As 2023 comes to a close, the tech industry faces more disruption than it has in decades. Change itself is nothing new, but the trends that dominated the past year aren’t linear evolutions of established ideas or clear-cut market events. Our understanding of what it takes to run a successful company or build a great tech product has evolved.
Two trends sucked up most of the airtime in the past year: the explosive growth of AI capabilities, and the seemingly endless waves of tech layoffs. The two headline issues can go a long way toward explaining current industry conditions, but plenty of other disruptive trends emerged and solidified in 2023, as well.
In this article, we’ll look at how these trends present growth opportunities and challenges, and how you can navigate both in 2024.
Where to grow? 2023 had some clear answers.
We can’t talk about 2023 without talking about artificial intelligence – it’s been a dominant news story across business, politics, media, arts, science, and education. Most of the attention has been on generative AI, which refers to systems that synthesize new content by “intelligently” following patterns in their data models.
This is the technology behind ChatGPT, “deep fake” videos, and custom-generated itineraries on Expedia. Beyond the thrill of generating Picasso-style portraits of your dog, though, there are serious ramifications for tech companies.
AI could be a boon…
It wasn’t long ago that AI still seemed like a pipe dream. Now that it’s being integrated into our lives in earnest, companies are starting to see some very real benefits.
For software developers
If you’re a developer and you haven’t tried GitHub Copilot or a similar AI-assisted pair programming tool, we’ll wait while you go check it out.
It’s pretty good, right? Not perfect, of course, but for generating ideas and boilerplate code, generative AI is a powerful tool. It’s not up to the task of architecting and implementing a microservices architecture on its own yet, but if you have the vision, it can help you connect the dots very effectively.
AI tools are driving innovation and efficiency for development teams at multiple levels. For example, you’ll find resources for using AI to improve your API governance and documentation, scale up your testing practices, analyze security logs, and many other tasks throughout the software development lifecycle. Individual productivity tools like GitHub Copilot are a good place to start, but the real potential for transforming your development process is in tools that change practices at an organizational level. We’re only beginning to see what’s possible there.
For product teams
For much of 2023, companies seemed to be in a race to announce new AI integrations without much clarity about what they were trying to achieve. Many of the first round of product offerings are likely not to stand the test of time, but commercial applications for AI are still in their infancy, and we’re only beginning to tap the potential. The challenge for product teams is to figure out how to create real value with AI.
For AI to create value for your business, it has to first not destroy the value of your existing assets – that’s imperative for product teams to remember. It’s very easy to find examples where companies have been caught flat-footed when AI products deliver misinformation or offensive messages, causing real harm to consumers. Your AI-enhanced products require human oversight – and they’ll require it for the foreseeable future. You must also build knowledge of your organization’s assets and vulnerabilities.
With the right input and supervision, AI can enhance your products and product teams in multiple ways. As with developer tools, a lot of what AI has to offer to product designers is efficiency and inspiration. AI tools can improve your data analysis, write UX interview scripts, contribute to brainstorming, translate sketches into digital assets, scale up your prototyping and A/B testing, and do competitor research.
The other obvious growth area for product teams is building products that directly implement AI in the design. Keep a couple of principles in mind:
- Focus on how AI can enhance the value of your core offerings: TripAdvisor has an incredible depth and breadth of data in the form of traveler reviews – their new AI-assisted travel planner consumes that data and incorporates it into its recommendations. They’re not reinventing themselves, just offering a faster pathway for consumers to discover the value of their primary data assets.
- Protect your vulnerabilities: AI doesn’t do very well with judgment calls or open-ended interactions – researchers have tricked system after system into disclosing sensitive information and making alarming statements. So you need to be aware of your vulnerabilities and offset them. The TripAdvisor tool is a good example of a well-controlled AI tool – the system won’t respond to inputs that aren’t listed as options, and the outputs have a standardized format. In addition to being a relatively safe AI implementation, it’s also a good product strategy – consumers like products that they understand and that extend naturally from their knowledge of the brand.
