The State of the IT Industry
The world of technology is constantly advancing, with new innovations emerging every day. As new technologies are introduced, the IT industry quickly adapts to incorporate them into the digital landscape. To remain competitive in this dynamic market, IT professionals and hiring teams must stay up to date with these developing trends.
In today’s business landscape, the principle that every company is a technology company has never been more accurate. It is essential for organizations to invest in digital tools and IT skills across all sectors. Advanced technologies, such as generative AI tools, have brought in a new era of business efficiency. The adoption of cloud computing software, artificial intelligence (AI), and other technologies has reached unprecedented heights.
Despite the evolution of technology, the growth rate of the industry is now stabilizing. McKinsey predicts that data-driven enterprise will become as standard as the corporate balance sheet by 2025. With economic conditions, legal regulations, and consumer demand in mind, more and more organizations are pivoting from mere technological adoption to enterprise optimization.
A Transition to Long-Term Tech Optimization
In early 2023, McKinsey reported that many digital solutions—including AI, cloud computing, and 5G—were approaching peaks in mass adoption. The prediction held that companies would begin to move from sporadic implementation to enterprise-wide optimization, with the goal of tapping into the greater potential of the digital foundations they had already begun to build.
However, generative AI has since surged into the spotlight, followed by a number of other cutting-edge technologies. These trends have rekindled the enthusiasm for greater technological investment, even as budgets have tightened. McKinsey does suggest, though, that companies should be careful about putting too much emphasis on hyped-up trends and instead look at long-term tech investment strategies to achieve optimal and sustainable growth.
Nevertheless, there continues to be a wide gap between demand for new technologies and the talent who can implement and manage them. This predicament has been an ongoing factor that has limited the growth of high-tech fields and could very well be exacerbated by the significant growth in demand for AI skills. Job postings related to artificial intelligence have increased by more than 450% compared to a year ago, with some offering as much as $900,000 in annual compensation. Demand for generative AI talent has seen the most growth in recent years, while applied AI, next-gen software development, cloud and edge computing, and trust architecture garner the most job postings overall. All of these new and emergent technologies face a deficit of talent to support the demand.
Regulatory Challenges and Opportunities
The widespread impact of new technologies has put the IT industry under the government’s microscope. New and proposed regulations have set limits on data collection, artificial intelligence usage, and digital payments, among others—which can significantly limit the power of big tech companies.
According to Deloitte, these regulations, along with new legislation that targets tax reforms, such as the Inflation Reduction Act, will open up new opportunities for small and midsize businesses (SMBs) to compete. While some larger companies reel from hits to their profitability and brainstorm ways to reshape their business models, strategic SMBs can use this time to accelerate growth and increase their market shares.
Unfortunately, changes in government regulations can also have a direct impact on IT teams’ established processes and preferred tools. In highly-regulated industries, such as healthcare, new legislation often shapes project initiatives. The 21st Century Cures Act, signed into law in December 2016, mandates all electronic health records (EHRs) to comply with the certification criteria outlined in the Final Rule published by the Office of the National Coordinator for Health Information Technology (ONC) in March 2020.
To be comply with these criteria, health IT systems have had to meet a series of interoperability standards to facilitate the access and exchange of patient data. Most of these requirements have pertained to the use of APIs based on HL7 fast healthcare interoperability resources (FHIR) specifications, such as the SMART on FHIR application launch framework. While FHIR adoption has been tremendous, implementation has presented a number of challenges, due in part to the lack of documentation and other relevant development resources. With FHIR being a new innovation, its specifications and applications have evolved since the concept was first introduced in 2014. As such, the official certification criteria are continually updated to clarify requirements and consider additional use cases. This adds extra pressure to healthcare IT organizations to maintain compliance in their ongoing efforts to achieve digital transformation.
Ultimately, companies in any industry with forward-looking leadership teams who strategically coordinate project plans in accordance with regulatory deadlines are poised for future success. While government regulations can present challenges for established IT practices, they can also pave the way for a more competitive and diverse technological landscape.
Security Comes into Focus
Privacy regulations have also accelerated in recent years. Governments around the world are increasingly discussing ways to protect consumer data, impacting the business strategies and practices utilized by IT companies and professionals. Privacy is a priority for consumers as well. A recent Cisco survey found 76% of consumers would not purchase from businesses that they did not trust with their data. Companies are responding by prioritizing cybersecurity and privacy in their data storage and usage practices. This also changes companies’ approach to ethical decision-making as well as the skills and expertise required when hiring and promoting IT decision makers.
Security breaches and cyber-attacks on enterprise systems have become increasingly common in recent years, due to overall digitalization as well as the rise of remote work. The SEC now requires companies to disclose cybersecurity incidents that have a material impact on investors, in addition to an annual disclosure on material information regarding their cybersecurity risk management, strategy, and governance. In 2022, there were at least 1,063 publicly disclosed security breaches (down 14.8% from 2021), and the average cost of these incidents in the U.S. reached $9.44 million.
