Wow! It’s been a whirlwind of a year and we only passed the first month!
As you can see, from my new profile picture, I am loving my newly commissioned AI artist, powered by Stable Diffusion.
Thinking beyond ChatGPT jokes, I am mostly focussed on the fact that we are in a tumultuous systemic inflationary environment, maybe unlike 1970’s but pretty close. The only silver lining has been the “AI Spring” we are amidst.
Let me explain.We are amidst systemic inflation because of key drivers such as - supply chain re-homing, de-globalization, aging population, boomer retirements, pandemic accelerated decrease in labor force participation. All of the above will cause supply shrinkage and in turn higher cost of goods. Technology in general and new Generative AI in particular holds the promise of acting as a deflationary force to counterbalance the natural systemic inflationary forces in play. Technology and AI will do so by driving up the productivity of the (decreased) working population, hence being the “deflationary force”.
With that out of the way, Happy 2023 and let’s get the year started with predictions for the road ahead!
Year ahead predictions
While the Federal reserve at the beginning of 2023 is pointing to disinflation (slowdown in inflation growth rate) and a “soft landing”, we will continue to remain in high inflation (at least high interest rates), tight financial conditions through the end of 2023 and beyond. - Somik Behera
Rationale - As I point out in my introduction, we are amidst a systemic shift where multiple forces are stacked against us in driving up inflation over the coming decade. While the Federal Reserve has forced demand destruction (via increased interest rates), which can achieve price stability in the short term, I am firmly of the opinion that we are in a new era with new rules, namely - high inflation, high interest rates. So, we better buckle up and reposition our businesses, companies and teams.
- Recession and Layoffs
Economy will NOT enter recession (2 quarters of negative GDP growth) but layoffs and belt tightening will continue throughout 2023. - Somik Behera
Rationale - Our (US) economy remains supply constrained and our growth might even accelerate as a result of “re-homing” of supply chains as more manufacturing gets on-shored and near-shored. So, even though we are amid the highest monetary tightening cycles in decades, the forces of supply chain re-homing and de-globalization remain stronger.
- Global supply chain re-balancing
We won’t see supply chain normalization and the trend of supply chain re-homing or de-globalization will continue. - Somik Behera
Rationale - COVID-19, coupled with the Russian invasion of 2022 and the continued aggression of Russia in Ukraine has changed the prevailing world order. It’s a time when nation states want to take back the control in their own hands - be it for managing geo-political risk or national security or self-sufficiency reasons.
- Population and Demographics
Global population will enter secular decline. - Somik Behera
This means the few remaining geographies with young populations will become mecca’s for western world’s investment dollars, where high interest rates are already forcing institutions to find greener pastures with higher possible returns
Rationale - For the first time in the last few GENERATIONS, China's population has started to go into decline. This is in addition to overall global population growth slowing down to 0.83% in 2022 and I predict that this year we will go into the reverse gear with population decreasing. The impact of population demographic trends will reinforce few other trends (1) - Inflation and (3) - Supply chain rebalancing.
- Inflation - As the global population decreases, we will encounter supply productivity destruction, which results in an increase in price of goods, lacking any technological advance.
- Supply chain rebalancing - With China losing the top spot in population growth, we will see other members of the BRICS countries ( Brazil, Russia, India & South Africa) take the position of China and Russia in the global supply chain rebalancing equation. The BRICS countries continue to hold the highest share of the global working age population and will become key anchors of the new emerging production centers.
Impact & Predictions for Cloud Operation teams
Now that we got the big picture out of the way, let’s get started with our regularly scheduled programming - predictions for our Cloud, CloudOps, DevOps & FinOps teams.
