Technology, more than any other industry, moves fast. And in 2023, you can expect that same momentum.
Emerging trends in technology, such as the rise of blockchain and the fall of virtual reality, will lead to changes in the industry landscape. Meanwhile, issues with talent, funding and regulations will continue to develop.
Technology industry trends for 2023
1. Fewer, bigger and better when it comes to venture capital funding placements
The declining public market in 2022 left larger investors looking for returns from other sources. This led to venture capital funds being able to raise a great deal of money.
The economic uncertainty, however, left venture capitalists skittish to place bets. We will see venture capital firms make fewer technology placements in 2023. But, needing to put their surplus to work, they’ll make larger placements focused on mature to maturing technologies.
2. Crest, fall and crest again in venture debt
2021 and 2022 saw big-name financial institutions dip their big toes in venture debt funding. The peer pressure of private lenders wading into the warm economic waters and usurping some of the traditional financial institutions’ commercial lending leadership was the motivation.
As the economic waters have turned a little colder, financial institutions’ intolerance for risk has sent many, including Citi, shivering back to the cabana.
However, founders — having enjoyed the nondilutive benefits of venture debt — will continue to seek out venture debt structures and private lenders who will happily fill the void as the waters return to warmer temperatures in late 2023.
3. The dog days of mergers
Uncertain economic conditions and investor trepidation have notably decreased valuations, and there has been a subsequent decrease in founder exits.
Driven to grow nonetheless, firms will still seek mergers. Strategic acquisitions will look attractive as ways to build equity. Even mergers of near equals that are still accretive to growth and earnings before interest, taxes, depreciation and amortization may occur.
Look for strategic mergers and acquisitions as opposed to buyouts in Q3 and Q4.
4. Unrealistic expectations for virtual reality
Early 2022 heard increasingly loud grumblings from within Meta Platforms Inc. management that the coming metaverse party was overhyped. Whether through self-fulfilling prophecy or just being too early to the party, the grumblers were proven right.
Lacking a clear path to monetization, the efforts sputtered. The grumblers’ reward for their accurate prognostication was 11,000 employees laid off.
Many B2C product and services companies will scale back heavily on virtual reality ventures, with only the gaming ventures continuing at full speed.
5. Shifts in virtual payment
A staple in payment systems since the early 80s, the magnetic stripe did away with carbon copy impression machines and enabled the ATM revolution. In the last decade, it has even made cash a bit outdated.
But its day has come. New technologies enabling and embracing virtual cards, wallets, payments and transfers will continue to see strong growth and large institutional investment.
6. Blockchain claims its name
Many outside and within the technology space have long conflated cryptocurrency and blockchain. There is even a cryptocurrency company named Blockchain. The cryptocurrency winter, culminating in the FTX storm, has obviously shaken the cryptocurrency industry and, along with it, investments in blockchain-based Web3 application development.
Now is the time for blockchain technology to stand on its own merit and be understood, seen and applied for its many strengths.
It has been trusted to convey billions in value. It will now be trusted to convey much more, including identities — think voting applications or transcript transmission — as well as authenticity and compliance.
Cryptocurrency will rise again. But after 2023, blockchain will no longer be synonymous with it.
7. Changing ranks in the war for talent
Tech layoffs at the largest firms (including Salesforce, Google, Amazon and Meta) will continue into mid-2023. Together, these firms have produced the bulk of the world’s cloud experience, be that in engineering, sales, product development or customer experience. These layoffs will bring more cloud talent to the labor pool than has ever been available.
Growing startup tech companies, stalwart industries going through digital modernizations and public-sector entities in government and education are all starved for talent. Laid-off employees can find positions with these organizations, although the working environment may be different from what they’re used to.
8. Outsourcing expands its reach
Outsourcing continued to rise in 2021 and 2022, and 2023 will see that trend accelerate notably.
There have always been known advantages to outsourcing in some situations, such as process simplification, on-demand expertise, labor costs optimization and core focus enablement. But recently, issues with attracting and retaining talent, increased salary demands, the baby boomer retirement bubble and decreasing university enrollment have continued to encourage outsourcing.
Another important factor is the uncertainty of the next 18 months. Companies will be looking for the ability to flex capacity up and down rapidly — without incurring the costs of hiring, training and terminating.
This confluence of forces will drive both demand and rates up for outsourcing. The need and true value of offering will prevail, and growth will be rapid.
9. Regulatory will be irregular
The governmental focus on technology has been consistent. However, the policies and actions of regulatory bodies has ebbed and flowed with the eco-political pressures of the times.
2023–2024 will see new pressures from different agencies and entities, crossing sociopolitical, economic and gubernatorial lines.
The Securities and Exchange Commission is prosecuting influencers for cryptocurrency and stock promotion just as they would with registered investment advisors. Meanwhile, the Department of Justice is investigating the former CEO of the smoking crater that is FTX, Sam Bankman-Fried, who was arrested on charges of wire fraud, money laundering, securities laws violations and other financial crimes.
For social media, the Federal Trade Commission is pressing personal privacy enforcement, and the Federal Communications Commission is considering banning TikTok. Additionally, the Supreme Court has three arguments on the current docket regarding the protections that have enabled the social media giants to become so influential.
The next 23 months will see frenetic regulatory activity. Anticipate strict enforcement of current policies and increasing fines for violation. Regarding policy reform, moderate advancement will be made on individual privacy protection.
How Wipfli can help
Stay on top of upcoming trends in the technology industry with Wipfli. Our associates can support your company no matter what phase of the business life cycle you’re in.
Contact us today to learn more about how we can find solutions to fit to your needs.
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