In its new Worldwide Black Book Live Edition International Data Corporation (IDC) stated that the European ICT market was expected to grow year on year by 4.1% in 2022 in constant currency terms. It also stated that in current annual value, the market will decrease year on year by 3.2% in 2022, due to exchange rate fluctuations, including the continuous drop of the euro against the US dollar. This currency value drop was due to the Russia/Ukraine war, which is negatively impacting the overall eurozone economy, with increased prices for oil, gas and food, as well as suspended natural gas supply from Russia. Growing inflation, supply chain constraints and geopolitical conflicts will also negatively affect the European PC and tablet markets, which will inhibit overall ICT spending in the region.
In contrast, despite the unfavourable macroeconomic environment, spending on software and security hardware in Europe is expected to stay relatively stable over the next few years. Cloud has emerged as a key technology for helping organisations increase their resiliency and the latest version of the Black Book Live now includes a cloud spending view of the market. Overall cloud-related spending in Europe is forecast to constitute almost one-third of total technology spending in 2022 and its share will keep increasing over the next five years.
Almost 43% of the total spending on server and storage markets in Europe in 2022 is expected to be focused on cloud enablement; this figure will grow rapidly in the next few years, making up half of this infrastructure spending by 2024. Many companies will continue to invest in modernisation of their infrastructure, which entails an accelerated shift to cloud in order to make IT budgets more stable and ensure Business Continuity, especially in periods of recession or disruption.
Software spending in Europe is expected to stay more or less stable over the coming five years, as organisations rely on software to support their Digital Transformation initiatives. Investments in cloud software will exceed 40% of total software spending and post a double-digit growth rate to surpass non-cloud software spending in 2024. Cloud migration will become a priority for organisations, with a focus on AI platforms, collaborating applications and security solutions and cloud-related spending will surpass spending on traditional software deployment in one to two years.
Many IT services providers will continue to expand the scope of their cloud professional services and managed cloud services, including planning, deployment, implementation and management of cloud environments in order to assist customers at any stage of their cloud journey. This will drive cloud-oriented services spending to exceed 25% of the total services spending in Europe in 2022. Cloud-related services spending in Europe will record a growth rate between 16% and 19% over the next five years.
“European companies are considering cloud adoption to help them overcome the disruptive effects of the worsening economic and geopolitical situation,” said Lubomir Dimitrov, Research Manager for IDC European Data & Analytics. “Business Continuity, security and Disaster Recovery plans will be the main focus of cloud deployments.”
Ayman Sayed, President and CEO at BMC
In 2023, the tech landscape will be dominated by a number of key macrotrends. We can expect the future workplace to continue shifting, with sophisticated technology enabling more flexibility around how and where employees work.
Alongside this, the companies driving global growth are also expected to change, with geopolitical challenges continuing to alter how business is conducted. Predicting market shifts and finding ways to succeed takes an incredible amount of data analytics and insights, and this will only grow in 2023.
Supply chains, including procurement, manufacturing, distribution, inventory and last-mile delivery, have changed in ways where data and insights are critical. For many, there is incredible pressure to ensure that supply chain changes can be absorbed to shield customer and employee expectations.
Another key macro trend is that of cybersecurity, which is growing in importance and increasingly shifting away from only being the job of a CSO. Now, cybersecurity is everybody’s job. This needs to be done in a way that does not create friction or slow businesses down and this is a change we’ll see continue into 2023 as companies become increasingly digitalised and data-driven.
This ties in with another key trend: the growing value of data. Statista reports that every person will create 97 zettabytes of data by the end of this calendar year. That is 21 zeros after 97 bytes of data. This creates immense opportunity if we can capture, analyse and apply it for better business results — and businesses are increasingly waking up to the new opportunities to make their data more beneficial.
Finally, we’ll see a continued rise in the expected standard of corporate social responsibility among tech companies. The socially responsible organisation creates an opportunity and expectation for each of us to make the right decisions and collectively impact climate change, diversity and inclusion, to make the world a better place. Because doing good in the world is good for businesses.
Paul Brucciani, Cyber Security Advisor, WithSecure
Cryptocurrencies will be the focus of the most sophisticated and persistent attacks. The inflationary forces welling up in economies running on ‘fiat currencies’ (i.e. paper-based promises to pay the bearer a certain amount, backed by the issuing bank) will attract increasing interest from investors. Cryptocurrency wallets and exchanges will be targeted by criminals and nation states.
