Breaking Analysis: Enterprise technology predictions 2023

With Erik Bradley, ETR

Making predictions about the future of enterprise tech is more challenging if you strive to lay down forecasts that are measurable. In other words if you make a prediction, you should be able to look back a year later and say with some degree of certainty whether the prediction came true or not. With evidence to back that up. 

In this Breaking Analysis we aim to do just that with predictions about the macro IT spending environment, cost optimization, security – lots to talk about there – generative AI, cloud and supercloud, blockchain adoption, data platforms, including commentary on Databricks, Snowflake and other key players, automation, events and we may even have some bonus predictions. 

To make all this happen we welcome back for the third year in a row, Erik Bradley our colleague from ETR.  As well, you can check out how we did with our 2022 predictions. 

Over 1,000 Inbound Predictions from PR

Each year, tech vendor PR pros reach out to us to help influence our predictions. It starts as early as October. This year we received thousands of predictions from hundreds of experts in the industry. The chart above shows the breakdown of categories we received. As expected there was a heavy focus on cyber security. Cost optimization, cloud, DevOps, and software were also popular topics. Digital transformation and SaaS received less attention. Erik Bradley points out that cybersecurity companies have a lot of cash, which may be why PR firms are working harder for them, and that security has been a top spending priority for multiple years. He is surprised that SaaS is only 5% and noted that a decade ago that category would have received all the attention.

2023 Predictions Snapshot

Below is a quick look at the predictions we’ll explore in detail.

Ok let’s get into the details of each of the predictions.

#1 – Tech spending increases ~4-5% in 2023 but the ‘rubber band economy’ confounds

We’re calling for enterprise tech spending to increase between 4-5%. ETR surveys currently land at 4.6%. This year we’ve seen a consistently downward trend for spending expectations by CIOs and IT buyers as shown below.

The Fed remains in control and the market’s expectation is that they will ease up on tightening in an attempt for a soft landing. But there are many unknowns. A quarter point may not be enough to cool inflation and just as the fed was late tightening if it eases to quickly the rubber banding effect will continue to confound forecasters.

We also note that the largest companies are the most conservative in cutting spend, while smaller firms are spending faster and growing at a much higher rate. As well, firms in EMEA expect to outpace the US and APAC. Erik Bradley notes that the larger companies are being more cautious and that energy and utilities are spending more than anyone.

[Watch the conversation on prediction #1 about the IT spending climate].

Enterprise Tech Spending Expectations by Sector

Below are some additional details from the ETR drill down survey.

January 2023 ETR Survey of 1,525 CIOs & IT Buyers

Expected Growth in 2023 IT Spend

#2 – Cost optimization remains a major theme in ‘23 – Consolidating redundant vendors will be the top cost saving technique

Saving money has been a major theme as we enter 2023. As shown below, the primary method that organizations plan to use for cost optimization is consolidating redundant vendors (36%), followed by cloud cost optimization (19%) then ‘other’ at 15%. Other included hiring freezes, layoffs, delaying hardware purchases and ramping up off shore resources.

There was no evidence in the data that firms were looking at cloud repatriation as a favored technique to save money.

Alexander Feiglstorfer from Storyblok sent in a prediction that “All in one becomes extinct.” We only partially agree with that prediction. We feel all in one solutions will remain the norm for larger companies while smaller companies will favor best of breed solutions.

We’re also seeing consolidation happening in functionality – Erik Bradley points to security as an area where that is clearly happening. As such he points out that niche solutions will be less popular, while platforms will be more appealing in a spending climate where companies want to reduce the number of vendors they’re managing.

[Watch the conversation around prediction #2 – consolidating vendors will be the most prominent cost cutting technique].

#3 – Security leads M&A in 2023 – PANW, CSCO, CRWD, MSFT & ZS buy…OneTrust sells

While the first part of this prediction is probably safe, we’re specifically calling out five companies that will be buyers and one company, OneTrust, that will sell in 2023.

Erik Bradley, explains the chart above. It’s based on ETR’s survey of emerging technology companies in the cybersecurity industry. ETR looked at the overlap between Palo Alto Networks accounts and various security vendors shown above, and have found that OneTrust and BeyondTrust have a high overlap in their overall net sentiment. We predict that Palo Alto Networks will make acquisitions in the near future, specifically in the authentication and identity space, as they need to move towards a zero trust path. We also predicts that other companies such as Cisco, CrowdStrike, and Zscaler will also make acquisitions in this space in 2023.

In our view, the market conditions, with private company valuations down 10-40%, and funding drying up, make acquisitions more attractive for these companies, and there will be a lot of movement leading up to the RSA conference in April. We would also expect M&A action for cybersecurity firms with a specialty in ML/AI.

[Watch the prediction about who is buying and who is selling in the cybersecurity space].