AI isn’t going to start taking over the entire product design and development process anytime soon. Human oversight and subject-matter expertise are still essential to getting value out of AI products, but the potential for increased productivity and creativity is exciting.
For other tech stakeholders
Even if you’re not looking for major product development opportunities with AI, there are growth opportunities that capitalize on it indirectly. AI has an incredible hunger for data and computing resources, which will require support from other parts of the tech ecosystem.
At the same time, innovations generated with applied AI have the potential to positively shape other technologies. Two other tech trends illustrate the symbiotic relationship between AI and the industry as a whole: the cloud and automation.
AI in the cloud, AI for the cloud
By 2024, the cloud computing market is set to grow more than 50% compared to 2021, topping out at nearly $700 billion. It’s good news, albeit tarnished considering that cloud computing is environmentally costly and cloud waste is rampant. That said, it’s also an enormous opportunity for innovation.
AI practitioners can still choose to host data models and applications on-premise, but increasingly, commercial applications are moving to the cloud, which provides more flexible pricing and usage terms. The shift comes with security and privacy concerns, though, and cloud providers will need to be more attentive than ever. Overall, cloud providers with expertise in AI applications will have an edge as that market expands.
Meanwhile, AI might be the path to a more efficient cloud. System architecture involves a lot of data analysis and pattern prediction as teams try to build a cloud application best suited to their needs. Data analysis and pattern prediction are where AI excels (really, that’s all it is), so there’s a lot of opportunity to build and employ AI-based tools in cloud architecture.
Automation, but perhaps not autonomy
For many companies, one of the most desirable outcomes of implementing AI tools is to cut down on human busywork. People, the thinking goes, should do the work that’s most essentially human (though what that is remains vague), while computers should take on as much routine work as possible. That’s the goal of intelligent automation, which is the practice of automating cross-functional business tasks using AI, workflow automation tools, and robotics.
AI experts are only one part of the team of people required to create these systems. Teams making workflow automation software (like Zapier or Slack integrations), robotics, and consumer interfaces will also need to be part of this transformation, and those prepared to work with AI will see more growth opportunities ahead.
One caution about automation – we’re nowhere near the point of setting AI-based systems off on their own to run factories, restaurants, or payroll systems. Human oversight and quality control are going to remain essential for a long time, perhaps forever, but even those jobs are subject to evolve with AI. To understand how, consider how AI data models are trained.
A basic principle in AI, crudely stated, is “garbage in, garbage out.” Put another way, AI is only as good as the quality of data in its models. AI companies depend on a huge number of people to screen, categorize, and clean data before it ever enters their model-training systems. The sheer scope of that labor is easy to overlook, and employees training AI models are often not well-compensated. Among the hazards of this system: some people are using AI to do this very work, leading to feedback that reinforces the biases of the AI models and increases the potential for errors.
This kind of ad hoc automation is not a good approach, but the demand for data is outstripping the supply of people able to do the work at current pay. Moving forward, there’s a significant opportunity to improve these processes and, as a result, improve the outputs.
Regardless of your specialty within the tech industry, it’s clear that AI is shaping future opportunities. As you look at the future of your organization, consider how you’ll respond to these changes. Even if you don’t engage directly with AI, you’ll be affected by it, as it influences the growth of the entire tech sector.
Do we need to worry about AI doom?
The jury is still out on what generative AI will mean for the future, but we seem to have a consensus that AI is an inevitable force. 2023 has seen a lot of innovation, as we discussed above, but also a lot of concern about the effects of that innovation. Even before the recent upheaval at OpenAI, which stemmed in part from a conflict over principles, executives from AI and media companies faced pressure to account for their ethical practices from the US Senate, creative unions, and healthcare leaders. The range of those complaints highlights the reach of AI and its potential to disrupt huge swaths of society.
