New year’s resolutions for

tech in 2023
January 2023
 It’s new year’s resolution time. While that might bring to mind less-than-successful
attempts to work out more or lose weight, resolutions in technology are essential
for companies looking to navigate the uncertainties of 2023. Last year’s excitement
around nonfungible tokens (NFTs), crypto, and the metaverse is likely to give way
to a more sober 2023, with geopolitical and economic uncertainties injecting more
caution into the next phase of tech’s evolution.

While looking ahead is always a tricky business, a group of McKinsey Technology

leaders have taken a look at what 2023 might hold and offer a few new year’s tech
resolutions to consider.

A shorter version of this commentary originally appeared in “Where Is Tech Going

in 2023?” in Harvard Business Review, January 6, 2023.

2 New year’s resolutions for tech in 2023

 Focus on the combinatorial trends

Lareina Yee
Senior partner, San Francisco

In 2022, we identified 14 technology trends that have the potential to change how we work and live.
These range from space technologies, cleantech, and AI to immersive-reality technologies. Each one
can deliver a powerful impact on its own—just think about how much better AI-enabled customer
care experiences could be. But an even bigger unlock for companies comes when they put innova-
tions from multiple trends to work at the same time to create new capabilities.

For executives in 2023, the challenge will be not just betting on individual trends or ramping up soft-
ware engineering talent but thinking about how all these technologies can create new
possibilities when they’re used together—what we call combinatorial trends.

In many domains, from consumer to enterprise, across all sectors, the combinatorial trends
are creating exciting new possibilities. Because of the vast array of possible combinations,
creativity in “mixing the ingredients” becomes a key to success. Consider the technologies in a new
electric car: cloud and edge computing that power the networks connecting cars; applied AI and
machine learning (ML) that enable autonomous decision making and driving logic; clean energy and
sustainable consumption technologies that create the core of vehicle electrification through, among
others, new lightweight composites and battery capability advancements; next-generation software
technologies that enable faster development of customer-facing features and reduce time to mar-
ket; and trust architectures that ensure secure data sharing. Together, these technologies combine
autonomy, connectivity, intelligence, and electrification to enable a new future of terrestrial mobility.

Similarly, new patient-level treatments such as blood-type-based treatments or cell targeting are
powered by advances in bioengineering (such as novel therapies based on tissue engineering),
immersive-reality technologies (such as remote therapies), Web3 (which can offer traceability,
interoperability, and permanence of electronic health records), applied AI and ML (such as
improved image processing and predictive health alerts), and cloud and edge computing
(which offer oncreased data access and processing capabilities). The impact is not simply
additive—it’s multiplicative.

New year’s resolutions for tech in 2023 3

 Prep the board for tipping-point technologies

Klemens Hjartar
Hjartarl
Senior partner,
partner Copenhagen

The economic
The economicuncertainty
uncertainty
onon the
the horizon
horizon in 2023
in 2023
is going
is going
to require
to require
boards
boards
to become
to become
more
more
thoughtful and nuanced about technology decisions. In the past week alone, I’ve spoken with
three CEOs who mentioned the need to shift the conversation on tech with the board.

While we can expect a flattening or reduction in investment in IT budgets, the bigger issue on the
table for boards is how to keep energies focused on what matters for tech. This focus is important
because many game-changing technologies, such as 5G, AI, and cloud, are hitting tipping points
for mass adoption. Our research shows, for example, that companies are looking to move about
60 percent of their IT estate to cloud by 2025.¹ And 50 percent of companies report they’ve
adopted AI in at least one function in their business.²

That requires the board to keep the business pointed forward and prioritize budget for upgrading
IT foundations that enable speed, security, resiliency, and reusability. These aren’t the sexiest
things in tech, but automating processes, investing in data foundations, cleaning up technical
debt, and continually renewing the IT architecture are needed for the business to have a chance
of taking full advantage of the new technologies coming online.