Operational Excellence above all else (aka Reliability) will be the mantra in 2023 - Somik Behera
Supporting industry data
While the mantra of doing more with less people via increased productivity and cost reduction remain priorities in 2023, Operational excellence will STILL trump everything else for Cloud, CloudOps and DevOps teams. One would think with the layoffs and budget shrinkage, the C-level might be thinking of productivity and efficiency and they are but Job #0 for CloudOps and DevOps team remains Operational excellence, which means keeping the lights on, infrastructure available and securely defended against malicious actors.
Source: IDC CIO Sentiment Survey
The previous graph showed the sentiment of technical executives in an organization as surveyed by Gartner. This graph shows the sentiment among the business executives and the pattern is supporting the thesis that “Operational excellence is job #0".
Security projects will remain indispensable and get continued investment in 2023 - Somik Behera
Supporting industry data
Security software not only remains a top 3 spending priority in 2023 but is also the least likely to experience spending cuts. The geopolitical landscape and increasing shareholder demand for board accountability for cyber risk exposure continues to support this trend.
Emerging markets CIO survey further cements the findings in North American markets that enterprise investments in security tooling, software and project continues to be a priority amid belt tightening.
Efficiency in everything we do will be back in vogue, especially given the Macro where inflation is not going back to the good ‘ol days of the past decade. - Somik Behera
Supporting industry news
It is clear that 2023 is the “year of efficiency”, be it in technology or social networks.
2023 is going to be the year of efficiency - Mark Zuckerberg, Q1 2023 Earnings Transcript
We also saw in Gartner’s technical professionals survey that “efficiency” metrics in everything that goes in a CIO’s office will become a must have. I hope some of you can leverage the Business Outcome & ROI reporting toolkits that we have developed for you folks at www.finkube.io
Source: FinOps Community Survey
Additionally, the year of efficiency is showing in the data and in trends around the adoption of FinOps practices. To become efficiency, one has to start observing and measuring the efficiency of their infrastructure or said another way the FinOps skillset is increasingly going from “good to have” to “must have”
While reporting on efficiency is step 1 of the user journey, we will increasingly see the end goals being increased “automation” - be it for (1) DevOps tasks using modern provisioning tooling and patterns such as Infrastructure as Code (IaC), Terraform or Programmatic Infrastructure with Pulumi, and for (2) FinOps tasks using technologies such as CloudNatix Autopilot where capacity and availability of workloads is automatically optimized.
“Platform” teams to drive automation will become mainstream in 2023 - Somik Behera
The notion of “platform teams” has been emerging for a couple of years as enterprises have whole-heartedly embraced cloud operating model. I predict that 2023 will be the year that Platform teams that build, operate and maintain “multi-tenant, highly available cloud infrastructure” for app teams, will become mainstream.
What helps solidify the rise of “Platform teams” is the fact that developers are migrating to Docker and Kubernetes in a whole-hearted way as seen by the Stack Overflow developer survey. As workloads become Dockerized and Kubernetized, it becomes much more tenable for an Enterprise to standardize on a single platform team serving multiple lines of businesses as tenants while taking away common operational heavy lifting away from the application teams.
And interestingly, Goldman Sachs CEO, David Solomon is of similar opinion 😀
Goldman Sachs Earnings
Source - Goldman Sachs Earnings Review
Generative AI will generate the most spoils in the lower layers of the infrastructure stack - Somik Behera
Finally, nothing in this day and age remains untouched by the excitement and exuberance of Generative AI. ChatGPT came on to the market and become the fastest consumer product to every gain 100 Million Daily Active Users (DAUs) within 2 months - A record! The prior best was by TikTok, which accomplished the milestone in an unheard of 9 months.
Not to mention the excitement in the startup community and among VC investors remains palpable.
So, you may ask, how will Generative AI impact me? My perspective, informed by primary research, this wonderful article by folks at a16z and experience across multiple technology transitions is that the value of this new computing paradigm will accrue at the lower layers of the stack. Generative AI remains incredibly compute intensive so infrastructure layer folks will be back in the limelight enabling Generative AI leveraging all the efficiency initiatives they have undertaken so far in 2023.
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