Top 12 DevOps Trends for 2023: What to Expect

The world is in turmoil in 2023. Supply chains still haven't fully recovered from the pandemic, Russia is waging war in Ukraine, and inflation is galloping across the globe. In an interconnected economy that heavily relies on software products, tech companies are certainly not immune to these shocks.

In this article, we'll explore how the present recession is impacting the tech industry and look at possible ways to counter its negative effects.

Recession 2023: fears vs. data

Inflation in the US reached a dangerous peak of 9.1% in June 2022, limiting the US dollar's purchasing power and slowing down consumer spending. However, as you can see from the graph, the rate went down to 6% by February. 

The Federal Reserve has raised interest rates by another 0.25% to curb the raging inflation. The 4.5% to 4.75% range is still the highest since 2007, and more hikes are expected. The high cost of borrowing should slow down the heating economy, but in the past, similar actions by the government preceded major recessions.

At the same time, the Bureau of Labor reports that the February 2023 unemployment rate was at 3.9%, down from 4.1% exactly a year ago. This is a reassuring trend, and many experts agree it may signify a "soft landing" for the economy.

So, should we be concerned? And is an economic recession unavoidable in 2023?

To get a good idea of where things are headed, we need to monitor several economic trends. Luckily, there are aggregate indices we can use for a comprehensive assessment. One of them is the Leading Economic Index (LEI), published monthly by The Conference Board.

LEI combines data from 10 critical US economic indicators, such as new orders in manufacturing, prices of common stocks, interest rates, the unemployment rate, building permits, and so on.

Here’s a visual representation of LEI’s fluctuations over the past two decades.

The three deep downward spikes are the 2000 dot-com bubble, the 2008 “Great Recession,” and the 2020 Covid-19 fallout. According to recent data, the US economy is currently on a dangerous trajectory, with key indicators pointing to an imminent recession.

Below are some key facts and figures from the Board's latest press releases that include a number of indexes:

• LEI saw a 0.3% decline in February 2023, but the negative dynamic is slowing down — from a sharper 1.0% drop in December.
• US consumer confidence dropped in February from 102.9 to 106.0 points, reflecting the buyer's reserved stance in light of the ongoing inflation. 
• Job growth has been strong in 2023, indicating the labor market's resilience. The Board's Employment Trends Index (ETI) increased slightly in February (118.29 points vs. 118.14 in January), marking a turning point in the number of jobs available in the US. 

Even though some indicators do point to a looming recession for the US market, the downward dynamic is not as concerning as with previous recessions. The economic slump in 2023 is unlikely to be as deep or prolonged as the one in 2008. And we probably won't reach the negative values of the 2020 Covid-19 downturn.

Here’s something else to think about: not every industry is affected by a recession to the same extent. That said, the latest developments in the tech market show how sensitive it is to such global events.

Let’s take a minute to look at the most notable effects of the current economic fallout on the IT industry. 

The Silicon Valley Bank and Signature Bank debacle

When the news of SVB’s imminent bankruptcy broke out, the hearts of many startup owners and investors around the world froze in terror. A few hours later, Signature Bank — which also catered to the needs of technology startups — collapsed too. Ironically, it was clients from the tech industry who pulled the rug from under their feet by hastily withdrawing money from accounts. 

However, the Federal Deposit Insurance Corporation quickly announced it would guarantee the banks' depositors access to their funds. The government went above and beyond anyone's expectations by canceling the $250,000 cap on insured funds. 

The meaning of this bailout is twofold:

1. The US government realizes the importance of the tech sector to the overall health of the economy.
2. As opposed to the 2008 crisis, the Fed is prepared to offer financial assistance directly to the banks' customers, not just save the institutions.

By urgently providing help, the US government averted a crisis that could have had serious repercussions for tech startups. The stock market wasn't so lucky.

Big Tech stocks plummeting

2022 hadn’t exactly been a good year for the big tech stocks. Most major players reported a significant decrease in their stock value. 

Meta suffered the most losses: its stock dropped over 65%, negatively affecting 5-year returns. Collectively, the six largest US tech companies lost about $3.8 trillion of their market value in 2022. The situation stabilized somewhat by the end of the year, but when the time for quarterly reports came, new shocks followed.

Microsoft caused a major panic when its stock dropped 1.3% in late January this year. The reason was the company’s poor financial performance in Q4 of 2022, its worst numbers since 2016. Microsoft also managed to drag down FAANGs with it: Facebook (Meta) fell 1.1%, Amazon - 1.5%, Apple – 1.5%, Netflix - 0.5%, and Google (Alphabet) lost 3.4%.