#4 – Zero trust moves from hype to reality in 2023 – CISOs providing the proof, not vendor marketing

CISOs tell us that zero trust, which was considered a major buzzword prior to the pandemic, has now become a priority focus for their organizations. A year from now, we’ll survey CISOs to quantify zero trust adoption as evidence of whether this prediction came true.

#5 – Generative AI hits where Metaverse missed

According to John Furrier, ChatGPT is a Netscape-like moment. Meaning the first time we all saw Navigator we realized a new era was upon us. From an enterprise perspective, according to Erik Bradley, natural language processing (NLP) will take out data prep tools and broadly infiltrate enterprise technology.

The popularity of OpenAI’s ChatGPT has been astounding and the following data from ETR underscore the mindshare it’s grabbing. ETR, for the first time, added OpenAI to its emerging technology vendor survey. The survey has been in the field for only a short time but already received 600 responses. OpenAI has shot to the lead, surpassing even Databricks with a 52% positive sentiment score.

Investors are excited about creating something competitive to ChatGPT and, according to AI expert Howie Xu, around $100 million investment will allow companies to create something similar.

AI is recession proof… Scott Stephenson, Deepgram 

ChatGPT is deep fakes for words…super useful for people who can’t write & increases productivity for those who can… David Moschella, Author

Finally, Scott Stephenson of Deepgram sent us a prediction saying “AI is recession proof.” Erik Bradley commented that he likes that quote better than the comments from Yann LeCun, Meta’s AI czar who recently slammed ChatGPT. Bradley stated that LeCun’s statements come across as sour grapes for a company that has spent an ‘insane amount of money’ on the metaverse, which has been a dud, while Microsoft’s investments in OpenAI are, in his opinion, much more sound.

[Watch the discussion on generative AI, ChatGPT, OpenAI and the future impact of NLP].

#6 – The cloud expands to supercloud as edge computing accelerates…Cloudflare wins in 2023

Since we began a community effort to define supercloud, the concept of a common experience across clouds, on premises and to the edge has gained momentum. Technologists and customers alike see this trend and Cloudflare in particular is leaning into the concept and even using the name.

Below are some comments from the community and ETR’s Insight roundtables that prompted our next prediction.

In 2023, highly distributed IT environments will become more the norm as organizations increasingly deploy hybrid cloud, multi-cloud & edge settings.  –Atif Kahn, CTO Alkira

If my sources from edge computing are coming from the cloud, that means I have my workloads running in the cloud. There is no one better than Cloudflare.  –Sr. Director IT Architecture in FS

Cloudflare’s market share continues to climb – to near 20% Pervasion in ETR’s most recent survey – and they are a leader in WAF, DDOS protection, and bot detection…in addition their core edge networking functionality. – ETR survey analysis

We predict 2023 will see the expansion of cloud to the edge and supercloud (i.e. consistency across clouds continuing to evolve). Cloudflare in our view will be a major beneficiary of this trend. According to Eric Bradley, Cloudflare has overtaken Google in terms of momentum in the market and is expected to be a big winner in 2023 as organizations increasingly deploy hybrid cloud, multi-cloud, and edge settings. Cloudflare is considered the best fit for the definition of supercloud as it brings all aspects together and is cloud agnostic. It is already highly pervasive in networking and security and is considered the number one leader in SaaS, web access firewall (WAF), DDoS, and bot protection.

Cloudflare is also taking share from competitors such as Akamai and is the only game in town right now. One possible area of strength according to one practitioner, however is Akamai has a better on-premises story than Cloudflare.

In our view, we like Cloudflare’s positioning of expanding the cloud to supercloud versus focusing on premises.

[Watch the full discussion on cloud, supercloud & Cloudflare].

#7 Blockchain’s struggles to find a home in the enterprise continue but devs will adopt in 2023. Solidity and other open source blockchain tools win. 

[Watch the full discussion on blockchain’s struggles in the enterprise and where it has a chance to get a foothold].

#8 AWS, Databricks, Google, Snowflake lead the data charge…Microsoft keeps it simple…dbt Labs disrupts legacy data prep tools. 

In the data platform space for analytics, machine learning, and databases, AWS, Databricks, Google Snowflake are leading the charge with Microsoft making is easy to do business with their data tooling. Snowflake and Databricks are currently on a collision course, as they both aim to become the single source of truth in analytics.

We predict there will be a big focus on, and greater adoption, of open formats and languages that are popular in the data science and open source communities. For example Databricks’ emphasis on Delta Lake and Delta Sharing aims the company at Snowflake’s traditional EDW and more recent data sharing domains. Snowflake’s embrace of Iceberg and Python allow it to encroach on Databrick’s core served markets of data science and data engineering. In 2023, these trends will accelerate as both companies attempt to expand their respective total available markets. Evidence will be seen in terms of more mature tooling, new capabilities and customer proof points.