The FAANGs will be in the dock
The FAANGs (Facebook, Amazon, Apple, Netflix and Google) will come under increasing scrutiny by regulators around the world, for two reasons:
- Cloud service availability: A large-scale, prolonged cloud service outage will raise questions about concentration risk
- Market failure: AWS, Microsoft or Google will become embroiled in antitrust concerns as cloud service users become ever more dependent on the three service providers that control half the global market.
Satellite communications: A geo-political target
Private satcom initiatives like Starlink will be viewed as trampling over long-standing international agreements about the exploitation of space, raising geopolitical tensions. This will lead to the space powers discussing the creation of a geospace treaty to bring order to how Earth-orbiting satellites are managed. Until then, they will be targets.
The fragile digital world
The irony is that the Internet was created during the Cold War to overcome telecommunication vulnerability, yet today, as geopolitical tensions rise, it is now the source of vulnerabilities. A large amount (90%) of international Internet traffic travels through just 436 submarine cables, if several lines are severed, which is easily done, there is very limited spare bandwidth to cope. Expect Internet connectivity to come under threat in response to adverse geo-political events.
If there is a ‘plan B’ worth having it is ‘How we will operate without the Internet’.
Green computing
Cryptocurrencies like Bitcoin are digital money protocols that enable peer-to-peer transactions without need of a central intermediary. Data mining is a computationally intensive way to prevent fraud and create trust among cryptocurrency users. The Bitcoin network alone, for example, uses as much power as an entire country like Malaysia or Sweden. Cryptocurrencies like Bitcoin will come under pressure to provide greener ways to maintain security.
The Ethereum Foundation says its switch from a ‘proof of work’ to ‘proof of stake’ verification method has led to a 100% reduction in energy for computation. Although it is a more environmentally friendly alternative to proof of work, it is also less secure.
Expect to see environmental regulation of computationally inefficient cryptocurrency service providers. Expect to see new forms of fraud based on subverting the ‘proof of stake’ security approach.
Tony Lysak, CEO of The Software Institute
The European technology industry is facing strong headwinds in the next 12 months, amidst rising economic uncertainty and geopolitical tension on the continent. Major technology brands, many of which increased hiring and salaries to capitalise on demand as the world reopened post-COVID, have been forced to make deep and significant cuts to their workforces. This radical realignment of the workforce will be the common theme in 2023 as more technology companies look to deliver sustainable, long-term growth.
Flexibility lies at the core of every successful workforce transformation. To keep pace with the rate of change, companies need to accept it as a constant and commit to the continual development of workforces in a cost-effective way. To achieve this, they need to prevent the ‘bloated middle’ and avoid excessive hiring of expensive mid-level employees who, while experienced, may lack the knowledge of emerging technologies and systems. Given the ongoing digital skills shortage (which pre-dates the pandemic) these people tend to have inflated salaries but a skillset that has more potential to become obsolete as technologies evolve.
The most effective approach for technology companies looking to stay lean and agile is to adopt a model whereby one expert of 10-15 years’ experience leads and mentors an underlying team of four – whether that is engineers, developers, or consultants. For simple repeatable tasks the ratio could extend to 1:8 but, for more complex tasks, 1:4 is the ideal.
It is important to note the short-term need to reshape workforces does not mean demand for digital talent will dissipate. Rapid and widespread digitalisation has transformed the nature of work to the point that digital skills are now a prerequisite in the modern workforce.
Given the ongoing geopolitical issues and rollout of new technologies, it is more important than ever that organisations have effective cybersecurity and software developments skills and systems in place. Whether it is shifting to a cloud-only supply strategy, employing the right CRM software, or reinforcing cybersecurity infrastructure, organisations – especially the largest technology companies – need to have a clear action plan for developing sustainable capabilities to meet these demands.
As we look to the future, there are – to coin a phrase being used by many politicians right now – ‘choppy waters ahead’. But the European technology industry is, for the most part, resolute and well-placed to come through this challenging time.
New technologies will continue to emerge that will transform the human resources and IT requirements of large businesses. They may find they require less of certain skills and more of others but being able to hire and retain the required talent and equip them with the right skills for Digital Transformation projects at an effective cost is critical for businesses that wish to continue to enjoy a competitive advantage.
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