This week’s blog features an article from industry experts at Harvard Business Review sharing their insights on what to expect from business tech in 2023.
Looking ahead is always a tricky business. While the turn of the year presents an opportunity to take a fresh look at your strategy and plan where to focus your energies, it can be hard to sort real trends from hype. This is especially true when it comes to tech. Think about this time last year, and the excitement around NFTs, crypto, and the metaverse. By the fall of 2022, NFT markets were down 90%, we’d entered a cold crypto winter, and a bustling metaverse was still more of a dream than reality. Separating real innovation from hot air can be the difference between a big win and a costly flop.
2023 will likely be a more sober year in tech. Geopolitical and economic uncertainties are injecting more caution into the next phase of tech’s evolution. Leaders will have to search for ways to do more with less, find value where innovations overlap, and strategically invest in technologies that are hitting a tipping point.
A group of McKinsey’s technology practice leaders have taken a look at what 2023 might hold, and offer a few new year’s tech resolutions to consider.
Prep the board for tipping-point technologies
Game-changing technologies, such as 5G, AI, and cloud, are hitting tipping points for mass adoption. Our research shows, for example, that companies are looking to move about 60% of their IT estate to cloud by 2025. And more than 50% of companies report they’ve adopted AI in at least one function in their business. While boards may be preoccupied with flattening or reduced investment in IT budgets, they need to keep energies focused on the risks and opportunities in this big shifts.
Doing this requires the board to prioritize budget for upgrading IT foundations that enable speed, security, resiliency, and reusability. These aren’t the sexiest investments, but automating processes, investing in data foundations, cleaning up tech debt, and continually renewing the IT architecture are needed for the business to have a chance of taking full advantage of the new technologies coming online.
The board is better positioned to advocate for this approach than anyone else. IT’s priorities are too often shaped by individual business units or divisions. The investments in tech foundations – “IT for IT” – benefit the entire business, so require the board, working with top management, to guide and direct the effort. A good rule of thumb is that 15–20% of IT’s change budget needs to be allocated to this foundation work. Read more.
Free the engineers you already have
Layoffs in the tech sector and belt-tightening measures at most enterprises mean that tech leaders in 2023 will need to master the art of doing more with less.
The trap will be to ask your tech people to simply do more. Instead, try getting them to do less — less admin work, less bureaucratic work, less manual work. We’ve found that in many large organizations, engineers spend as little as 50% of their time on actual development. Imagine improving that by just 10 percentage points for a large company that has thousands of engineers. There are huge amounts of productivity there for the taking.
CIOs can capture it by being more scientific and methodical in developing and applying the craft of engineering. Specifically, there are a few steps they can take:
- Be more thoughtful about team makeup and get a handle on who your top performers are. Individual engineer performance can vary 2-3x between teams.
- Look into how many distractions you can take off of your engineers’ plates. Even relatively simple fixes, like cutting down on meetings or making the “agile ceremonies” more productive, can free up substantial time.
- Lastly, go all out on automation to remove the scourge of manual tasks that weigh down engineers. Automating testing or compliance can have a huge impact in terms of freeing up engineer capacity to do what they love.
Get your head in the cloud
Last year, many CEOs changed their outlook on cloud computing, essentially going from “I’ll do it because that’s what my CIO recommends” to “I want to be all in.” This point came home to me recently when the CEO of a large bank expressed frustration with the lack of incremental progress on the cloud. Rather than rolling back the program, however, he declared a much more ambitious goal and an accelerated timeline to get there.
Right now, companies have a can’t-miss opportunity to ramp up their cloud ambitions: as tech companies limit head-count and eliminate programs, top talent — not just the bottom 20% performers —are coming on the job market, While many of them are being snapped up quickly, companies should think through how to move quickly when cloud talent becomes available so they can take a big step forward in their cloud capabilities.
The big question, then, is how companies are going to harness these two trends. Most corporate forays into the cloud have been limited to simply moving applications from their own servers (often referred to as “lift and shift”), or building test and development environments to try out new programs. But now is the time to think bigger and smarter. In 2023 companies should focus on building out strong cloud foundations that allow them to take advantage of the most important benefits that the cloud provides (e.g., scaling applications or automatically adding capacity to meet surges in demand). Read more.
The cloud is changing security
For years, security was treated as a blocker — albeit a critical one — that slowed progress to ensure security protocols were in place. In 2022, however, that started to change profoundly prompted by the big commitments companies made in moving to the cloud. This shift created a useful forcing mechanism for CIOs and CISOs to rethink security’s role, particularly how to improve the business’ risk posture.
That trend will accelerate in the coming year, for a few important reasons.
- First, companies are taking the opportunity to automate security as they migrate applications to the cloud. This is because businesses themselves as well as cloud service providers are upping their own security game. Providers have poured billions of dollars, especially into new security tools, for example, to automatically scan code uploaded by developers for cybersecurity issues and reject code with vulnerabilities, providing clear recommendations for what fixes to make when they do. Most security issues are the result of code and system misconfigurations, which means automation will radically reduce the number of security breaches.
- Second, as more heavily-regulated industries like banking and pharma move to the cloud, regulators themselves are rethinking what the pressure points are. They are already becoming more prescriptive about security and compliance standards for the cloud and thinking about other issues, such as the significant concentration risk. Read more.
Decentralized AI is changing the playing field
Last year brought huge strides in AI “decentralization” — the trend of expanding access to advanced AI technologies that were traditionally available only to players with access to massive, centralized, proprietary data sets. Products such as Stable Diffusion and ChatGPT have enabled a wider set of enterprises as well as individuals to access and interact with deep learning models that otherwise would be restricted to institutions with very large datasets. The implications are enormous, from improving search to increasing developer productivity.
Our analysis through QuantumBlack, AI by McKinsey, indicates that in 2023 we can expect to see early signs of how this decentralization can disrupt different sectors, likely starting in the entertainment, gaming, and media areas where traditionally we’ve seen new technologies make early inroads.
The big challenge and opportunity for companies in 2023 will be to take advantage of these decentralized AI capabilities — and what this technology might mean for their business models. For the CIO or CTO, the focus will need to be on how to rework their architectures to easily incorporate application programming interfaces (APIs) (e.g., from OpenAI, Stability.AI) to embed “intelligence” into a wider swath of applications and processes. Read more.
Read the entire original article here.
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