Go back to the first video in this series, Top 3 Predictions for 2023 to Act On Now.
Paul Gottsegen
So, first of all, peel that layer of digital into what are the subsectors? What does digital even mean these days? What are the parts of digital that are non-discretionary next year?
Steve Hall
So, Paul, I think the spend on digital and why I'm taking a contrarian view is over the last several years we have seen the market at a seven and a half billion, basically per quarter. It was good, but most of that spend was coming from I.T. Through 2022, we really saw 9 billion of spend per quarter - significant growth that was going to the service providers that we typically cover.
But what we saw was growth across the enterprises. Now, what do I mean by that? Engineering, industry, specific BPO applications, they all increase significantly. The challenges that we saw or the opportunities, even better word for it, that we see is engineering is exploding. So everything from IoT, IT OT integration, all of these things are changing how we do work. Manufacturing is being completely disrupted with electronic vehicles, batteries, different components coming together, all of which requires a really different way to manufacture and develop. Knowledge workers have changed industry specific BPO, from claims processing, loan processing, to critical care, all of that is now driven by digital technologies and they're all being driven at the top end of the market.
So I think what you're going to see is continued spend there. And again, even as we go into what could be a tough recession which can be particularly difficult for retail and others, I still think on the tech side, we're going to see really strong growth for most of the service providers in the space, but also across banking, insurance, manufacturing, utilities, and energy. I think you're going to see a lot more spend on the technology side of the house.
Paul Gottsegen
Well, just one follow up question on that. Not really a prediction, but just given that prediction, how do you advise clients to find the money to fund these non-discretionary digital investments while they're just managing day to day operations?
Steve Hall
Yeah, it's a brilliant question on a lot of fronts because if you think about some of the capital, capital is going to increase for them because of the inflationary pressure, the interest rates and things there. But more importantly, there's a great cost optimization play here. So how do you think about reducing your cost of software, reducing your cost of network, and reducing the cost of capability across. Once you do that, how do you take that money reinvest it into some of the digital components that we talk about? But I also think there's going to be new money. There's going to be spend coming from manufacturing, there's going to be spend coming from other organizations. It’s just not an IT bucket anymore. And finally, I think the last thought on this is there's going to be a lot of revenue generating opportunity because of the digitization of data. And those revenue opportunities will have its own business case. You'll see spend go into that as we see more and more monetization of data just like what we're doing internally, you're going to see lots of organizations do that externally as well.
Continue to the next video to dive into Trend #2: The energy crisis fuels cloud consumption.
About the authors
Paul Gottsegen
Paul is President, ISG Client Experience, managing the firm’s marketing activity globally, including demand generation, branding and communications. He is a leader in the firm’s work to establish and maintain a leading position in AI and new technologies and to capitalize on the opportunities they present. From 2019 to 2023, Paul led the ISG Research business to great heights, and continues as Chair, ISG Research.
Paul was a classic product marketing leader for PC hardware for the first 20 years of his career, including launching the industry’s first network servers. He has since applied that product marketing experience to CMO roles in large services firms. While marketing is his “center of gravity,” he has led large sales organizations and has been a general manager with full P&L responsibility.
Prior to ISG, he was the Chief Marketing Officer for Mindtree and Infosys, completing end-to-end branding and marketing turnarounds. As Vice President of Enterprise Marketing at HP, Dell Inc., and Compaq earlier in his career, Paul led product marketing, revenue marketing and enterprise alliances for the network server businesses.
Paul is Board Chair of the Gastric Cancer Foundation. He holds a bachelor’s degree in computer science from Brandeis University and an MBA from The Wharton School.
Steve Hall
Steve is President, ISG EMEA, providing strategic insight and advice to help ISG clients in the region solve their most critical business challenges and adopt and optimize the technology and operating models they need to compete successfully.
Steve was named Chief AI Officer in 2024. He leads the firm’s work to help clients create an AI strategy, establish a business case for investment and select the right business partners. His industry-leading expertise in navigating the complexities of adopting technology at scale is helping clients drive value into every aspect of their operations.
Steve joined ISG in 2005 and has led ISG Digital Advisory Services, Emerging Technology Services, Global Product Engineering and Application Development & Maintenance. He is trained as a software engineer and holds a bachelor’s degree in computer science from Regis University.
