The CIO Dive Outlook on 2023

Whenever a flashy technology gains notoriety, C-suite leaders turn attention toward the CIO. The head of technology is expected to keep tabs on what their organization needs to operate today as well all tomorrow.

CIOs, leaned on as trusted advisors, are often the most tech-savvy leaders in the room and provide a great deal of insight into business operations as well. As the new year gets underway, expectations of the CIO are only rising. 

With their foresight capabilities in mind, CIO Dive asked six leading CIOs to offer up their top enterprise technology predictions. From cloud to AI and software, leaders shared the key changes they expect to see — and what they're preparing for.

(Responses have been edited for length and clarity) 

More from Sippel: CIOs will be challenged to find efficiencies in their business while not slowing transformational initiatives. In this environment, vendors who can support both will be winners, while anyone focused solely on transformation might get lost in the shuffle.

More from Sacchi: Over the last few years, companies invested heavily in the cloud to drive efficiencies, scale their business and expand their target addressable market. Now they want to make sure they’re optimizing what they have. 

Faced with economic headwinds, they’ll be looking for ways to harness the access they now have to their data, using this information to identify trends, adapt their offerings, target customers better and offer more effective promotions.

More from Franchetti: AI has evolved from a sideline experiment to a core part of how most organizations run their business. It’s no longer about whether or not to use AI, but how to realize its value to drive outcomes. 

Looking ahead to 2023, we will continue to see a fundamental shift from experimental to ubiquitous and pervasive AI deployments across IT. 

Many AI projects fail to deliver on the value they promise. The success of these deployments will rely on choosing use cases that optimize core processes within the organization, and on selecting the right toolkit for the job. 

More from Phelps: With inflation impacting labor costs and software subscriptions, CIOs will continue to make right-sized investments in SaaS solutions, people, and processes to scale their business while providing a flexible, hybrid work environment that supports the employee and customer experience. 

For many, this will mean negotiating longer-term agreements with partners and vendors and being extra cautious in avoiding vendor lock-in and automatic renewals. 

More from Ramakrishnan: Bloatware is a $84 billion money pit for businesses, and increasingly under scrutiny in a rocky economy. For IT, it means doing more with less, and cutting out discretionary bloatware spend. 

Just about every CIO I speak with is planning to review or is already in the process of reviewing their app inventory across the enterprise. It’s important to know which apps should be retired, maintained, replatformed or postponed.

More from Greene: The pandemic and other critical events shined light on the need for predictive technology to turn raw data into real-time insights that help organizations anticipate and mitigate the impact of unexpected events. 

With this increased adoption, it’s also essential we are building intelligent systems that can continuously evolve as the needs of our customers and their patients change. 

There are two diverging narratives taking shape in the cloud ecosphere.

An economic downturn, interest rate hikes and high levels of inflation led to market conditions that favor spending cutbacks and workforce reductions.

At the same time, companies remain committed to moving forward with digital transformation, a strategy that requires more resource investment and capital in order to gain or retain a competitive edge.

While these goals may be in tension, they are not mutually exclusive. Opinions differ on how enterprises can gain the most value from tech spend, but most companies view dollars spent on cloud as a net benefit — a path toward efficiency and revenue growth.

“If you do things right, you are going to get more bang for the buck in the cloud, more innovation more rapidly,” said Harish Grama, global cloud practice leader at the IT infrastructure service provider Kyndryl.

Here are three trends that will impact cloud strategies in 2023.

Crisis management

CIOs guided businesses through the last crisis in 2020, John-David Lovelock, distinguished VP analyst at Gartner, told CIO Dive. Organizations are once again loosening the purse strings, turning to their CIOs, giving them more resources to “help other departments save money,” Lovelock said.

More than three-quarters of senior finance leaders plan to increase or maintain investments in digital technologies this year, according to Gartner.

CFOs are urging internal stakeholders to double down on the move to cloud because they see it as a competitive advantage, a way to get a leg up given current macroeconomic conditions, Sid Nag, VP analyst at Gartner, told CIO Dive.

Overall IT spending is projected to grow 5.1% globally in 2023, with a bulk of new investments going into cloud technologies, according to Gartner.

Worldwide spending on public cloud alone is expected to reach $591 billion this year, a 20.7% uptick from 2022’s $490 billion, Gartner forecasted.

As IT budgets increase, so will cloud spending. Even if budgets decrease, cloud has earned immunity.

“Companies do want to consolidate spending,” Lee Sustar, principal analyst at Forrester, said. “They may wind down on-prem or cut back on some investments, but so long as cloud is synonymous with modernization, they will continue to spend on cloud.”