CUBE contributor George Gilbert predicted dbt Labs will be a new disruptor in the data space, as they are essentially API-ifying KPIs inside the data warehouse and simplifying the data pipeline. According to Erik Bradley, Additionally, dbt Labs is currently the number one leader in the data integration space, with a 33% overall net sentiment to lead data analytics integration.

Google will remain focused on BigQuery adoption, but customers have complained that they would like to use Snowflake with Google’s AI tools, but are being forced to use BigQuery.

AWS will continue to stitch together its bespoke data stores, taking the “Right tool for the right job” approach and filling the gaps.

Microsoft is simply making it cheap and easy to use their products, despite some complaints from the community about Cosmos.

Erik Bradley’s concern is that Snowflake and Databricks are fighting each other, allowing AWS and Microsoft to catch up to them. He believes that both companies need to stop focusing on each other and think about the overall strategy. He also points out that AWS and Azure are collecting their toll, as both Databricks and Snowflake run on top of them. He predicts that Snowflake and Databricks may make some sort of acquisition in the future.

[Watch the full discussion on our predictions around the battle for data platforms].

#9 – Automation makes a resurgence – UiPath & Microsoft’s Power Automate separate from the pack

We predict automation makes a resurgence in 2023, with ETR data showing an increase in spending momentum. UiPath and Microsoft Power Automate will lead, with UiPath separating itself from Automation Anywhere. However, Microsoft Power Automate has a significant presence with its “good enough” approach.

The focus for RPA/automation is shifting from back office to front office workloads, with software testing emerging as a mainstream use case. ML and AI are becoming more embedded in end-to-end automations. Low-code is also becoming more prevalent, serving lines of business. This trend is expected to continue as organizations strive to automate as much as possible, particularly in light of recent layoffs in the tech industry. However, there is a challenge for companies like UiPath and Automation Anywhere to compete with Microsoft’s low cost and ease of use. To compete, these companies will need to have a 10X better product that offers more powerful end-to-end use cases.

Surprisingly, a recent Cowen survey in the US and Europe captured the following results regarding automation:

• 2/3 of respondents are currently involved / plan to assess RPA in 2023;
• 72% that are implemented / in PoC anticipate RPA spending growth. UiPath was the most cited vendor (68%) followed by MSFT (41%).

At a starting point of $15/user/month for Power Automate, it’s unlikely that Microsoft has fewer RPA deployments. We note the ETR data across 1,500+ respondents shows almost the exact reverse in terms of account presence (60/40 Microsoft over UiPath). But the Cowen data caught our attention. Nonetheless, firms like UiPath, Automation Anywhere and the others listed above have significantly broader enterprise-wide automation agendas and can offer greater benefits; albeit at higher software costs.

[Watch the full discussion on our predictions around the automation].

#10 – The # of enterprise tech physical events  doubles. Big events get smaller. Digital becomes a 1st class citizen

John Furrier provided much of the input for this next one. We predict that the number of physical events is going to dramatically increase – by 2x at least in 2023. That might surprise people, but most of the big giant events are going to get smaller.  There are some exceptions including AWS re:Invent, Snowflake Summit, Mobile World Congress and perhaps RSA. And there will be some others that grow but generally we see a trend toward more smaller events and more regional and intimate road shows.

These micro-events are going to be stitched together and digital becomes a first class citizen.

We predict that increasingly, brands will prioritize earned media and will begin to build their own news networks, going direct to their customers.

[Watch the prediction on enterprise tech events doubling in 2023].

Bonus Predictions with Honorable Mentions

Erik Bradley threw in the following bonus predictions.

Data Prep Tools Headed for Extinction

“I definitely think the data prep tools are facing extinction.” He believes this will negatively impact companies like Talend, Informatica and other names like these. The problem he sees is that the BI tools increasingly include data prep capabilities. An example of that is Tableau Prep Builder.

I definitely think the data prep tools are facing extinction – Erik Bradley, ETR

In addition, he cites advanced NLP being embedded in as well.  An example he cited is ThoughtSpot, Tableau with Ask Data, Qlik has Insight Bot. He believes all these minimize data prep complexities and will continue to improve over time. According to Bradley, a regular business user can just self-query, using either the search bar, or even just speaking into what it needs, and these tools are doing more of the data prep.

Knowledge Graphs Break Through in 2023

According to Erik Bradley, Neo4j is growing its pervasion in the ETR survey and is grabbing Mindshare with more IT buyers citing it. AWS Neptune is another one that he seems to be getting its act together, and spending momentum is growing there. TigerGraph is also growing in the survey sample.

Knowledge graphs are ready to break through.

Real Time Streaming Analytics Shine in 2023

The prediction here is real time streaming analytics moves from the very rich big enterprises to mainstream and more people will actually move towards real time streaming this year. Because the data prep tools and the data pipelines have gotten easier to use, the ROI on real-time streaming is more obvious. 

[Watch Erik Bradley’s bonus predictions for 2023].

Please by all means let us know how your predictions compare with these. As always we appreciate the collaboration and input from the community.