Industry executives and experts share their predictions for 2023.  Read them in this 15th annual VMblog.com series exclusive.

How Economic Headwinds May (or May Not) Mess With Your Cloud in 2023

By Adam Stern, founder and CEO of Infinitely Virtual
 
The economy is top-of-mind for everyone these days, and small and medium-size businesses (SMBs) are clearly in that number.  Inflation hit a 40-year high in June, interest rates continue to climb, supply chain issues persist, and the risk of a recession in late 2023 is a flashing caution sign to businesses of all sizes.  
 
Top-of-mind questions as we approach the new year: 

• Is economic volatility about to lay waste to the best laid plans of SMBs?
• Can a thoughtful IT strategy serve as a hedge against inflation?
• Can that same thoughtful IT strategy act as a lifeboat amid the swells of a potential recession? 

Off the cuff, my top-of-mind answers are no, yes and maybe.   
 
IT is supposed to be a force multiplier, one of those areas in which capital investment (eventually) pays for itself.  Right now, however, companies are struggling to recruit and retain workers.  While the job market has started to cool a bit, there are still more than 10 million job openings in the U.S., and with reduced labor-force participation, there aren’t enough candidates to fill those openings. Accordingly, businesses are often understaffed, which looms as a challenge to businesses seeking to attract and retain qualified workers in 2023.
 
No surprise, then, that SMBs are looking for more predictability when it comes to their expenses. When you don’t know how much it’s going to cost to hire your next employee, renew leases, purchase supplies, or borrow money, getting a handle on precisely how much you’re spending on cloud IT solutions and services becomes a financial necessity.
 
From my POV, any business hosting applications in-house has to ask itself why; 2023 may be the year organizations give that practice a serious rethink.  When it comes to supply chains, tech costs are rising, making it difficult to get the gear the business needs.  Inflation is bringing cost increases in areas such as servers and storage.   
 
Here’s a definite silver lining: the current economic climate appears to be accelerating the shift to the cloud, with growth predicted to rise more than 20 percent this year alone.  In addition, Producer Price Index (PPI) data shows a steep year-over-year price increase for host computers and servers — a 21 percent surge over pricing levels in June 2021. The cloud has typically been a source of efficiencies, if not outright savings, given that it sidesteps depreciation cycles by derailing what has come to be known as the “IT rollercoaster.”  
 
As IDC noted in a recent report, “many SMBs do not have a deep well of reserves to sustain their businesses for years during tough economic times.” And in 2023, that fact will make it especially critical, in IDC’s words, “to apply technology smartly and zero in on efficiency, cost savings, productivity and automation—and fast—to weather today’s economic storms.”  
 
“By size, smaller SMBs say supply chain issues are leading to a lack of IT equipment/materials,” IDC said. “This is likely because the smallest SMBs use fewer cloud technologies and rely on more basic and physical IT, such as laptops, mobile devices, printers and servers. When we asked about the technology improvements and enhancements SMBs made in the 12 months leading up to Q1 of 2022 to boost resiliency, the results showed SMBs lag behind their enterprise counterparts.”
 
The work-from-home trend, propelled initially by COVID-19, has settled into a new normal for at least some percentage of the workforce.  In fact, in an ADP survey conducted earlier this year, 64 percent of the global workforce said they have already, or would consider, looking for a new job if their employer required that they return to the office full time.   
 
Given the data, in a still-tight labor market, flexible work options for candidates and employees have taken root.  Eighty seven percent of workers whose employers offered “at least some remote work” have taken advantage of the opportunity, spending an average of three days a week doing their jobs remotely.  According to recent research, 38 percent of companies reported an increase in remote work offerings over the last year “to keep employees happy and to moderate wage-growth pressures.” A similar percentage said they expect 2023 to be much the same.
 
Whether IT proves to be an inflation fighter, a recession buster or simply an efficient way to boost productivity, in 2023 I’m looking for cloud computing to help attract and retain employees by supporting seamless remote or hybrid work models.   
 
With increasingly mature cloud tools and applications addressing issues like security and data protection, I believe SMBs should make running their business their top priority in 2023 – which probably isn’t information technology – and take on the revenue-generating activities that will keep them ahead of any potential economic downturn.

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ABOUT THE AUTHOR

Adam Stern is founder and CEO of Infinitely Virtual (www.infinitelyvirtual.com — @IV_CloudHosting) in Los Angeles.  Stern is an entrepreneur who saw the value of virtualization and cloud computing more than a decade ago. His company helps businesses move from obsolete hardware investments to an IaaS [Infrastructure as a Service] cloud platform, providing them the flexibility and scalability to transition select data operations from in-house to the cloud.