FinOps finds its footing

The proliferation of “as a Service” capabilities and features has made cloud convenient and, when not carefully managed, expensive.

FinOps, a data-driven approach to cloud cost management, encompasses strategies and technologies that allow companies to track and optimize spend in complex hybrid multicloud ecosystems.

As hyperscalers compete for market share, they’re offering customers a growing menu of features. 

“Buyers are very confused,” Nag said. “It’s cloud one day, edge computing the next day, and then it’s 5G, it’s AI and ML, it’s IoT, it’s analytics. This is endemic across the industry.”

Simply managing data costs has become a pain point for many companies, according to a September Coleman Parkes survey commissioned by Dynatrace, which found three-quarters of senior IT leaders struggle with data oversight across cloud-native and multicloud environments.

Drawing on concepts central to DevOps — agility, continuous integration and shorter deployment cycles — FinOps aligns financial governance with on-demand nature of public cloud.

Liberty Mutual saved an estimated 20% on cloud expenditures last year by deploying FinOps strategies and set a goal to reduce annual IT spend by one-quarter by 2024, according to Angela “AJ” Wasserman, product owner of cloud financial operations at the insurance company.

“Three-quarters of the clients we're talking to right now have some type of cost management FinOps or cost monetization initiative underway,” Paul Sussex, Americas digital and financial services cloud leader at consulting firm EY, told CIO Dive. “Businesses have come a long way in a short amount of time because costs were getting astronomical.”

Industry verticals gain ground

Hybrid and multicloud are the new normal. Even the big three hyperscalers — AWS, Google Cloud and Microsoft Azure — have acknowledged multicloud through partnerships designed to facilitate hybrid environments.

As the hyperscalers continue to consolidate market share, industry verticals represent a new frontier for growth. AWS signaled its commitment to industry cloud in November with the release of a new cloud training game aimed at financial services.

IBM, the mainstay of the mainframe, is leaning into industry verticals to stay competitive in the cloud market. Banking and insurance — industries the tech company has traditionally served through its on-prem business — have been at the forefront in the IBM strategy, Brent Ellis, senior analyst at Forrester, told CIO Dive.

Financial services companies are prime candidates for industry cloud solutions both because of the size of the sector and the security and compliance requirements of companies operating in that space.

Other sectors are on the industry cloud radar, including healthcare, telecom and manufacturing, according to Nag.

There are two approaches to building industry-specific cloud products, Ragu Rajaram, global cloud consulting leader at EY, told CIO Dive. One is built on top of hyperscaler infrastructure, the other is a platform built within a private data center.

“With the industry cloud that Microsoft or AWS offers, you're bound to using its features and functions, and it gets you to market really fast,” Rajaram said. “But others are looking at industry cloud that is agnostic of the underlying cloud service provider.”

Both approaches are being adopted as companies continue to invest in cloud. Gartner predicts that by 2027 more than half of enterprises will use industry cloud platforms to accelerate business initiatives. 

Entering into 2023, market uncertainty, talent pool shakeups and a focus on user experience will shape tech labor dynamics. As tech leaders grapple with talent gaps and look to strengthen distributed workforces, citizen developers will become even more common and automation will increase productivity. 

After a historically in-demand year for tech hires, who had the most power in the room, economic slowdown created a stir in 2022. Some companies felt the weight of a slowing economy, resulting in headline-grabbing layoffs at the biggest names in the tech industry.

If economic slowdown persists, the tide could turn so employers hold more power as anxious tech employees shy away from job hopping. 

Though companies are still expected to increase investments in tech and, in turn, the teams that research, develop, implement, monitor, secure and manage those systems. Until complete talent shortage solutions materialize, it is unlikely that the tables will completely turn in favor of employers this year. 

Here are four technology workforce trends to watch in 2023:

Change in tech workforce strategies

Market uncertainty are two words that no C-suite or board of directors wants to hear, but that is the reality heading into 2023. In response, some organizations will look to change their tech workforce strategies to mitigate potential risks, according to Christopher Gilchrist, principal research analyst at Forrester. 

“Organizations will most likely overcorrect on their conservatism if they choose to abandon and deviate from their current tech labor strategy,” Gilchrist said in an email. “These are organizations that will design workforce strategies and execute on decisions that reduce short-term workforce risk, but at the expense of longer-run talent risks.”

To get it right, organizations should remain steadfast in their hiring strategies in order to avoid self-inflicted workforce woes, even if cutbacks or slowdowns are necessary, Gilchrist said.

Breadth of skills favored

For CIOs, the struggle to fill in-demand tech positions can be stifling. Tech worker attrition can create skills gaps, declines in productivity and a loss of corporate knowledge.

