Tech industry leaders are gearing up for a potential rebound in 2024, according to Deloitte‘s latest report.
The 2024 Technology Industry Outlook, which included a survey of more than 100 tech executives, indicates that despite challenges over the past two years, there are optimistic signs of recovery.
The technology industry flourished during the early pandemic years as companies accelerated their digital transformation efforts. But the industry has hit several speed bumps over the past two years.
High inflation, elevated interest rates, and considerable macroeconomic and global uncertainties contributed to a softening of consumer spending, lower product demand, falling market capitalizations, and workforce reductions in 2022. Headwinds continued into 2023, with slight weakening of global tech spending and rising layoffs. But there are now glimmers of hope.
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Nevertheless, Deloitte’s report suggests that a comeback may be on the horizon, with economists revising down recession risks and analysts foreseeing the tech sector returning to modest growth in 2024.
The report was compiled by Deloitte’s Susanne Hupfer, Michael Steinhart, Prashant Raman and Ankit Dhameja.
Over the past few years, the technology market faced global challenges such as geopolitical tensions, supply chain disruptions, raw material shortages, and emerging regulations. Deloitte recommended tech leaders focus on manufacturing locations, enhance supply chain transparency, prepare for systemic risks, streamline business processes, leverage intelligent automation, reduce tech debt, modernize legacy architectures through cloud migration, and extend their reach into other industries.
In the Q4 2023 survey of 122 tech executives, 55% rated the tech industry as “healthy” or “very healthy,” with 62% believing it would maintain that level in the next six months. While “efficiency” emerged as the primary focus for 25% of respondents, “innovation” and “productivity” tied at 21%, closely followed by “growth” at 19%. The majority perceived the industry as “innovative” and “evolving,” with 62% feeling it was an opportune time for their companies to take greater risks.
Strategies to pursue
For 2024, Deloitte anticipates tech leaders to concentrate on several strategies.
- Angling for a comeback with cloud, AI, and cybersecurity: Enterprise spending on software and IT services, particularly in artificial intelligence, cloud computing, and cybersecurity, is expected to drive growth in the tech market. Tech leaders are advised to assess and potentially shift or augment their offerings to meet the rising demand. Generative AI, while sparking interest and investment, may not see a significant uptick in enterprise purchasing until the second half of 2024, the report said.
- Balancing globalization and self-reliance: The interconnected nature of the tech industry increases the risk of disruptions from geopolitical unrest, supply chain volatility, and new regulations. Leaders are encouraged to diversify supply chains and manufacturing locations, spreading operations among trusted regions to ensure redundancy. Agility in adapting strategies as governments refine trade policies is crucial, the report said.
- Setting the stage for growth with generative AI: The next year is expected to be transitional for generative AI, with tech companies experimenting and finding applications for efficiency and productivity. Evaluation of how to speed up software development with generative AI-enabled tools is likely. Legal and regulatory landscapes may evolve rapidly, setting the stage for greater adoption in the second half of 2024 and beyond, the report said.
Global regulations in the EU and the US, focusing on data protection, ethical use of AI, and sustainability goals, are anticipated to take effect.
Tech companies are urged to prioritize compliance efforts, turning them into competitive advantages through collaboration between business, legal, accounting, and finance teams.
Each of these themes, as outlined by Deloitte, presents strategic opportunities for tech companies to reduce risk and pave the way for sustainable growth in the next 12 to 18 months.
Prudent investments in supply chain resilience and data governance are recommended as hedges against geopolitical and regulatory shifts, while generative AI can streamline operations in the short term and accelerate long-term innovation efforts.
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