The Six Five team discusses the Best Prediction for Tech in 2023.
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Transcript:.
Patrick Moorhead: Overall, my big prediction is this whole notion of practical innovation, ESG and let’s throw DEI in there if we want. We had essentially for gosh, eight, seven years near zero interest rates and money was free. We had the pandemic that hit, which we shut down, but shut down people’s ability to work and create stuff for the most part, if you were in the tangible world. Those of us in the non-tangible world, non-factory, we could work from home.
Then we poured trillions of dollars we gave away for free. We printed more money and here we are paying for it. We have high interest rates driven by the Fed activity that was in there to lower inflation, that was driven by all the free money that we give out. Heck, I think there were three million US workers who just decided I’m not even going to go back to work. Either they were comfortable in their parents’ basement, or they had enough money to ride through that, or they just decided to give up.
Where I’m at now is growth isn’t in vogue, EBITDA is. I think that’s true for startups, but I also think that’s going to be even more true for bigger companies out there. I think even the biggest companies, the trillion-dollar companies, are going to get away from innovation for the sake of growth into practical innovations. You’re going to see some projects that are going to get cut. You’re already seeing these big companies get rid of it.
Practical innovation that has a clear line of sight, probably going to get rid of some of the riskier types of ventures. I also think you’re sitting there, board of directors, let’s bring in some ESG action. Now, first of all, I just want to say that love it or hate it, the pressure is on board of directors to hit their ESG targets. I don’t want to debate those targets and whether they’re going to save the planet or not. All I’m going to say is that they’re real.
What I do know is that if you are hitting your ESG goals and not hitting your financial goals, you will be tossed. This practical ESG I think will come in. I think we’ve talked, Dan, you and I have talked to some, I think, very insightful CEOs like Darius Adamczyk and Arvind Krishna that quite frankly supply a lot of the companies in manufacturing and warehousing. I think that this notion of ESG for ESG’s sake, is not going to be in vogue next year.
But good for the environment, good for the business, I think is going to work so that’s where I think we are moving. By the way, I hope we’re going to see some big breakthroughs in fusion, energy. That would be amazing. Mini nukes, that would be great.
Daniel Newman: Yeah. Maybe that, maybe a little crisper in the process. We’re going to do a bonus Twitter section at the end here, but I want to finish with a more noncontroversial 2023 prediction.
By the way, I liked yours a lot because I’ve been using the words economical or practical ESG for some time. I couldn’t agree with you more, Pat.
Patrick Moorhead: Did I just lift, did I just steal your and not give you credit? Is that what you’re saying?
Daniel Newman: You know how it works though. I come up with quips that have no solid backing. You actually give all the backing and then we come out of meetings, and I get all the credit because I gave the one-liner.
Patrick Moorhead: By the way, for the record, there was something, a call we were on in the last week of the year.
Daniel Newman: Did you hit the quip home run? Did you hit the quip home run?
Patrick Moorhead: I got the home run.
Daniel Newman: All right. All right. All right. All right. Better together, buddy. We know this.
Patrick Moorhead: I know I do.
Daniel Newman: I call it, it’s the year of hashtag better together. It’s the year of iteration over innovation, or iteration of innovation. In a down economy with all the things that you talked about, high interest rates, high inflation, job cutting, economic uncertainty. Arvind Krishna, who you mentioned, said that he thinks IT is the most protected line item in any budget, but budgets are still smaller. You have a 20% smaller budget, it may be protected, but you’re still going to see that 20% cut across the organization.
Companies are going to try to get more out of the technology they’ve already bought. I’ve mentioned this a few times on this pod. I mentioned this last week on a few different interviews I did on TV, but I like names like IBM, Cisco, Dell Infrastructure, HPE, Oracle, SAP, just as a few names that will do really well. That’s because companies are going to need to do more with their current infrastructure, with their servers, their storage. They’re going to need to do more with their data. They’re going to want to do more with their existing software deployments.
They’re going to want to do more to secure their environments. These core IT companies, they were less cool. They didn’t go up a ton, they never saw their PE ratios swell up to 60, or 100 or 200. Most of them saw very conservative growth. But you saw IBM reach an all-time high late in this year, or sorry, 52-week high. I’m not sure if it was all-time, 52-week high. We’ve seen companies like Cisco, Dell’s Infrastructure has done really well. HPE’s GreenLake keeps growing. We saw you mentioned Oracle’s solid growth and SAP’s cloud growth.
This is because companies are going to be like, “Well, we were going to lift and shift. We were going to make a big strategic move, but you know what, we’re going to wait a year, we’re going to wait two.” That means double for these companies because one, it means the budget shift from whatever that new project was back to them. Two, it gives these companies more years to stay sticky, and to keep those customers in the longer term as they continue to innovate on the technologies they have, even as new and exciting data and cloud providers come into the fray.
I think in ’23 until we see some really clear signs that we’re going to return to growth, we’re going to return to near or very low interest rates. You’re going to start to see that slingshot for those kinds of companies. It’s going to be these solid day in, day out companies that are going to do really well.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