To mitigate cyber risk, companies have shifted toward zero-trust architecture since the term was popularized by Gartner in 2019, building on existing research from Forrester, Google, and other big players. Zero-trust adoption is still in its early stages. In Microsoft’s 2021 Zero Trust Adoption Report, 96% of security decision-makers acknowledged the importance of zero trust for their organization’s success. Despite this recognition, in January 2023, Gartner reported that less than 1% of organizations have a comprehensive, mature, and measurable zero-trust program in place, predicting this figure to be 10% by 2026.
Identity and access management (IAM) has gained traction as an investment priority this year, joining network security and cloud infrastructure security in the top three. This has been in response to stolen access credentials and gaps in cloud configurations were particularly vulnerable targets for hackers throughout 2022. Looking forward, technologies such as the Metaverse and AI are expected to be targets of exploitation. As a result, nearly half of executive leaders project an increase in the number of cyberattacks in the year ahead.
As global data protection regulations grow stricter and cyber threats become more sophisticated, the heightened emphasis on privacy and security in the IT sector cannot be understated.
Economic uncertainty may also contribute to a slowdown in digital adoption as businesses become more strategic about their investments. Earlier this year, Gartner projected that IT spending, though still growing, would be just half of that forecasted at the end of 2022. This predicted slowdown would be a result of CIOs reprioritizing and delaying decisions about how to spend their IT budgets.
Predictions of a recession in early 2023 have largely been delayed, and technology leaders, though still cautious, are recognizing the opportunity to keep investing and innovating to retain a competitive edge. Bain & Company points out that global ER&D spending is being largely fueled by investments in advanced technologies, especially AI, machine learning, and cloud computing.
Additionally, as we have discussed before at Resource 1, IT is often a recession-proof field. Companies are more dependent on their digital infrastructure than ever before. Even if leaders are not actively investing in new technologies, they most certainly need to maintain what they have already implemented and continue to optimize these tools across their organizations—no matter what economic winds blow their way.
The IT Employment Landscape
Further evidence of IT’s resiliency are the mass layoffs that took place within big tech companies throughout 2022 and the first half of 2023. Although technology sector layoffs have made headlines, the future is not as dismal as it appears. Fast Company reports that many big tech layoffs are actually in non-IT departments. For example, 20% of layoffs have been in sales, while HR, recruiting, and marketing have also seen significant job cuts in IT companies. Layoffs have disproportionately affected select functions in IT, but overall, demand for technology professionals remains at an all-time high.
Current layoffs suggest a need to transform the business models of big tech corporations, rather than a need for significant concern around long-term IT employment. In the current winner-takes-all market—in which tech conglomerates like Meta and Alphabet dominate their respective segments—headcounts are expected to fluctuate with the economy. Aggressive business strategies take advantage of economic booms, which led to over-hiring in 2021 and superfluous supply in the current landscape.
Mirroring the overarching state of the IT industry, SMBs have strong opportunities when it comes to hiring. Rather than implementing hiring freezes during this time, small to mid-sized companies can take this time to invest in and attract top tech talent, stabilize their workforces, and grow.
Tech Roles Remain in High Demand
In part due to demand at SMBs, laid-off tech employees are finding natural transitions into new roles. A ZipRecruiter survey found 37% of these workers started new positions within one month, with the majority re-entering the IT sector. But IT professionals are also moving into other sectors, particularly retail, finance, and healthcare, as the digitalization of these industries continues.
Technical workers remain the most in-demand professionals across industries. Indeed’s Best Jobs of 2023 report ranks eight IT roles among its top 10 careers—based on level of compensation and demand—with full stack developer, data engineer, and cloud engineer positions at the top. The demand for professionals with AI skills and experience has also significantly increased, and with limited supply of talent, the competition for these skillsets is high. Filling these roles remains essential for driving innovation in every sector.
Recruitment Challenges Ahead
The tech talent shortage remains a significant concern. The continued need for IT skills means heavy competition for specialized tech workers will persist, especially where the pace of skills development has struggled to keep up with the rise in demand.
For instance, Statista reports DevOps as the second most sought-after tech skill in 2023. HR professionals also identified DevOps professionals as the most difficult technical workers to source. Similarly, talent gaps in other high-demand fields, such as cybersecurity and AI, will continue to challenge employers in search of top talent.
Ultimately, the IT industry is in a regular state of flux as new advancements come to light, as regulations shift, and as the supply of talent struggles to keep up with demand. Organizations that are challenged by hiring in the current IT employment landscape are often choosing to partner with IT consulting firms like Resource 1. Working with recruiters who are well-versed in the technical skills you are seeking is a strategic approach to building your IT workforce so that your organization can remain optimally positioned to navigate the road ahead.