Predictions 2023: What’s coming next in enterprise technology
Making predictions about enterprise technology is more challenging if you strive to lay down forecasts that are measurable. In other words, if you make a prediction, you should be able to look back a year later and say with some degree of certainty whether the prediction came true or not — with evidence to back that up.
In this Breaking Analysis, we aim to do just that with predictions about the macro information technology spending environment, cost optimization, security – lots to talk about there – generative AI, cloud and supercloud, blockchain adoption, data platforms (including commentary on Databricks Inc., Snowflake Inc. and other key players), automation and events, and we even have some bonus predictions.
To make all this happen, we welcome back for the third year in a row, Erik Bradley, our colleague from Enterprise Technology Research. As well, you can check out how we did with our 2022 predictions.
1,000+ inbound predictions from PR
Each year, tech vendor PR pros reach out to us to help influence our predictions. It starts as early as October. This year we received thousands of predictions from hundreds of experts in the industry. The chart above shows the breakdown of categories we received. As expected there was a heavy focus on cybersecurity. Cost optimization, cloud, DevOps and software were also popular topics. Digital transformation and software as a service got less attention. Erik Bradley points out that cybersecurity companies have a lot of cash, which may be why PR firms are working harder for them, and that security has been a top spending priority for multiple years. He is surprised that SaaS is only 5% and noted that a decade ago, that category would have received all the attention.
2023 predictions snapshot
Below is a quick look at the predictions we’ll explore in detail.
OK, let’s get into the details of each of the predictions.
No. 1: Tech spending increases ~4%-5% in 2023 but the ‘rubber band economy’ confounds
We’re calling for enterprise tech spending to increase between 4% and 5%. ETR surveys currently land at 4.6%. This year we’ve seen a consistently downward trend for spending expectations by chief information officers and IT buyers, as shown below.
The Fed remains in control and the market’s expectation is that it will ease up on tightening in an attempt for a soft landing. But there are many unknowns. A quarter-point may not be enough to cool inflation, and just as the Fed was late tightening, if it eases too quickly, the rubber banding effect will continue to confound forecasters.
We also note that the largest companies are the most conservative in cutting spend, while smaller firms are spending faster and growing at a much higher rate. As well, firms in Europe, the Middle East and Africa expect to outpace the U.S. and Asia-Pacific. Erik notes that the larger companies are being more cautious and that energy and utilities are spending more than anyone.
Enterprise tech spending expectations by sector
Below are some additional details from the ETR drill-down survey.
January 2023 ETR survey of 1,525 CIOs and IT buyers
Expected growth in 2023 IT spend
No. 2: Cost optimization remains a major theme in ’23 – Consolidating redundant vendors will be the top cost-saving technique
Saving money has been a major theme as we enter 2023. As shown below, the primary method that organizations plan to use for cost optimization is consolidating redundant vendors (36%), followed by cloud cost optimization (19%) and “other” at 15%. “Other” included hiring freezes, layoffs, delaying hardware purchases and ramping up off shore resources.
There was no evidence in the data that firms were looking at cloud repatriation as a favored technique to save money.
Alexander Feiglstorfer from Storyblok sent in a prediction that “All-in-one becomes extinct.” We only partially agree with that prediction. We feel all-in-one solutions will remain the norm for larger companies, while smaller companies will favor best-of-breed solutions.
We’re also seeing consolidation happening in functionality. Erik Bradley points to security as an area where that is clearly happening. As such, he points out that niche solutions will be less popular, while platforms will be more appealing in a spending climate where companies want to reduce the number of vendors they’re managing.
No. 3: Security leads M&A in 2023 – PANW, CSCO, CRWD, MSFT and ZS buy, OneTrust sells
Although the first part of this prediction is probably safe, we’re specifically calling out five companies that will be buyers and one company, OneTrust LLC, that will sell in 2023.
Erik explains the chart above. It’s based on ETR’s survey of emerging technology companies in the cybersecurity industry. ETR looked at the overlap between Palo Alto Networks Inc. accounts and various security vendors shown above, and have found that OneTrust and BeyondTrust Corp. have a high overlap in their overall net sentiment. We predict that Palo Alto Networks will make acquisitions in the near future, specifically in the authentication and identity space, as they need to move toward a zero-trust path. We also predict that other companies such as Cisco Systems Inc., CrowdStrike Holdings Inc., and Zscaler Inc. will also make acquisitions in this market in 2023.
