s walk through each separately, then tie them all together and close with a positive message about emerging technologies and economic growth.
Three Trends Explain the Messy Digital Landscape
Layoffs in Tech: News Noise Obscures the Fact that We’ve Landed Where Expected
In the Q&A portion of a recent TBR webinar, participants asked three principal analysts about implications from the recent rounds of layoffs, in both the tech sector and more broadly across the market, particularly in the U.S.
TBR’s Boz Hristov noted that hiring ramped up considerably during the pandemic and that the recent layoffs, while newsworthy, reflect a net increase in headcount over the last four years. Taking trends from as far back as 2017 and extending them to the first half of this year, you can see the pandemic hiring spike as an aberration and current staffing levels as what could have been expected in late 2019. Not great for the tens of thousands let go by the tech giants, but not a sign of the tech sector’s impending collapse.
Further, current layoffs provide a huge opportunity for enterprises to hire experienced IT staff, taking advantage of their skills and expertise as many enterprises push into the next wave of digital transformation (more on that below). TBR’s Chris Antlitz has noted that telcos have been constantly looking for automation and outsourcing opportunities, quietly restructuring their talent while also seeking more specialized skills.
Those specialized skills should now be more abundant in the market. So, for the short term, tech giants like Meta, Microsoft and even Accenture can fine-tune their margins by reducing overhead and headcount. In the longer term, enterprises might be better staffed with IT talent, forcing tech giants to hone their value propositions.
And inevitably generative AI will be part of every technology player’s value proposition: If generative AI is not top of mind for your business leaders, it should be.
Robots Aren’t Hiring Robots — Yet
Let’s start with Boz’s most disruptive observation (yes, even just an observation can be disruptive): Why does an enterprise need to deploy a robotic process automation (RPA) solution if ChatGPT can write code? Why pay for any of the RPA vendors or their consulting partners if generative AI leapfrogs what RPA tools can do while eliminating the middle steps between identifying what can be automated and going full speed ahead? Within the IT services and consulting space, RPA vendors may provide the best examples of adapting to — or failing to adapt to — emerging realities around generative AI.
From the time you started reading this blog post to now, another company has launched its AI-enabled solution. Hype, greed and fear cloud the marketplace right now. Over the next six months, TBR expects to see quiet markers of clarity and sensibility, relentless marketing, and, eventually, some clear leaders in the early days of generative AI. What’s happened with digital transformation provides a useful road map for where GenAI could be headed.
Tell Me About Optimization, Not Transformation
Digital transformation evolving toward digital optimization has emerged as a persistent theme in TBR’s Voice of the Customer research. Enterprises that undertook digital transformation initiatives pre-pandemic now need iterative — not transformative — change and expect IT services vendors and consultancies to help with optimization, aka cost-cutting and faster return on investment.
IT budgets won’t contract in the latter half of 2023, but the money will be spent keeping the (technology) lights on, securing the enterprise, and making incremental improvements that reduce costs. That isn’t exciting or agile or disruptive, but it’s the reality for most enterprises in the current macroeconomic environment. And for enterprises slow to the digital transformation game, they can now hire experienced tech talent (recently laid off by Meta, Microsoft and others) and use generative AI and automation to accelerate their time to digital transformation value. Like how we pulled all those trends together?
It’s All Good as Long as There’s a Little Chaos and a Lot of High Expectations
Here are the real positive notes: 1) confusion and uncertainty fuel consulting, 2) everyone expects their tech to work and everyone has had at least one suboptimal experience with AI, so 3) growth opportunities will abound for IT services vendors, consultancies, tech vendors and telcos.
To learn more about the impact these trends are having on the digital landscape, watch our recent webinar “How the Latest Trends in IT Services & Telecom Influence the Evolving Digitally Enabled Ecosystem” for free now