Those who remember the tech industry growth of the 2010s have fond memories of a time when startups flourished everywhere, and tech hubs like Silicon Valley pulsated with boundless energy and optimism. For years, companies like Apple, Google, and Amazon were not just industry leaders but symbols of continuous innovation.
Fast-forward to mid-late 2022, and you see a different picture. In a nutshell, the tech industry’s growth rate hit a rough patch. First, it was the pandemic and supply chain problems, then high inflation, rising interest rates, increased competition, war, and recession.
Global uncertainties caused a significant downturn in the tech industry growth, marked by massive layoffs and decreased demand. Many tech companies adopted a cautious approach and focused on return on investment, cost reduction, and workforce rebalancing. This period marked one of the most challenging phases for the tech sector worldwide, with over 250,000 jobs lost in 2023 alone (Layoffs.fyi) and already close to 100 K in 2024.
Despite these challenges, optimism for a tech comeback is rising. Economists have lowered recession risk assessments, and analysts expect modest growth. But as we put COVID-19 behind us and move forward, a pressing question arises: could the tech industry be on the brink of a major comeback? Or the downturn is here to stay and we should reprogram our strategies based on the “new normal”? If so, what is the “new normal”? To answer these questions, let’s take a quick look at where we are now.
The Global Tech Industry Growth Horizon
The CompTIA IT Industry Outlook 2024 report highlights key trends and challenges in the tech industry in 2024, emphasizing the importance of strategy and tactics. According to the report, the industry faces challenges like geopolitical tensions, economic uncertainties, and skills gaps, but remains optimistic about growth prospects.
A range of issues drive IT professionals and channels to clients (Comptia)
Companies are advised to enhance governance, leverage new technologies for business efficiencies, and adopt a multigenerational workforce approach. Marketing is also gaining prominence as a business differentiator, and cloud architecture is critical for managing complex digital solutions.
Yet, the tech industry growth is poised for a cautious yet optimistic comeback. A survey by Deloitte revealed that 55% of tech executives rated the industry as healthy or very healthy, and furthermore, 62% believe it will be at that level in the near future. According to the survey results, key areas of focus include enhancing supply chain resilience, streamlining business processes, and investing in talent.
The Canadian Economy Horizon
According to RBC, the Canadian economy continues to face challenges with high interest rates impacting growth and consumer spending. While inflation rates are slowing down, household debt remains high, and business investment is down. However, the Bank of Canada has been lowering its bank rates, which has provided some relief.
The reduction in business investments could limit the capital available for tech startups and innovation-driven companies. However, the anticipated easing of interest rates could eventually lower borrowing costs, potentially reviving investment in tech infrastructure and R&D.
Also, with a cooling job market and increased unemployment among new graduates, the tech sector might find an expanded talent pool. However, companies may face challenges in offering competitive salaries due to economic constraints, which could impact talent retention and overall sector growth.
High debt levels and financial pressures on Canadian households might reduce discretionary spending on tech products and services. Yet, as inflation eases and consumer confidence improves, there can be a gradual recovery in demand for tech innovations and digital services.
According to the Canadian government’s 2024 Economic and Fiscal Overview, the economy is showing resilience with growth surpassing expectations. The federal government is determined to focus on investment in economic growth and technology adoption to enhance productivity. Economic forecasts indicate a continued upswing and lower interest rates by the end of 2024.
How Canadian Tech Companies Can Get Prepared
The current environment presents a mix of challenges and opportunities for the Canadian tech industry growth. While the sector has faced significant headwinds, there are somehow promising signs of recovery. According to multiple research done by different sources including Gartner, the focus should be on leveraging innovations in the following domains to drive growth and enhance efficiency in the foreseeable future:
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- Embracing AI and Automation
The rapid advancement and adoption of AI, particularly generative AI, across various industries is already evident. Integrating vital AI functions into technology product offerings may attract new clients and allow you to differentiate your solution. Automating routine internal tasks can also drive efficiency and reduce costs. AI can streamline content creation, improve decision-making, and enhance customer interactions. It has the potential to transform business strategies, improve efficiency, and drive competitive advantages.
The impact of generative AI on high/low-income economies (World Economic Forum)
- Embracing AI and Automation
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Differentiation Using Marketing
AI-driven marketing tools have the potential to revolutionize how companies understand and interact with customers. By leveraging AI, businesses can analyze vast amounts of data to personalize marketing efforts, optimize campaigns, and improve ROI. AI can also help predict client behaviour, tailor communications to individual preferences, and manage customer relationships more effectively. This differentiated approach not only increases customer engagement and new client acquisition but also leads to higher customer satisfaction and loyalty.
As the time for AI implementation is critical for the tech industry growth, allowing companies to enhance their solution, it would be almost natural to outsource marketing to agencies and external consultants that have already enjoyed successful experience with AI marketing tools. Comptia’s IT Outlook Report also indicates that half of the US tech respondents said the percentage of total revenue allocated to marketing ranged from 11% to 20% in 2023. While in 2024, 22% expect a significant increase, 39% a moderate increase, 35% no change in the marketing budget, and only around 5% will decrease the marketing budget (see diagram below).
2023 marketing allocation percentage of revenues and the 2024 outlook (Comptia)
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- Revisiting Business Models
This does not necessarily mean that all tech companies should rebuild their business models from scratch. However, as AI becomes a critical part of offering technology solutions, revisiting business models must also be done. Exploring new revenue streams that stem from the sophisticated ability to forecast, optimize, and shorten sales cycles will differentiate highly successful companies from mediocre-run organizations, and, of course, drive sustainable growth.
Migrating to the cloud and adopting “Everything as a Service” (XaaS) models can provide flexibility and scalability. Cloud computing enhances collaboration, streamlines operations, and reduces IT costs.
- Revisiting Business Models
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Prioritizing Security and Ethical AI
Implementing robust security measures and ensuring ethical AI use is crucial. This includes data protection, compliance with evolving regulations, and addressing ethical concerns before they become a crisis that may impact the company’s reputation.
Be transparent, trustworthy, and explainable to ensure security and ethical AI
(Info-Tech Research group)
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Investing in Talent Development in the growing tech industry
Investing in training and development programs to enhance employees’ skills in AI, cybersecurity, and other emerging technologies ensures that your company will have the expertise needed to drive innovation, increase employee retention, and maintain a competitive edge.
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Key Takeaways
Canadian business owners and decision-makers, the message is clear: adapt, innovate, and prepare to thrive in the next wave of technological advancement. The future of tech is bright for those ready to seize the opportunities it presents.
The increased use of marketing and sales productivity systems directly impacts the number of units sold and revenues (Based on Harvard Business Review)
By embracing AI, revisiting strategy, investing in differentiated automated marketing and sales systems, offering talent development programs, and ensuring robust security, tech companies can prepare and position themselves for a resilient and prosperous future (Harvard Business Review). The key lies in leveraging innovation to drive efficiency, enhance customer experiences, and stay ahead of the competition in an ever-evolving digital landscape.
It is important to note that the present economic situation affects tech industry growth in various provinces differently. Regions with higher consumer debt levels or where these sectors make up a larger portion of the economy can be particularly susceptible. For a tailored analysis specific to your operation, feel free to reach out. At Direct Objective Consulting, we are always happy to explore strategies that can position your business for continuous growth opportunities.