Seven in ten IT managers said the Great Resignation contributed to a loss in organizational knowledge, making it difficult for current employees to find and access important information, according to 2022 Sinequa data which surveyed 1,000 IT managers. 

The need to get skilled workers — while also dealing with a drained talent pool and the long-term effects of high attrition — will push more tech leaders to search for candidates with a breadth of skills rather than a specialization, according to Gilchrist.

“What we will see is a redistribution of tech talent that begins to skew towards the breadth of skills rather than the depth of a single specialization,” Gilchrist said. “As the tech workforce continues to experience favorable shifts in compensation and opportunity, organizations will mitigate this by expanding the skill set of current and future employees.”

Many companies turned toward upskilling as a way to retain ambitious employees, but the strategy can also help teams fill gaps.

For industries such as energy and food, Gilchrist expects them to remain cyclical with tech hiring at a reduced rate this year. 

“For industries that are more sensitive to price changes, look to them to constrain future tech workforce growth — [like] hiring freezes — and consolidate current tech workforce proportional to forward guidance and growth targets,” Gilchrist said.

Automation continues to be a focus point

One of enterprise IT’s fiercest foes is the user expectation that comes from consumer-facing technology. As more Gen Z digital natives enter the workforce, they want their work technologies to function as easily as the technology they grew up around. 

This can push technologists to innovate and implement systems that support and curate user-friendly experiences.

Automation is one way that businesses continue to improve the experience of their employees. Especially for businesses that have embraced hybrid work, automation can streamline processes and support a distributed workforce. 

“With so many people switching to jobs that would better accommodate their needs holistically, employers needed to invest in automation – automating workflows to facilitate remote onboarding, task and process automation to enable workers new to their jobs the ability to focus on outcomes over process,” Amy Loomis, research VP of Future of Work at IDC, said in an email.

Automating tedious, repetitive tasks also improves the productivity of workers which has proven to be a point of focus for leaders during an economic slowdown.

“Automation will continue to be an area of focus both in service of employee engagement and in service of driving and measuring productivity,” Loomis said. “As organizations shift to more outcomes-based means of measuring progress, automation will enable the correlation between employee engagement/experience and say customer engagement/satisfaction.”

Rise of citizen developers

Citizen developers, or business technologists, have continued to become more common in the enterprise arena each year, but 2023 is the year they become key. 

All at once, businesses are struggling to find tech talent, more Gen Z digital natives and tech savvy employees are entering the workforce and low-code technology is improving.

“So the biggest challenge in 2023 is closing the [talent] gap and learning how to leverage this massive population of talented individuals that actually already work for your company and bringing them into the technology delivery ecosystem,” Janelle Hill, chief of research of the CIO research practice at Gartner, said.

In less technology-intensive industries, like the government, close to one-quarter of employees were considered business technologists. In industries heavily dependent on IT, like energy, that number was closer to half in 2022, according to Gartner research.

For CIOs, this means eliminating corporate barriers, such as rules restricting cross-department projects, and extending the definition of teams, according to Hill. Redefining roles, work and who is allowed to work on IT functions is critical.

“Traditionally, CIOs have leveraged tech providers, consulting companies [and] outsourcers as part of their digital delivery system, and we're kind of suggesting [to] go beyond the normal parties and tap into unconventional talent sources and talent populations,” Hill said.

IT professionals reached new salary heights last year as businesses waged war on attrition. Tech workers had ample work opportunities thanks to high demand, and businesses were quick to pay a premium for workers with the most sought-after skills.

In 2023, that salary ceiling will keep rising even amid tech industry layoffs and an economic slowdown, according to experts. Businesses know that in order to reach their technology goals, they require the talent that builds, supports and drives these initiatives. 

IT salary and compensation strategies will be marked by competitive salary ranges, better transparency thanks to legislation and a decoupling of compensation from location — putting more emphasis on skills rather than cost-of-living metrics.

Here are three trends that will impact IT professionals’ salary outlook and businesses’ compensation strategy:

Decoupling compensation from location

A byproduct of an increase in remote work, businesses will continue to value the skills of a candidate above their location, according to Lily Mok, VP analyst at Gartner.

“If [candidates] have the right skills that the organization is looking for, they can actually get higher pay than they previously could in their local market,” Mok said. 

Many tech workers moved away from traditional talent hubs during the pandemic, and in order to keep those workers, businesses did not adjust their salaries in accordance to cost of living differences. 

This has seeped into hiring efforts as a way for businesses to prevent poaching, according to Mok. 

