Tech Leaders: Take 6 Actions To Navigate The 2023 Downturn

In the year ahead, technology leaders must not only manage their budgets for a downturn but also position their organizations for the inevitable market rebound.

Christopher Gilchrist, Principal Analyst, Forrester

March 29, 2023

4 Min Read
Antique golden compass and old map
D. Hurst via Alamy Stock

Technology executives looking at how to use their budgets this year may be confused. The market is generating more noise than actual signals when it comes to the nature of a possible recession ahead. Will the recession be shallow and short? Deep and long? Or will we miss a recession altogether? The anxiousness of business leaders to “get this right” is high given sticky inflation, lingering demand, and a labor market refusing to slow down. And this has tech leaders feeling the brunt of all this pent-up anxiety.

For 2023, Forrester forecasts US tech spend growth to slow to 5.4% this year. While this still will outpace GDP growth, risk aversion is the natural tendency amid uncertainty, and budgets continue to tighten accordingly. It has been well documented that firms that remain steadfast toward the long term during recessionary cycles tend to outpace their competitors when the market rebounds. Those that try to time the market end up over or under correcting, only to play catchup later. So don’t use the recession as an excuse, as that will not help outpace the competition. Instead, focus on keeping your customer as the priority during all economic cycles.

Chart a New Course To Lift Your Organization Past Market Headwinds

Customers are not required to hold fast until you gain traction again. They are concerned with both the experience you offer, and the relationship built upon that experience. Take stock in the budget you have, work back from the customer journeys you support, and orchestrate resources around the core business capabilities. As budget decisions are made, be critical of where you cut spending and be pragmatic in terms of where you invest, not cutting at the expense of future growth and not allocating more than the expected rate of return. The result will be a clear line of sight demonstrating the value of tech and its impact on growth now and in the future.

To stay ahead of their competition and stay with their customers through these uncertain times, tech leaders can take six recommended actions:

  1. Build bench strength as competitors slash staff too deep. Tech leaders should prioritize skills over roles and build a new talent model with two commitments: First, focus on current skills that deliver business outcomes to build the organization in a smarter, more adaptive fashion, and second, invest in emerging skills with differentiating technologies such as automation fabrics, AI/ML, security, cloud-native infrastructure, and software development.

  2. Prioritize short-term investments with clear customer experience (CX) and employee experience (EX) outcomes. Tech leaders should leverage experience into a mutual, reinforcing driver of outcomes and growth. The pandemic exposed the growing importance of great CX and EX. Now, tech leaders must understand the critical technology touchpoints along customer and employee journeys and make commitments that realize growth efficiently and effectively. This means placing productivity gains at the center of why tech investments are made.

  3. Rationalize and invest in a strong cloud strategy. While cloud spend spiked during the pandemic, the resulting chaos and overspending created an unsustainable sprawl. It’s time for tech leaders to declutter and move toward the cloud in one motion. They should use cloud cost management and optimization solutions to find unmanaged resources, shut down redundant assets, remove unnecessary access, and refine billing.

  4. Shift from innovation to resilience that will provide long-run market advantage. Tech leaders must be pragmatic with innovation, enabling quicker changes to intended business behavior. Innovation is the lifeblood of their growth and differentiation. As such, plan to prioritize innovation spend to deliver greater resilience that delivers more than risk mitigation -- it provides competitive advantage for all stakeholders.

  5. Optimize your service provider estate, and capture pricing opportunities. Tech leaders should move toward the optimal lineup in 2023, better positioning themselves for the rebound by augmenting major providers with a few dozen specialists and boutiques as needed. This means inventorying current providers, prioritizing co-innovation partners, and beginning the tough internal negotiation on which providers to keep.

  6. Position tech leadership at the highest levels of the organization. Tech leaders must show how each decision directly impacts top and bottom lines, reinforcing sales and operating margins and putting their company in a position to be stronger beyond 2023. They should also leverage governance practices to thoughtfully challenge the intent of funding, policy, risk management, and performance decisions so that each choice aligns with the strategic business objectives across the organization.

This is not the time for tech executives to batten down the hatches waiting for more favorable winds. Change course and find the necessary lift through thoughtful planning with the intent of long-term success. Keep customer experience as your North Star, using employee experience and technology capabilities as the momentum to stay on course. This will allow you to chart a new course for your organization, realizing more value from orchestrated partnerships, practices, and platforms.

To learn more about the actions that tech executives can take to navigate the 2023 downturn, visit here.

About the Author(s)

Christopher Gilchrist

Principal Analyst, Forrester

Christopher Gilchrist, a principal analyst, is part of Forrester’s research group covering the intersection of technology progress and the evolution of market value. Leading the technology insights and econometric research (TIER) portfolio, he supports audiences in pursuing a deeper understanding of how technology advancement evolves business models, strategy, and corporate governance.

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