At present, no one has yet turned a direct profit from their investments in generative AI. OpenAI, the most high-profile and most widely commercialized player, is organized as an unusual non-profit/for-profit hybrid, reflecting the challenge of building AI infrastructure under typical corporate constraints.
The reasons to be skeptical of AI boosters also go well beyond these practical concerns. Questions need to be asked about intellectual property, models that reinforce the biases of their creators, worker displacement, misinformation and “deep fakes,” the reliability of scientific publications, and other serious issues. While AI may be an inevitable force, it may not prove to be a sustainable one. This isn’t an area to throw caution to the wind; organizations need careful AI strategies to stay on the right side of this trend.
Don’t overlook the other growth trends in the room!
Of course, there was more in the news in 2023 than just AI, including the rise of green (or clean) technology, the proliferation of the Internet of Things (IoT), and the next-generation tech standard for cellular networks, 5G.
Green technology, particularly hardware solutions like wind and solar power generation, comes with a significant challenge in terms of information sharing. For example, a consumer with electric panels on their residence can access production data, which may directly affect their energy consumption. However, other measures, like carbon offsets for flights or the sustainability of different products at the grocery store, remain far more opaque. Greenwashing is widespread, even though an increasing number of consumers want to be able to make environmentally sound decisions. Technology companies can prevent greenwashing, even when they don’t focus on the hardware.
Another major growth area is robotics and IoT devices. Improvements in battery technology, solid-state storage, and mobile data are all opening possibilities that didn’t exist just a couple of years ago. More importantly, they’re dropping the price point significantly, making it possible to distribute robotics and IoT devices much more widely. Home automation and smart home devices are a $100 billion market annually, with growth set to accelerate in the coming years. Factory automation has become increasingly sophisticated, driving down the price of robotics and making it cost-effective for service industries, healthcare, and agriculture. As with AI and clean tech, capitalizing on the growth in this sector doesn’t require deep expertise, as many IoT devices and robotics platforms offer API integrations.
Meanwhile, another slow-burning trend still offers potential. We haven’t gotten the revolution that wireless carriers promised in 2021, but 5G is changing consumer behavior in more subtle ways. The reliability of data streaming has improved significantly, and carriers continue to make 5G infrastructure improvements that should move us closer to the promise. It may not be a bad time to invest in products and tools to take advantage of the increased capacity when it arrives.
Your best path to growth in 2024 may not be an all-in investment in any one of these trends. Instead, it may be an opportunistic adoption of process improvements and tools that help you stay lean and focus on your core business. You might decide to position yourself as a knowledgeable service provider to companies operating in these areas, offering cloud services or UX expertise to those working on the technical cutting edge.
A year for resilience
In our year-end post on API trends in 2022, we mentioned some of the curveballs and roadblocks last year threw our way. If we were hoping for an easier 2023, most of us didn’t get it – but if you’re reading this article, we celebrate your strength and resolve! Reflecting on the challenges of the past year can only prepare us better for the future.
Financial challenges abound
One trend that held over from 2022 was hard to ignore – layoffs continued across the tech industry. While the rate slowed as the year went on, the total number of tech layoffs in 2023 has already exceeded those in 2022. There are reasons to expect 2024 will be better in this regard – most major stock indexes will end the year higher than they started, some by quite a wide margin. Inflation is down, and many people expect interest rates to stabilize in 2024, allowing companies to spend money more freely.
The year has been particularly tough for small companies and startups, which may remain true for a while. The Russell 2000, an index of 2,000 of the smallest publicly traded companies in the US, is the only major stock index that is likely to end 2023 lower than it started. Venture funding shrank dramatically in the first half of the year and so far hopes for a new VC investment boom haven’t panned out.
High-profile bankruptcies were another hallmark of 2023, including one-time “unicorns” WeWork and Convoy. It’s worth noting that 20% of new unicorns in 2023 were AI companies, although as we discussed earlier, that market segment has yet to realize any profits. The landscape of startup investment remains uncertain.
