Industry executives and experts share their predictions for 2023. Read them in this 15th annual VMblog.com series exclusive.
Customers, not talent, become the new battleground
By Chris Barbin, CEO, Tercera
If cloud leaders thought 2022 was a tough year, they may want to buckle up for 2023. This year is going to test executives and managers in new ways.
Customers will be harder to come by (and more demanding) as businesses reign in spending amidst an uncertain economic environment. Cloud vendors will ask more of their services partners as they too struggle for growth and profitability.
Employee engagement and mental health will be a bigger issue as companies “rightsize” their teams and ask more from their top talent. Many more companies will turn to in-office mandates in the name of productivity and collaboration, but only those that do it thoughtfully will see the results.
Capital will be harder and more expensive to come by, putting pressure on IT services companies to conserve cash and increase margins.
Here are 5 more trends that we believe IT services firms should pay close attention to in 2023 as they look to prioritize and recalibrate for durable growth.
1. Customers, not talent, become the battleground
In 2022, finding and retaining talent was a company’s biggest barrier to growth. With more than 150,000 tech workers laid off in 2022 and talent a little easier to come by, the battleground will shift to finding, retaining and expanding customers.
With so much economic uncertainty, businesses are becoming more discerning when it comes to new investments. Sales cycles are slowing, buying committees are getting harder to get through, and companies are looking to get more from their existing systems. And more value from their partners and vendors.
This could prove both an opportunity and challenge for IT services firms. Those that can demonstrate measurable ROI in the near term and work within buyers’ new realities will have an advantage. Those that aren’t agile and continue to focus only on expensive, large scale transformations will have a harder time.
2. IP and automation move from marketing to mandatory
Services IP becomes a must-have rather than a nice-to-have as cash-strapped customers and time-strapped consultants look to deliver results more efficiently.
Firms will put more emphasis on the bottom of the IP maturity pyramid. Playbooks, accelerators and tooling that support a leaner workforce and improve project margins will bring about better ROI in the near term than stand-alone products that require significant investment.
Firms will also shift spending from new headcount to systems and processes that will help the organization run more efficiently, predictably and profitably. For some, that’s investing in a better Professional Services Automation (PSA) platform. For others, it’s better financial or demand gen systems. Those that invest here will be in a better position to grow as the headwinds return.
3. Industry Clouds take off with a focus on healthcare and manufacturing
Industry Clouds continue to be a growth pillar for the ISVs in our Tercera 30, with verticals like healthcare and manufacturing moving up the priority list.
Mature vendors like Oracle and SAP already have strong footholds in these industries, and many of the Tercera 30 Market Anchors, Movers and Challengers are now extending their capabilities and partnerships here.
Customers in these industries have been slower to adopt the cloud, but now see it as a way to tackle tough supply chain challenges and lower healthcare costs. But they want to do more than lift and shift existing data and processes into the cloud. This presents a huge opportunity for service providers.
4. Analytics and AI move out of their silos
Macro-economic headwinds and the increasing use of cloud data platforms will push every function within a company to use data and AI as a way to optimize spend and grow faster.
Software will become more intelligent as vendors embed more Machine Learning and higher order AI capabilities into their applications. Expect deeper collaboration between SaaS vendors and cloud platform vendors like Snowflake and Databricks to bring data sharing capabilities into the mainstream.
Employees in every function, from software developers to marketers, will start to explore how AI technologies like ChatGPT can make them more efficient (and get a little scared along the way).
5. Retention and mental health finally get the attention they deserve
A combination of layoffs, leaner teams, higher utilization and stressed out managers is going to translate into burnout that has longer term implications for both businesses and the people within them.
Wellness and mental health, already growing in importance, will become an even bigger topic in 2023. Firms shouldn’t be tempted to cut back on mental health benefits as a way to cut costs, as their teams will need them more than ever.
Those companies that have processes and tools in place to keep a pulse on how employees are faring, those bold enough to recommend therapists vs. coaches and those who provide training for managers on how to spot and handle mental health issues, will be a destination for employees once markets stabilize and growth comes roaring back. Because it will…eventually.
In 2023, leaders are going to have to recalibrate and shift where they are spending their time and increasingly scarce resources, balancing the dials between customers, team and financials.
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ABOUT THE AUTHOR
Chris Barbin is the founder and CEO of Tercera and, like many entrepreneurs, a “work hard, play hard” kind of person. Chris brings more than 25 years of technology and professional services experience, and is a proven entrepreneur, CEO, senior executive and board member. His most notable entrepreneurial journey was founding Appirio, one of the first professional services companies hyper-focused on the first wave of enterprise cloud computing. He and the founding team grew Appirio to more than 1500 employees around the world, were World Economic Forum Tech Pioneers and eventually sold to Wipro for $500M+. Chris is also the founder of SipTequila.com, on the Board of Trustees at Bates College, and a contributor on the Forbes Technology Council.