In our view, the market conditions, with private company valuations down 10% to 40%, and funding drying up, make acquisitions more attractive for these companies, and there will be a lot of movement leading up to the RSA Conference in April. We would also expect mergers and acquisitions action for cybersecurity firms with a specialty in machine learning and artificial intelligence.
No. 4: Zero trust moves from hype to reality in 2023 – CISOs provide the proof, not vendor marketing
Chief information security officers tell us that zero trust, which was considered a major buzzword prior to the pandemic, has now become a priority focus for their organizations. A year from now, we’ll survey CISOs to quantify zero-trust adoption as evidence of whether this prediction came true.
We believe that CISOs are prioritizing zero trust because it has the best return on investment and enables business transformation projects to move forward. Once a zero-trust model is established and embedded into the operating model, organizations can go to market without the typical long delays to validate the security architecture.
Boards of directors in our view are beginning to understand zero trust and it is being redefined as a move away from hardware security toward software-defined security with authentication as its base. Hybrid work has been a key drive and is here to stay as zero trust aligns with a hybrid work environment.
As well, tying back to our previous prediction, we see companies such as Palo Alto and Zscaler making acquisitions to improve their software-defined authentication capabilities.
No. 5: Generative AI hits where metaverse missed
According to John Furrier, ChatGPT is a Netscape moment — meaning the first time we all saw the Navigator web browser, we realized a new era was upon us. From an enterprise perspective, according to Erik, natural language processing will take out data prep tools and broadly infiltrate enterprise technology.
The popularity of OpenAI LLC’s ChatGPT has been astounding and the following data from ETR underscore the mindshare it’s grabbing. ETR, for the first time, added OpenAI to its emerging technology vendor survey. The survey has been in the field for only a short time but already received 600 responses. OpenAI has shot to the lead, surpassing even Databricks with a 52% positive sentiment score.
Investors are excited about creating something competitive to ChatGPT and, according to AI expert Howie Xu, around $100 million investment will allow companies to create something similar.
AI is recession-proof — Scott Stephenson, Deepgram
ChatGPT is deep fakes for words… super useful for people who can’t write and increases productivity for those who can…. — David Moschella, author
Finally, Scott Stephenson of Deepgram Inc. sent us a prediction saying “AI is recession proof.” Erik commented that he likes that quote better than the comments from Yann LeCun, Meta’s AI czar who recently slammed ChatGPT. Erik stated that LeCun’s statements come across as sour grapes for a company that has spent an “insane amount of money” on the metaverse, which has been a dud, while Microsoft Corp.’s investments in OpenAI are, in his opinion, much more sound.
No. 6: The cloud expands to supercloud as edge computing accelerates; Cloudflare benefits in 2023
Since we began a community effort to define supercloud, the concept of a common experience across clouds, on-premises and to the edge has gained momentum. Technologists and customers alike see this trend and Cloudflare Inc. in particular is leaning into the concept and even using the name.
Below are some comments from the community and ETR’s Insight roundtables that prompted our next prediction.
In 2023, highly distributed IT environments will become more the norm as organizations increasingly deploy hybrid cloud, multicloud and edge settings. – Atif Kahn, CTO, Alkira Inc.
If my sources from edge computing are coming from the cloud, that means I have my workloads running in the cloud. There is no one better than Cloudflare. – senior director of IT architecture in financial services
Cloudflare’s market share continues to climb – to near 20% Pervasion in ETR’s most recent survey – and they are a leader in WAF, DDOS protection and bot detection… in addition their core edge networking functionality. – ETR survey analysis
We predict 2023 will see the expansion of cloud to the edge and supercloud (i.e. consistency across clouds continuing to evolve). Cloudflare in our view will be a major beneficiary of this trend. According to Erik, Cloudflare has overtaken Google LLC in terms of momentum in the market and is expected to be a big winner in 2023 as organizations increasingly deploy hybrid cloud, multicloud and edge settings.
Cloudflare is considered the best fit for the definition of supercloud as it brings all aspects together and is cloud-agnostic. It is already highly pervasive in networking and security and is considered the No. 1 leader in SaaS, web access firewall or WAF, distributed denial-of-service or DDoS, and bot protection.
It’s also taking share from competitors such as Akamai Technologies Inc. and is the only game in town right now. One possible area of weakness, according to one practitioner, is that Akamai has a stronger on-premises story. We like Cloudflare’s positioning of expanding the cloud to supercloud versus focusing on-premises.
No. 7: Blockchain’s struggles to find a home in the enterprise continue, but devs will adopt it in 2023. Solidity and other open-source blockchain tools win.
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