We recently hosted our latest roundtable to hear from our local CIO and CTO peers on how they are planning on weathering the downturn. Will there be a kickback on cloud budgeting? Spring cleaning? Alternative methods of planning? How are management models being impacted by the market, and by this new, hybrid world?
With Gartner signaling increasing economic pressures – including persistent inflation, talent scarcity, global supply constraints, rising interest rates, and a strong dollar, – we wanted to hear the group’s perspective on how they plan to respond to some of these difficulties (although, the takeaway remains – companies are still investing in IT and digital spend). Along the way, we got an introduction to our friend Prith Banerjee’s new book: The Innovation Factory, which is a no-nonsense take on partnerships, that intends to offer a historical perspective as well as practical guidance on how large companies can successfully collaborate to achieve innovation goals and initiatives.
We also heard from Mark Settle, who spoke on his recent piece “A CIO’s Guide to Weathering the Downturn,” featured in Forbes, with a lot of counterintuitive and fascinating advice around the upcoming downturn. For example: managing fear (maybe raise your performance standards rather than lowering them) or reassuring your top performers (they need it more than you might think!).
Budget & The Recession
- September and October Will Be Turbulent – While most budgets are expected to stay flat or even slightly increase, it’s an ambiguous environment to be sure
- The Recession is Real – Companies are seeing this via layoffs, even if tech buying has persisted. Investors are moving from the rule of 40 to the “rule of 60” when making investments in order to mitigate risk or split their orgs into separate teams for investment and re-investment. That being said, much of tech is somewhat sheltered from it. D2C companies are heavily impacted, consumer behavior has changed dramatically (although premium brands can still raise prices). B2B and tech companies however still have large pent up demand
- SG&A are the First Staff Getting Cut – Research and engineering are fairly safe, but unnecessary AWS and platform costs are being re-evaluated. Hyperscalers might see a shrinking customer base
- Quid Pro Quo Deals are the Norm – Everyone has deals with everyone, or their cloud provider has a special vendor, etc.
- There is More Margin Pressure – Everyone wants margins up, a lot of cost saving and rationalization going on. Grow at all costs is dead for now
The Changing Work Environment
- Command and Control Management Philosophy is Dead – …but we’re not quite sure what to replace it with yet? Culture in modern organizations must be encouraged, not demanded – how do you entice employees to want to be a part of something? Bring people to the office without forcing them via social/cultural incentives (and spend on this, it’s important). Virtual work environments can kill culture if companies don’t properly manage them, they require a lot more active communication and effort than the passive relationship-building that used to take place at 5-day a week office settings. Leadership will also need to uplevel to meet the current generation where they are at – employees are demanding more collaboration, thoughtfulness, encouragement, sensitivity, etc. A lot of extra effort is required for new graduates
- Different Strokes for Different Folks – Certain groups thrive on being together physically (e.g. SDRs), others don’t (e.g. Developers). There is not necessarily a one-size-fits-all work culture – you must be able to accommodate different cohorts. Middle management has become the new HR in terms of deciding whether or not teams can or can’t be remote. Furthermore, HR policies are good stakes in the ground, but there’s often flexibility for top performers
- Stay Open to Experimentation – Try things and see if they work – experiment (Float Away Thursdays, Spike Week, etc.)
- Hardware, Not Just Software is Needed for Hybrid Work – OWLs, whiteboarding, etc.
- Consider a Renewed Focus on Top Performers – They often don’t get the attention or reassurance that they need. Now is a time when employees are getting jittery and might want to jump (consider the alternative as well: Now is a good time to scoop up top talent that is getting jittery at other places)
- New Employees are More At-Risk – New people onboarded during the pandemic and working remotely have never met their team or manager in-person. As a result, they have less loyalty or ties to the company culture, which in turn, impacts the staying power of employees, and morale more broadly
- How Will the Role of the CIO Keep Changing? – Business first, tech second / Business not IT. CIOs will have to be bilingual and speak both languages going forward, now more than ever. Additionally, internally, there is a new focus on creating alignment vs. the old focus on execution
- Startups Struggle the Most with New Working Models – Work from home negatively impacts early-stage companies the most
- We are Running a Giant Experiment – What are the 3-5 year effects of new working models and different companies taking different approaches? While productivity is up now, will this change? It will take time for things to pan out. For the moment though, the 9-5 is dead and it’s clear that most employees do not want to spend five days in the office
Where is Technology Headed?
- The Goalposts are Constantly Shifting – Digital transformation today is table stakes tomorrow. Expectations continue to rise all the time
We’re moving from the internet economy (3G), to the cloud economy (4G), to the industry economy (5G) – everyone won’t just have compute in their hands, they will have environments in their hands. The mobile economy is exploding internationally. Most CIOs are focused on internal administration still today, but they will increasingly have to branch out and be a part of this increasingly connected world (the distributed workforce is just the first step). Access to information is the great enabler
- Workplace Apps – Who is Winning? – Google inside the valley, Microsoft outside the valley (competing on cost). Many companies are ditching Slack on this basis as well, Salesforce still hasn’t properly integrated it
- Data Management/Governance and Vendor Neutrality – It’s important for companies to s or tay mindful of cloud providers pushing their own products – they are often not vendor neutral
- Large Companies Need to Become Better at H3 Innovation – H1/H2 are usually covered by large R&D teams that have the process down to a science. H3, however, remains elusive – and it’s more important now more than ever to be considering, given the uncertainties in the future
Geopolitics & Education
- Education is Divorced From Industry – Publishing has become the only avenue for professors to access tenure. As a result, they spend most of their team publishing and very limited time teaching. They don’t update their materials, and they certainly don’t collaborate with, or keep up with industry (no domain experts at all). Furthermore, today you can’t even get tenure from doing IT research, which is such an important area. There needs to be better programs to get industry into universities
- America’s Long Term Innovation Challenge – The best innovation will no longer come to the US as other countries achieve parity on PhDs (China already has). The top 10 AI/ML companies today, as ranked by MIT, are nearly all from China – this is happening across many fields including AV, EV, IoT, etc. As a country, we will need to update our immigration policies in order to retain foreign talent. Many students come to the US, and then leave, because the visa policies are so restrictive. And now, even the students themselves are starting to dry up
- Government / Business Collaboration – China and Taiwan have an easier time coming up with unified business strategies than the United States, on account of top-down leadership and better government/business collaboration. For example, in the 80s, Taiwan’s leadership decided on a 5 year plan for semiconductor manufacturing and implemented it. They got TSMC in there and did the work on developing talent around chips. Today, they have some of the most concentrated talent in this space and have made it really hard to relocate it elsewhere. Innovation takes time, and short term thinking kills it
- The Silicon Valley mindset will be key for America – Problems are not just problems, they are puzzles to be solved