CIOs are in a holding pattern

Recent conversations with information technology decision-makers show a stark contrast between the period exiting 2023 and the mindset leaving 2022. While security efforts are still being funded, those that enable business initiatives that generate revenue take priority over cleaning up legacy technical debt. Cloud has become fundamental and getting data 'right' is a consistent theme that appears to be an underpinning of initiatives getting funded today.

Erik Bradley's recent ETR year-end panel featured a DevOps and Site Reliability Engeineering manager in financial services, a chief information security officer in a large hospitality firm, a director of IT for a big tech company, the head of IT infrastructure for a financial firm and a chief technology officer for a global travel enterprise.

You're cruising along at full speed on the highway and suddenly you see red taillights up ahead, so you tap the brakes. Then you speed up again, traffic is moving along at full speed, so you think nothing of it. And all of a sudden the same thing happens - you slow down to a crawl. And you start wondering what the heck is happening. So you become a lot more cautious about the rate of acceleration going forward. Back in June we reported that despite the macro headwinds, CIOs were still expecting 6% to 7% spending growth for 2022, down from 8% at the beginning of the year, but given Ukraine and Fed tightening, that still seemed pretty robust. Amazon.com Inc. is a good example of this - there are others - but Amazon entered the pandemic year with around 800,000 employees. It doubled that workforce during the pandemic. Right before Thanksgiving 2022, Amazon announced it was laying off 10,000 employees and Andy Jassy, Amazon's chief executive, just announced this past week that number will now grow to about 18,000. In reality, this is a rounding error and Amazon's headcount remains far above 2019 levels. But its stock price does not, as its valuation is now under $1 trillion.

Importantly, not everything is on hold. This downturn is different from previous tech pullbacks in that the speed at which new initiatives can be rolled out is much greater, thanks to the cloud, and if you can show fast return, you'll get funded. Unless it's driving fast business value, they're holding off on modernization projects. However, business enablement initiatives are still getting funded. The two primary strategies CIOs are using to save money are: 1) consolidating redundant vendors; and 2) optimizing cloud spend. Initiatives are being funded by stealing from other pockets of budget. 1 priority 1 technology priority in 2023. Specifically cloud, cloud native, container and application programming interface security are the main areas of focus. CISOs report there are still holes to plug from the 'forced march to digital' during COVID. Although optimizing cloud spend is definitely a strategy organizations use to cut costs, there's very little evidence that cloud repatriation - moving workloads back on-premises - is a major cost-cutting trend. 'Real-time' we sometimes define as 'before you lose the customer.' These job markets remain tight.

We've said many times that prior to COVID zero trust was this fuzzy buzzword. Even today, the joke is if you ask three people what is zero trust, you'll get three different answers. But that's changing. Ask ChatGPT and you'll get the following answer, which is generally acceptable: It encompasses strong authentication and multiple identity layers. It requires taking a software approach to security instead of a hardware focus. I see huge promise in that space. Instead of searching for IP addresses, you can read emails at light speed and identify phishing threats. And when you talk to CrowdStrike Holdings Inc., Zscaler Inc., Okta Inc., Palo Alto Networks Inc. and many other security firms, including Amazon Web Services Inc., they're listening to these narratives and working hard on skating to this vision of a zero-trust architecture.

A digital business is a data business. And data is at the core of such a firm. So it's no surprise that this topic gets a lot of mindshare amongst practitioners. But getting enough value from data is still a challenge for most organizations. Or data lives in silos within different business units, different clouds, on-prem and now increasingly at the edge. It seems the problem will get worse before it gets better. Although it's early days for most customers, many practitioners with whom we spoke see this as a strategic imperative. Only then can you take advantage of tools like ThoughtSpot. They haven't integrated in a way AWS and Snowflake do with SageMaker. Moving the data is too expensive, time-consuming and risky, so we've mostly stayed on AWS. As well, Databricks Inc., while taking a different path, understands the powerful nature of this trend and the importance of ecosystem integrations to make it a reality. But it's still not pretty across clouds. And Google LLC's posture seems to be 'we're going to let our database product competitiveness drive the strategy first and the ecosystem integration take a back seat.' Owning the database is critical and Google doesn't want to capitulate on that front. BigQuery is high quality and competitive. And strategies that prioritize integration work. Apple and Oracle are two examples. However as we've said many times, strong ecosystems are the hallmark of a public cloud company. They're killing it in database. Take Redshift, for example. It continues to grow, as does Aurora and other data stores. But AWS realizes it can make more money in the long term partnering with the Snowflakes, the Databricks, the MongoDBs, the Couchbases and others of the data platform world versus sub-optimizing their relationships with partners and customers in order to sell more homegrown tools. The fundamental fact is that data will remain distributed. Moving data is expensive and hard. Standards to share and join data across clouds will require new standards but will open up new revenue generating opportunities that many firms have on their strategic planning radar. IBM Corp. chose OS/2 over Windows and for years attempted to win in PC operating systems. Lotus Development Corp. refused to run on Windows when it first came out and instead supported Digital Equipment Corp.'s VAX/VMS operating system. IBM initially wanted to run its best software only in its cloud. Same with Oracle Corp. VMware Inc. tried to build its own cloud. But eventually, when the market speaks and reveals what seems to be obvious to many years ahead of time, a vendor faces reality and stops wasting money to fight a losing battle. In IT we rarely get rid of stuff. Rather, we add on another coat of paint until the wood rots out and roof is going to cave in.

Followers of this program know it's a real sore spot with us. We've heard the stories about repatriation, we've read the thoughtful articles from venture capitalists on the subject, we've been whispered to by vendors that we should investigate this trend. But the data doesn't support it. Even the most 'hardo' chief financial officers understand the business benefits far outweigh the possible added cos