“There is a shift in how we look at the compensation strategy as a whole and determining factors,” Mok said. “Location is no longer a driving factor in how [businesses] price out roles.”

Glimmers of this trend were seen last year in analysis of IT salaries across the country. Inland states gained ground on coastal states that have traditionally held the highest tech wages, according to the 2022 IT Skills and Salary report by Skillsoft.

California, Virginia and Connecticut all reported lower average annual salaries than the year before and dropped from the top five spots, according to the report, which surveyed nearly 8,000 IT staff members and decision makers.

Competitive compensation remains a driving factor

While business appetite for tech talent is begginging to cool, organizations still need to hire for critical skills and positions. These workers have many opportunities, and high salaries remain a driving decision factor.

The majority of workers that switched jobs from April 2021 to March 2022 — 60% — experienced salary hikes, according to a Pew Research Center survey. Fewer than half of workers who remained with their employer during the same period saw salary increases. 

“Competitive compensation has and continues to remain as that lever that every business can use to attract talent,” Alisia Genzler, group president and chief client officer at Randstad Technologies, said.

More open and honest conversations about compensation

As salary transparency laws increase visibility of compensation structures, workers and businesses have better access to data detailing average ranges for roles and skills across industries and locations. 

“You need to ensure that you’re educating yourself on what is happening in the marketplace and assume that the types of people you’re hiring are doing the same thing,” Genzler said. “When we talk to our clients, specifically about transparency laws and things like that, they are watching it very closely and making sure that they understand what that impact means for them.”

Oftentimes businesses do not want to approach the higher end of the salary ranges they provide, Drew Sussberg, VP of operations at Motion Recruitment, said. This can create confusion and result in workers becoming disillusioned or put off. 

“If a tech worker sees what their current company is marketing for the pay range, and they feel like they are worth that range and they’re not making that, then they should certainly have an open an honest conversation with their direct boss,” Sussberg said.

Large salary ranges are still quite common despite those impacts. For example, Netflix included a salary range of $90,000 - $900,000 for a software engineer role. Websites and tools, such as Comprehensive.io, can track tech salaries and identify trends in the market. 

If enterprises learned one lesson in recent years, it’s that technology can guide businesses through difficult times.

Cloud supported the pivot to remote work and gave companies the tools and agility to manage one type of economic crisis. Now, business leaders are leaning on digital transformation to overcome a different set of challenges, as inflation, workforce woes and ongoing supply chain disruptions contribute to a growing macroeconomic malaise.

IT budgets are set to increase in 2023, reaching a worldwide total of $4.6 trillion, a 5.1% increase over last year according to Gartner projections released in October. Whether or not that will keep up with the inflation rate, which is slowing but was still above 7% in the final months of 2022, is one of many open questions impacting enterprise budgets.

“Because of the macroeconomic situation, we are starting to see a general caution exercised by the C-suite,” Ragu Rajaram, global cloud consulting leader at EY, told CIO Dive.

That puts greater pressure on CIOs to justify spending. But companies aren’t anxious to impede modernization with major budget cuts.

“Digital technology is a very important differentiating factor in today’s market,” Stewart Buchanan, VP analyst at Gartner, said in an interview with CIO Dive. “Along with talent, it’s one of the last things CFOs tell us they want to cut.”

Contingency budgets

IT spending projections aren’t carved in stone. Last year, Gartner issued a midsummer correction, downshifting to 3% year-over-year growth from its initial projection of 5%.

CIOs should acknowledge economic realities and be prepared to alter spending accordingly. Rather than presenting a monolithic budget, they should devise contingency plans for best- and worst-case scenarios, as well as for the middle ground, Buchanan said.

“Stop planning one budget. You need several budgets or lots of options in your budget. The more options you have, the more likely you are to not only survive, but thrive in the current economic situation,” Buchanan said.

Once options are in play, CIOs can navigate changing economic conditions based on business needs, provided they have a clear, data-backed understanding of the situation. CIOs should prepare to communicate situational changes to other stakeholders, Buchanan said, and to demonstrate they are doing the following:

• Spending available funding wisely.
• Factoring in inflation in an acceptable way.
• Dealing with the vendors responsibly and making sure price increases are not egregious.

"Ten or 15 years ago, the complaint was that IT costs are fixed so you can’t do anything,” Buchanan said. “The challenge now is to unfix those costs, embrace variability and move to a more flexible spending model.”

Variable vendor costs

The move to cloud and “as a Service” infrastructure, platform, software and security solutions unfixed IT costs, building flexibility into enterprise budgets. This has been a blessing and a curse for companies, particularly those that embarked on rapid migration in the race to modernize.