We would be remiss to talk about the financial headwinds of 2023 without mentioning FTX and Silicon Valley Bank. Those two bankruptcies forced many tech investors to revisit funding models and valuation practices. Some of the repercussions were immediate, like restricted cash flow for startups, while others are cause for longer-term reflection on the culture of risk in tech and the industry’s tendency to elevate founders’ profiles.
The last big trend affecting the tech industry’s finances in 2023 was Web3. It’s hard to overstate how dramatically the public mood around Web3 changed over just the last few years. If we were writing this article two or three years ago, we would be talking about the booming markets in NFTs and cryptocurrencies.
In the past year, it’s been difficult to find a single mainstream publication discussing the upsides of Web3. This is not to say that there’s no future for crypto and Web3 ventures, but that investors’ attention has shifted towards building a more resilient, stable marketplace with more modest growth goals, as recent progress towards a Bitcoin exchange-traded funds (ETFs) shows.
Security is more important than ever
Some of us have been preaching this for what feels like our entire careers, but 2023 might have been the year where the broader public finally got the message: Cybersecurity is an essential concern for every person.
Security breaches in 2023 hit a wide range of consumer-facing companies and public sector targets, like DNA-testing firm 23andMe, MGM Resorts, Uber, Roblox, and Duolingo. Consumers had their DNA data leaked, got locked out of hotel rooms, and had their children’s personal information stolen. Gig workers felt a new sense of vulnerability as their personal data was compromised.
No security breach triggered as much public alarm as the one experienced by the password manager app LastPass, and rightly so. The actual attack began in 2022, but the public wasn’t notified of the breach until months later, leading to ongoing financial losses. The company’s mismanagement of the response had the silver lining of increasing public interest in cybersecurity.
The LastPass incident is more fuel for the push to move away from traditional passwords, a trend that seems to be gaining more traction. More companies and consumers are starting to move to multifactor authentication (MFA) and even passwordless auth. The shift could bring major improvements in online security, which is why an increasing number of tech industry players are backing the transition.
No company can afford to cut corners on security. With access to capital limited, consumer uncertainty continuing, and volatility coming from all sides, it’s likely many companies will be operating with slim margins for error in the coming year. A cybersecurity incident could easily undo all the progress you’ve made, no matter how wise a strategy you have for capitalizing on other trends. Furthermore, hackers are always among the first to put new technology to use, and AI is already being used in cyberattacks.
Are you ready to build for an uncertain future?
Despite the grim warning about AI-assisted hackers, we’re optimistic about the year ahead. 2023 brought incredible innovations in many areas, with opportunities for growth in all parts of the tech industry. The challenges of the year were sobering but also brought valuable lessons and space for reflection on how we want to grow in the future.
The uncertainty we all feel right now is perhaps more than most people working in the tech industry have ever experienced. By multiple measures, the last two years have been the most difficult stretch for tech companies since the tech bubble of the early aughts, meaning that a two-decade industry veteran (an extremely long time, by tech standards!) has never worked through a time as challenging as this. Even the recession of 2008-2009, which had a much broader impact, did not affect the tech industry as deeply as the last two years. The explanations for why are complex – we’ve only touched the surface in this article – and the future is unclear.
This might not be the best time to scrap your plans and go for broke with a plan to be the next unicorn, but it’s also clearly not a time to stick your head in the sand and wait for others to figure out what’s next. Your growth in the next year depends on careful planning, sound practices, and sustainable product models.
Of course, you’ll want to pay close attention to news and trends, but remember that you don’t have to be riding in the front seat of the bandwagon to reap the benefits of new technologies. Wherever your current expertise is, you can find a way to capitalize on that asset by adapting to new use cases and trends.
With all the uncertainty in the air, your best bet is to keep security and compliance at the center of what you do.
Stoplight’s tools help you build secure API products that can withstand uncertainty and position you to grow. You’ll need to invest in flexible tools, robust governance practices, and collaborative design and testing to help you grow, leaner and meaner. Preserve your best assets and conserve resources for whatever comes next.
