Tech in 2023: hell, it can’t be worse than this year

TECH, technology by Peter Griffin

As I outlined a couple of weeks back in Tech in 2022: The year the worm turned on big Tech, it has been a bit of a grim year for the tech sector. 

Trillions of dollars of value have been erased from the publicly listed tech giants. The rot at the centre of the crypto industry was dramatically exposed, and chaos reigned at Twitter – the most beloved (if not profitable) of the social media platforms – as Elon Musk implemented his warped concept of free speech.

There were barely any highlights, just waves of redundancies and budget cuts as an industry that overexpanded and overhyped numerous technologies prepared to knuckle down for hard times ahead. 

The news that Amazon is likely to lose US$10 billion (NZ$15.8b) in its Alexa voice assistance division this year really said it all. 

Here’s a company that has spent nearly a decade attempting to put its Echo speakers in every home across the planet and now has very little to show for it because all we want to use them for is to ask Alexa for the weather forecast.

Given the state of things, my own meta-analysis of tech predictions for 2023 (see links to the best of them below), reveals a surprisingly bullish outlook for tech next year. 

Most analyst firms expect global IT spending to increase by 5-10% next year and the new discipline forced by economic headwinds means it is likely to be more discerning and impactful spending. 

The sense I get from all of these 2023 predictions is that we will also start to see meaningful adoption of technologies that have hogged headlines but too often delivered little of tangible benefit – 5G, artificial intelligence, robotics and clean technology among them.

Here are five predictions of my own for the year ahead and what it will mean for tech, through a decidedly New Zealand lens.

The clamour for the cloud

AWS, Google Cloud and Microsoft are all busy building their NZ cloud regions, the first time that the three big “hyperscalers” will have dedicated data centres in the Auckland region, removing the necessity to send our applications and data to facilities offshore. 

While all three are unlikely to go into commercial operation before 2024, expect the public cloud providers to ramp up their business development efforts as they seek to recoup the billions in investment these facilities represent. 

AWS, for instance, claims it will spend $7.5b here over the next 15 years on its local cloud investments, creating 1,000 new jobs and generating $10.8b in economic impact in the process. 

The relatively late arrival of the big three in the infrastructure game here speaks to our low and slow adoption of cloud services to date. But the cloud providers clearly see that as an opportunity. 

They will spend 2023 ramping up their marketing efforts, talking up the virtues of local data residency and sovereignty and low-latency connections, and hustling to secure customers. Education is required to help NZ businesses make the most of cloud platforms and AI and machine learning tools and the fact the public cloud players are investing serious cash here will help lift capability across the board.

A pivotal year for Meta

“I got this wrong, and I take responsibility for that,” was Mark Zuckerberg’s frank admission last month on the expansion and lavish spending on his metaverse project, which ultimately resulted in Meta having to shed 11,000 employees to stem losses.

But Zuckerberg is doubling down on his vision for the metaverse, which will make 2023 a pivotal year for the social media company and the global adoption of the metaverse in general. He can’t win with his current strategy, which is deeply flawed in a technical sense and just entrenches rather than overcomes the ethical problems with Facebook’s business model. 

But Zuckerberg isn’t stupid. He won’t step down as CEO. 

He won’t sell off the loss-making virtual reality hardware division he has sunk billions into. 

But a large pivot will likely see him take a much more collaborative approach to develop the metaverse, with him seeking to join a cluster of companies supporting open protocols and digital identity standards. 

The metaverse in 2023 is likely to take off more in the world of industry, with specific user groups using it to collaborate for work. Only significant improvements in hardware, software and user interface design will lure consumers to the metaverse and Meta clearly can’t deliver this on its own.

Climate tech will be the new crypto

The crypto winter will last most of 2023, with regulators figuring out how to put the controls in place that might prevent another FTX-style collapse. 

Web3 projects will struggle and coin prices will fail to recover much of the losses of 2022. 

But a hot new category, with its fair share of hot air will suck up a disproportionate amount of funding and attention. 

Venture capital firms and major corporations committed this year to ramp up investment in this space. While we sorely need innovation in climate technology to literally save the planet from burning, it’s a high-risk sector with a lot of largely untested mitigation and adaptation technologies, such as direct air capture and green hydrogen suddenly getting attention. 

As Abe Yokell, co-founder of investment firm Congruent Ventures told Forbes: “Climate tech investing will emerge as a relatively predictable safe haven for entrepreneurs, tech refugees, and investors. 

“The inevitable impacts of climate change, alongside the recently passed Inflation Reduction Act, will create the conditions/precedent for a long bull run across the climate tech landscape.”

Our own climate tech efforts are small and thinly funded and will need a focused effort supported by government initiatives to make any significant progress in 2023.

A cyber disaster will wake us up

We’ve so far managed to avoid an Optus-scale cybersecurity incident, though last year’s Waikato district health board revealed how vulnerable our critical infrastructure is to a crippling cyber attack.

We continue to underinvest in state-level cybersecurity capability compared to other countries, such as Australia, which has made it a national priority. With a complacent government and weak penalties for those responsible for data breaches, we will become a test bed for cyber attacks in 2023. 

I’ll be surprised if we don’t have at least one disruptive event that takes out a key government service for an extended period or one of our biggest companies, sparking a national conversation about our own future as a cyber-secure nation. 

Capex aversion is a boon for our SaaS players

With the exception of major players Datacom and Fisher & Paykel Healthcare, the bulk of our tech sector is made up of business-to-business software as a service (SaaS) providers, with Xero being the most successful among them.

Recession will prove to be a big opportunity for these players as businesses everywhere seek to curtail capital expenditure. Instead, they will adopt service-based models, spending at a lower and more predictable level. 

In the area of business productivity and cloud services, SaaS will be in hot demand. 

Indeed, the SaaS market is anticipated to continue a solid run of double-digital annual growth out until at least 2028. But the low barriers to entry to the SaaS market are also seeing competition intensifying. 

As a result, many SaaS players will deploy new pricing models in 2023, including consumption-based pricing and more granular subscription tiers to deliver better value for money and encourage loyalty.

Consumer SaaS is a different story. With households cutting their spending next year, entertainment, gaming and online services like data storage and photo-editing software will come under pressure. 

It’s the time to help businesses do more with less and our SaaS industry has a great track record of doing just that.

Futurism found-up: All of your 2023 tech predictions in one place

Analyst groups

Tech Companies 

Consulting firms

Originally published on BusinessDesk.co.nz.

Photo credit: Alexander Shatov, Unsplash