The reason this is a job for the board is that IT’s priorities are too often shaped by individual
business units or divisions. The investments in tech foundations—“IT for IT”—benefit the entire
business, so they require the board, working with top management, to guide and direct the effort.
A good rule of thumb is allocating 15 to 20 percent of IT’s change budget to this foundation work.
For the board to be able to engage at this level, the CIO and CTO will need to have more continual
and frequent dialogs with individual members of the board about tech priorities and needs.

1
“Projecting the global value of cloud: $3 trillion is up for grabs for companies that go beyond adoption,” McKinsey, November
28, 2022.
2
“The state of AI in 2022—and a half decade in review,” McKinsey, December 6, 2022.

4 New year’s resolutions for tech in 2023

 Free the engineers you already have

Aamer Baig
Senior partner,
partner Chicago

You don’t
You don’thave
havetotobe
beaasoothsayer
soothsayer toto
know
knowthat
that
the
thecoming
coming year
yearwill
willbring
bring
with
withit significant
it significant
pres-
sures
pressures
for tech.
for tech.
Layoffs
Layoffs
in theintech
the tech
sector
sector
and initial
and initial
belt-tightening
belt-tightening
measures
measures
goinggoing
into effect
into effect
in
most
in most
enterprises
enterprisesmean
meanthat
that
tech
tech
leaders
leaders
in 2023
in 2023willwill
needneed
to to
master
masterthethe
artart
of of
doing
doingmore
morewith
with
less.

The trap will be to try to get your tech people to simply do more. We’ve seen, in fact, that huge
amounts of productivity are there for the taking by getting your engineers to do less—less ad- admin-
ministrative
istrative work,
work,
lessless
bureaucratic
bureaucratic
work, work,
lessless
manual
manual
work.work.
We’ve
We’ve
found
found
that,that,
in many
in many
large
large
orga-
or-
ganizations,
nizations, engineers
engineersspend
spendas as
little
little
as as
5050percent
percent
of their
of their
time
time
onon
actual
actual
development.
development.Imagine
Imagine
improving that by just ten percentage points for a large company that has thousands of engineers.

CIOs can make significant inroads into this productivity gap in 2023 by being more scientific and
methodical in developing and applying the craft of engineering. First, be more thoughtful about
team makeup and getting a much better handle on who your top performers are. Our research
shows that individual engineer performance can vary two- to threefold between teams.

Second, look into how many distractions you can take off of the plates of your engineers. In many
cases, even relatively simple fixes, such as cutting down on meetings or making “agile ceremonies”
ceremo-
nies” more
more productive,
productive,
can free
canup
free
substantial
up substantial
time. time.

And third, go all out on automation to remove the scourge of manual tasks that weigh down
engineers. Automating testing or compliance, for example, can have a huge impact in terms of
freeing up engineer capacity to do what they love. Through these and other actions, we have seen
companies able to increase the productivity of their engineers tenfold.

This isn’t just a productivity issue; it’s a talent issue. The CIO of a telco company recently spoke
about the need to become a destination for top engineers but had not factored in how important
developer work style is as part of that equation.

New year’s resolutions for tech in 2023 5

 Get ready for decentralized innovation

Vinayak HV
Senior partner, Singapore

The idea that companies with the biggest data sets will lead the way in innovation (such as AI)
took a hit in 2022. We’ve seen numerous start-ups emerge with compelling products that are
going to give some of the large tech companies a run for their money.

That reality is reflected in a number of AI products that are generating buzz, such as Stable
Diffusion, which got 10,000 stars on GitHub in less than two months, or ChatGPT, which crossed
the threshold of one million users in just five days. I recently asked ChatGPT to write a poem about
Web3, and although I wouldn’t necessarily call myself a literary critic, it was surprisingly good. The
implications are enormous, from improving search to increasing developer productivity.