However, in March, tech stocks were on the mend again. The Wall Street Journal now says the SP500 tech stocks could be a "safe haven" for those wanting to insulate themselves from the recession. 

Despite the seeming stability of their stocks at the start of 2023, many tech giants are letting employees go in record numbers. 

Massive layoffs

The figures from January look concerning and reflect the lowered expectations of demand for tech companies' products and services. 

However, a large percentage of these furloughs by the big names can also be attributed to overhiring during the pandemic. That's how Google's CEO, Sundar Pichai explained the coming layoffs to the company's employees.

Microsoft seems to be using the same logic. The company's headcount grew from 163,000 to 221,000 in two years. As Microsoft is shifting focus from hardware to AI, it will have to cut many jobs.

Here are some of the most shocking numbers:

Alphabet (Google)

Google is planning to let go of 12,000 employees and cut back on bonus payments to its top executives. 

Microsoft

The tech giant is prepared to cut its workforce by almost 5%, which amounts to about 10,000 jobs. 

Meta

The company already parted ways with 11,000 people in November 2022 and announced a further 10,000 layoffs this March. Meta has lost much of its valuation due to the shrinking user base of Facebook and the heavy investments into the Metaverse project.

Twitter

Following the acquisition of Twitter by Elon Musk in October 2022, the company laid off almost 50% of its workforce. It's estimated that 2000 remained of the previously 7,500-strong workforce, with a further 200 laid off in February. It's unclear whether the decision was prompted by the market conditions or the new owner's desire to hard-reset the service.

It's not just the big names who are laying off their staff. Smaller IT companies are also putting employees on the bench, hoping to wait out the storm without losing talent. The culprit here is the same — a decline in demand.

Shrinking client budgets

Available data is scarce, but we know from insider channels that many small and mid-sized IT companies are seeing budget cuts from their clients. As the economy slows down and operational costs increase, businesses are reducing non-essential spending.

According to SWZD's 2023 State of IT report, business owners intend to save costs on IT services in one or more of these ways:

• Re-evaluate vendors and renegotiate contracts
• Delay tech purchases (including software solutions)
• Adapt existing products and services
• Look for cheaper equivalent solutions on the market
• Reduce own services, leading to less need for IT support

So, unless it's insulated with tons of cash, a tech company needs to adjust to meet those changing client needs.

It's clear that IT companies should be cautious and work on improving resilience in these uncertain times. However, a recession is always an opportunity to make a quantum leap and get ahead of the competition. In order to navigate the ever-сhanging business landscape, tech firms need to devise a balanced strategy. 

Below are some of the things that IT companies can do, or are already doing, to tackle the challenges of a recession.

Saving costs and building up cash reserves

Even though we're exiting the bear market (stocks are on a firm upward trajectory), accumulating some financial fat is still a solid recommendation. 

Many IT companies choose to temporarily freeze bonus programs, promotions, and salary reviews. Some may have to resort to layoffs or at least benching their employees when clients don't pay for their hours. These days, such steps are often necessary to ensure business continuity.

Optimizing processes

When business is slow, it may be a good time to review and update internal processes. This includes security practices, talent acquisition and retention, and project management approaches. 

For example, an IT company may work on its change management or switch to a DevOps workflow for better efficiency. Or explore the benefits of technologies like blockchain for improved security and continuous delivery. 

Strengthening core partnerships and competencies

Another strategy for surviving and thriving in a recession is focusing on the services and clients that generate the most revenue. 

Instead of chasing new projects, an outsourcing firm may want to concentrate on retaining its strategic partners.

For those who develop their own products, it's a good opportunity to invest in their core expertise and keep building their brand's reputation on the market. 

Unlocking revenue streams with new business models

Adding new services to a company's offering is a great way to ensure flexibility in a market in recession. We're not talking about creating these from scratch but rather basing existing services on a different model. 

Many tech firms are tapping into the growing "as-a-Service" market to achieve that. Estimated at $545 billion in 2022, it's expected to reach $2,378 billion by 2029.

Clients love this format because it offers subscription-based managed access to the tech partner's services and resources. And it doesn't make a dent in their budgets. 

Investing in employee training and hiring strategically

Prospects may look gloomy now, but soon the economy will inevitably expand, and it's smart to plan for that. This is why tech companies are using this chance to snatch the talent they need while the job market isn't at its hottest. A recent survey shows that 79% of employees that were laid off from tech firms found new jobs within three months.

At the same time, many choose to offer free training for their employees on the bench. 

Planning for the long game, decision-makers know that demand will increase again, and they will be ready to handle it with in-house expertise. 

To sum up, every tech company's situation is unique, and no magic key opens all doors. Depending on the available resources, client relationships, and overall financial climate, a tech business may opt for a more conservative or daring approach.