Technology Industry Outlook 2022
- March 11, 2022
When the pandemic began two years ago, it catapulted many organizations into the future, rapidly accelerating digital transformation. Work environments changed overnight as remote work became commonplace and market demands evolved.
Deloitte urged technology organizations to upgrade their supply chains for greater transparency and resiliency and to embrace cloud, everything-as-a-service (XaaS), and edge intelligence to ramp up their transformation efforts. They also recommended they consider strategic acquisitions to bolster talent capabilities, especially in critical areas such as artificial intelligence (AI), robotic process automation (RPA), and cybersecurity.
As 2021 began and many supply networks struggled, we advised technology industry leaders to reexamine where and how manufacturing happens and to focus on improving transparency, flexibility, and resiliency. They recommended tech companies double down on their digital transformation efforts, emphasizing cloud infrastructure improvements, data and analytics capabilities, cybersecurity, and business model evolution. They also suggested that organizations reorient and reskill their workforces in order to optimize remote work capabilities and take full advantage of advanced technologies such as AI.
At the start of 2022, many of these issues remain front and center for technology companies, with one important difference: Leaders now have an opportunity to address these challenges more deliberately and purposefully. Instead of managing an immediate crisis, they can lay solid foundations for future innovation and growth. Some of the specific themes we see playing a foundational role in 2022 and beyond include:
• Taking cloud and everything-as-a-service to the next level. As more companies embrace cloud and service-based IT to drive innovation and transformation, and as XaaS providers multiply, more work will be needed to manage the technical and operational complexities of hybrid, multi-cloud approaches.
• Creating the supply chains of the future. As technology companies continue to recover from pandemic-induced supply chain disruptions, they will start proactively preparing for future uncertainty and other systemic risks. To do it, they’ll build systems with better visibility and resiliency.
• Building the next iteration of the hybrid workforce. With more experience utilizing a hybrid workforce under their collective belts, tech companies will evolve their cultures, accelerate experimentation with collaboration solutions, and develop better approaches to managing tax implications.
• Leading the charge to create a sustainable future. Although the tech industry is working to address critical sustainability issues, growing pressure from stakeholders and potential changes to environmental, social, and governance (ESG) reporting rules will incite tech companies to heighten their focus on reducing and reversing environmental impact.
The technology industry has largely thrived over the past two years, but that momentum may not be sustainable. To enable the next wave of growth, technology companies should rededicate their efforts to improving transparency, agility, collaboration, sustainability, and digital innovation.
Taking cloud and everything-as-a-service to the next level
Workforce challenges and changing IT demands spurred by the pandemic are accelerating the shift to services: software-as-a-service, infrastructure-as-a-service, and platform-as-a-service will continue to gain popularity, and hardware-as-a-service will increasingly catch on as a way for businesses to provide integrated services to their hybrid workforces. What’s more, leaders view everything-as-a-service (XaaS) as critical to their digital transformation and key to creating new solutions and business models to thrive in the new normal.
Cloud is rapidly becoming the preferred platform for enabling XaaS and spurring innovation—powering AI capabilities, intelligent edge services, and advanced wireless connectivity. Many organizations are leveraging a hybrid, multi-cloud strategy to increase access to best-in-breed technologies, optimize costs, improve resilience and reliability, and minimize vendor lock-in. Moreover, distributing workloads—across multiple clouds and on-premise—can help enterprises satisfy requirements around performance, data security and privacy, regulation, and cost, which can vary by application and geography.
The complexity of this multi-cloud, multi-vendor approach means organizations will need a way to seamlessly integrate and coordinate a multitude of cloud-based applications and data from a single platform or dashboard. Tech companies are stepping forward to meet this growing need for orchestration, and we expect the playing field for solutions to grow over the next few years.
Creating the supply chains of the future
The supply chain disruption that occurred amid the pandemic affected everything from automotive production to consumer appliances, medical devices, and even toys. Its impact extended far beyond the semiconductor sector, exposing the tech industry’s critical chokepoints across complex distribution and supply chains.
Supply chain bottlenecks have affected the indirect channel partners and distributors of tech companies as well. Rising product prices have led them to take financial hits in the form of higher discounts offered to customers, and potentially losing out on business to tech companies’ direct sales channels. In 2022, tech companies should work with their channel partners to review channel performance and relationships, change and adapt channel programs, and figure out new ways to go to market together.
To effectively deal with future (and potentially greater) supply chain challenges, tech companies should build their supply networks with the ability to offer granular visibility across all tiers and levels. Incorporating advanced technologies such as 5G, robotic automation, blockchain, and AI can provide sales, distribution, and channel executives with near-real-time insight, and better visibility into diverse areas across their supply chain, logistics, and channel operations.
Building the next iteration of the hybrid workforce
Many have said that 2021 was the year of the “Great Resignation,” driven by changing employee attitudes and expectations because of the pandemic. And while the tech industry is accustomed to high turnover, intense competition for talent, and critical shortages in emerging technology experts, it has nonetheless been hit especially hard. What makes this year different is that hybrid work is now the norm.
To attract and retain talent, technology companies are trying to capture the best of both the at-home experience and the in-office one, balancing the flexibility their employees are demanding with the business needs of their organization. Tech companies that do not adapt may struggle to maintain a unified culture, feeling of belonging, and sense of fairness among their employees, with respect to advancement and compensation.
To address this challenge, companies should focus on three areas: creating equivalence between in-person and virtual work, driving purposeful engagement, and establishing rules on how and when to co-locate. Equivalence ensures that all employees can be equally involved regardless of location, individual sensitivities, and working styles. Purposeful engagement requires engineering moments that matter in order to build strong connections. Co-location rules require broad agreement on what talent needs to be concentrated in one location, when to have in-person interactions, and how to make the most of them.
Leading the charge to create a sustainable future
Tech leaders are aware of the environmental impacts from current technology systems. Manufacturing processes, billions of connected devices, and proliferating data centers come with enormous energy demands. As a result, the tech sector may be responsible for 2%–3% of the world’s greenhouse gas emissions.
Thankfully, technology leaders are already taking bold actions to drive essential change. Several have set ambitious goals for reducing their carbon footprints, and we expect tech giants will continue to be top global buyers of renewable energy in 2022. Some tech companies are tackling the e-waste problem, using more recycled materials in their products, designing them for better repair and recycling, and promoting a circular economy for electronics.
Perhaps most significantly, we expect tech companies to accelerate the creation of digital innovations that track and mitigate the effects of climate change. For example, environmental monitoring satellites, IoT, data analysis, blockchain, and AI can be used to increase efficiencies of buildings, manufacturing, and agriculture; improve data center management; and reduce traffic congestion.
In the coming year, tech companies should be on the lookout for the potential signals of change in the market, including
• New approaches, vendors, and evolving leaders for multi-cloud orchestration.
• Advances in risk management for multi-cloud, multi-vendor environments.
• Changes in the predictability of product lead times that could make it more difficult for tech companies to manage prices for products.
• Potential trade policy changes between the United States and other key regions that could affect how tech companies source products and contract with global suppliers and distribution channels.
• The evolution of enhanced employee benefits, well-being programs, and flexible, hybrid workplaces. In the coming year, tech companies should be on the lookout for the potential signals of change in the market, including:
• Activity in the collaboration technology market, including acquisitions, partnerships, and significant new upgrades and enhancements to established products.
• Regulatory discussions and potential decisions around ESG reporting—which may require tech companies to allocate more resources to comply with the evolving rules.
• Emerging technology-driven innovations to combat climate change and increase sustainability.