Cloud opened up new avenues for data, analytics and ML applications. The promises of optimization and efficiency gains tempted some companies down the path to unpredictable cloud bills and wasted spending.

Now, companies are fixing mistakes they made by moving quickly to cloud without effective governance, according to David Linthicum, chief cloud strategy officer at Deloitte Consulting.

Cloud is a utility. Companies are billed for storage and compute. “In a couple of minutes, you can onboard a terabyte worth of very expensive storage space,” Linthicum said.

While it’s relatively easy to monitor spending in a single cloud deployment, hybrid multicloud ecosystems are harder, but not impossible to manage. Mistakes made early in the migration process are now opportunities to find savings through FinOps tools and stronger governance.

Negotiating better deals with vendors can also help CIOs manage IT budgets without slowing modernization.

Vendors may be willing to ease pricing on longer-term contracts, Buchanan said, but there are limits to what they can offer.

“The product management teams use a lot of clever pricing and analytics modeling,” Buchanan said. “You’re not negotiating with a human being anymore. There’s a lot of AI behind the person you’re talking to. It's not just whether or not your account manager likes you anymore.”

SaaS tools and platforms sit at the core of enterprise technology aspirations, driving results with flexibility and agility. But their usage is not immune to the broader economic or business trends at play. 

As last year wrapped up, more than two in five IT leaders took issue with employees who added new SaaS applications without keeping IT in the loop, according to Snow Software data. Limiting the amount of duplicate SaaS applications and identifying configuration issues were other top challenges for two in five IT leaders.

SaaS usage is expected to expand to operational systems as businesses continue to modernize processes and search for efficiency, visibility and cost optimization. 

Enterprise customers and SaaS providers were cautious about a slowing economy and lower spending power as inflation reached record levels in 2022. The push and pull between the two actors were put on display during earnings calls and layoff announcements this past year. 

Despite challenges, SaaS spending is not expected to stall, but enterprises will not be taking purchasing lightly. Vendors will feel the pressure to keep profits up in a saturated market.

Here are three trends that will shape enterprise SaaS use in 2023:

• An increased focus on SaaS asset management

In 2023, enterprises will work to improve SaaS governance. In addition to controlling application sprawl, an economic slowdown is creating an environment where businesses have to be diligent about spending, even if budgets are not at risk of being cut. 

But taking action can be difficult, according to Stephen White, Gartner senior director analyst. IT leaders need to increase their visibility across their SaaS portfolio.

When analyzing the most challenging aspects of SaaS application management, IT leaders were most concerned about shadow IT, security, configuration issues and duplicate applications, according to Snow Software data.

“Visibility is a foundational element, coupled with understanding of subscription terms, interpretation and validation requiring expertise to establish viable paths to cost optimization,” according to White.

Businesses risk monetary loss if tech leaders fail to control the SaaS portfolio. More than one-third of desktop software spending and roughly one-third of annual investment in data center software, SaaS, IaaS and PaaS is wasted, according to a Flexera report.

The struggle to implement best governance practices will be a defining battleground for IT departments. 

• The rise of premium tiers

As businesses think critically about their SaaS portfolios, vendors will feel pressure to keep profits up. John Annand, research director of infrastructure and operations at Info-Tech Research Group, expects SaaS vendors to splice out capabilities and add the tools to premium packages. 

“SaaS offerings are going to fragment even further to capture more monthly or annual dollars from users,” Annand said in an email. “Instead of the all-the-features-you-can-eat single-price model, I suspect application developers will look to hide more and more advanced features behind additional subscription tiers.”

The combined effect of inflation, competitive labor markets and environmental sustainability requirements is expected to lead to 15% to 20% higher SaaS costs by 2025, according to Gartner projections. Major software providers, including Slack and Microsoft, increased product pricing in 2022.

• Moving operational systems to SaaS

SaaS usage has ballooned, powering many mission-critical workflows. In 2023, SaaS usage will expand to operational systems, according to Liz Herbert, VP principal analyst at Forrester.

“We expect that 2023 will be a year of further modernization especially of those laggard back-office and operational categories,” Herbert said in an email. Many clients had previously held off on moving operational systems to SaaS due to a combination of other priorities and lower maturity of the SaaS offerings in those spaces.

Areas such as customer relationship management software, HR and collaboration are heavily saturated with as-a-service offerings, but SaaS options in other areas like ERP, supply chain management and manufacturing have increased, according to Herbert.

“We see a lot of client projects focusing on modernizing old applications to new SaaS ones in these operational and back-office categories in particular,” Herbert said.

By 2025, 30% of organizations will rely solely on SaaS applications for their mission-critical workflows, according to Gartner predictions.