Can the economic slowdown propel digital innovation?
The economic downturn is starting to hurt the major tech firms but it is going to be interesting to watch how they react. Any changes they make will have a profound impact on how corporate IT operates.
This week Microsoft said it would also be cutting 10,000 jobs. Towards the end of last year, Salesforce announced a 10% reduction in staffing; Meta said it was reducing its workforce by 13% while Amazon said it would be cutting 18,000 jobs.
Will the supply side of the industry’s misfortunes be good fortune for corporate IT? During the pandemic, businesses accelerated digital transformation programmes. But today, the easy jobs, the low-hanging fruit, have all been taken and, hopefully, are delivering positive business outcomes. The next phase is far harder. The skillset required both by CIOs and the IT departments they oversee, is likely to be very different.
Optimists may see these IT industry job cuts as a way to hire IT talent for those hard to fill vacancies CIOs need in order to deliver the next phase of AI and data-driven digital transformation.
On the other hand, looking at Microsoft chief, Satya Nadella’s official statement regarding the job cuts, there is no reason to believe the tech sector will simply stop innovating during these difficult times. On the contrary, Nadella described the economic downturn as “showtime for our industry and for Microsoft.” To succeed, Nadella says Microsoft needs to align with what he describes as “the world’s success.” And for a tech firm, this means investing in the next major wave of computing such as advances in AI, to support businesses and the public sector.
No one can be certain how these things will play out. Gartner’s latest forecast shows that corporate IT spending is set to continue to be invested in software and services.
Gartner distinguished analyst, John-David Lovelock, believes CIOs will find it hard to compete on tech talent with the IT sector.
It is all very well for a business leader to have aspirations to grow the organisations they head up into digital businesses. But many are unlikely to go the whole way, which means digital technology intellectual property will be regarded as less strategically important compared to other business assets. A tech firm’s IP is its digital assets and the people who create these assets. It can hire the very best talent since there is a direct link between these skills and the revenue potential of the company.
If Gartner’s Lovelock is right, IT leaders may well find they need to ramp up their own supplier management skills. Given that a digital skills shortage hinders the ability for a CIO to drive IT-powered innovation, the only option is to look at contracting with external IT service providers. CIOs may well need to partner strategically to fulfil their digitisation ambitions.