After two very difficult years in the tech sector, everyone is hoping for a comeback. We are looking at a more positive economic climate, the prospect of interest rates dropping, and there is much less talk of a recession. There is a renewed optimism that we could be entering a recovery stage for the tech sector, although it will likely be slow growth to start.
With that said, Deloitte has released its 2024 Technology Industry Outlook, outlining the strategies and areas of focus they expect from tech leaders in the coming year. In a survey Deloitte conducted with tech executives, 55% feel the tech sector is healthy or very healthy today, and 62% feel it will be there in 6 months. Deloitte indicated further that their top priority in 2024 is efficiency, followed by innovation and productivity, and then growth. It is very telling that 62% feel this is the right time for their company to take risks.
With innovation and growth identified as priorities and executives focused more on taking risks this year, we could be looking at an exciting time for the tech sector, particularly with the incredible developments we are seeing in several verticals. Below is a look at some of the areas Deloitte expects tech leaders to focus on this year.
Increased Spending on Software and IT Services
Deloitte predicts that enterprise spending on software and IT services will be a major factor in fueling growth this year. They point specifically to AI, cloud computing, and cybersecurity as specific technologies that will be important here. A report from Gartner supports this idea. Their data shows IT services will become the largest segment of IT spending this year, with spending on IT services expected to grow 8.7% in 2024, reaching $1.5 trillion.
Deloitte suggests that tech leaders should be prepared to shift strategies to meet this demand. While they see enterprise purchasing related to generative AI waiting to ramp up later in 2024, they do expect that the vast majority of enterprise software and services companies will integrate generative AI capabilities into their offerings over the next year.
Globalization vs Self-Reliance
World events have had a significant impact on the tech sector over the past few years. We have been through a pandemic, overseas conflicts, disrupted supply chains, and a patchwork of new regulations at home and abroad. The tech sector has had to do a great deal of pivoting and develop new strategies as they face a rapidly changing world.
The Deloitte report points out that tech companies must continue to be agile in their strategies this year, diversifying supply chains and manufacturing locations and considering spreading operations among trusted regions.
Generative AI Continues to Fuel Growth
The fast-paced developments in the world of AI have led to much excitement, as well as controversy. Lawmakers continue to look at ways to regulate a sector that is moving faster than regulations can keep up, and investors are eager to capitalize on technology that is quickly becoming a part of our lives.
Deloitte is predicting 2024 will be transitional for generative AI. Companies will look at ways to become more efficient and increase productivity, speed up software development through the use of generative AI tools, and deliver and monetize generative AI capabilities. All of this is coming at a time when the legal and regulatory landscape is evolving.
Dry Powder
According to a recent report from BlackRock and Preqin, “dry powder,” or funds committed by investors but waiting to be called, has risen to approximately $4 trillion. When investors commit this level of funds, it means that returns should justify it.
As times got tough in the past two years, investors started doing more thorough due diligence.
Valuations have come down significantly across all stages. This should mean that deals done in the past two years will do much better.
2024 looks to be an exciting year for the technology industry. Not only the AI revolution is taking place right here in front of our eyes but there is a transition going on from Web 2 to Web 3, which Goldman Sachs, Morgan Stanley, and Citi Bank say is worth eight to twelve trillion dollars.
It will be common ground for companies to have a digital-first-strategy where firms will build things digitally before they build them physically. This will require an immense computer infrastructure and software applications that will take advantage of such architecture.
There will be many global complexities and regulatory concerns leaders will have to navigate as they attempt to execute their strategies to facilitate growth and innovation, and agility will be key.