These developments represent the maturing of AI “decentralization,” which refers to the devel-
opment of advanced AI technologies that are not monopolized by players with access to massive,
centralized, proprietary data sets. In 2023, we can expect to see early signs of how this decentral-
ization can disrupt different sectors, likely starting in the entertainment, gaming, and media areas,
where traditionally we’ve seen new technologies make early inroads.

The big challenge and opportunity for companies in 2023 will be how they can position
themselves to take advantage of these decentralized AI capabilities. For business leaders, it will
be important to think through how their business models can take advantage of decentralized
technologies. For the CIO or CTO, the focus will need to be on how to rework their architectures to
easily incorporate APIs (such as those from OpenAI and Stability AI) and embed “intelligence” into
a wider swath of applications and processes. This capability can, for example, provide automated
suggestions of code or code libraries to draw from or auto-generate code to kick-start the
development. The goal should be to have AI-driven intelligence built into every part of the tech-
nology stack.

Enabling this means allocating sufficient resources to experiment. Top innovators allocate 1 to 5
percent of their revenues to innovation that could yield disproportionate returns. Protecting this
budget will be especially important as businesses feel the screws tightening on budgets, as the
ability to effectively innovate during downturns allows companies to position themselves to grow
quickly when the economy recovers.

6 New year’s resolutions for tech in 2023

 Make the most of your security opportunity

Jan Shelly Brown

Partner, New Jersey

I like to think that 2022 was the year that security became one of the cool kids in tech. For years,
security was treated as a blocker—albeit a critical one—that slowed progress to ensure security
protocols were in place. In 2022, that changed, with companies making much greater commit-
ments to modernizing their tech through moving to the cloud and rethinking the security role so it
could act as a real enabler.

Peering ahead to 2023, that trend will accelerate as security itself becomes much more auto-
mated, in part thanks to the investments cloud service providers (CSPs) are making in their own
risk capabilities and tooling. Code that developers submit will automatically be scanned for
cybersecurity issues and rejected unless it complies, while providing clear recommendations for
what fixes to make. Because most security issues are the result of code and system misconfigura-
tions, this process will radically reduce the number of security breaches at many large
companies. At one large bank, for example, breaches dropped 70 to 80 percent after
implementing security automation. The other benefit is simply the pace of development. With
engineers able to submit code and update it based on automated feedback, the pace of develop-
ment can increase as much as ten times. The key point isn’t that the cloud is more secure; it’s that
moving to cloud provides companies with a huge opportunity to rethink their security posture.

The other big shift we can expect is in the regulatory environment. As more heavily regulated
industries such as banking and pharma move to the cloud, regulators themselves are rethinking
what the pressure points are. They are already becoming more prescriptive about security and
compliance standards and are thinking about other issues, such as the significant concentration
risk. What if one of the big CSPs goes down and 30 banks with it? While there won’t likely be real
answers to these new questions in 2023, we can expect to see the contours of new policy start to
emerge.

New year’s resolutions for tech in 2023 7

 Get your head in the cloud

Will Forrest
Senior partner, Chicago

One of the most surprising developments for me in 2022 was how quickly many CEOs have
changed their outlook on cloud computing, essentially going from “I’ll do it because that’s what
my CIO recommends” to “I want to be all in.”

At the same time, as tech companies eliminate programs and jobs, there is a surge of top tech tal-
ent becoming available. This is creating a once-in-a-lifetime opportunity for companies to jump
ahead in terms of acquiring key cloud talent.

The big question, then, is how are companies going to harness this surge of talent and executive
interest in cloud? Up until now, many corporate forays into the cloud have been limited to simply
moving applications from their own servers to the cloud (often referred to as “lift and shift”) or
building test and development environments to try out new programs.

The coming year is the time, instead, to focus on building out strong cloud foundations that allow
companies to take advantage of the most important benefits that cloud provides (such as scaling
applications or automatically adding capacity to meet surges in demand). Companies will need
to focus on developing the right application patterns (code base that can be applied to multiple
applications or use cases) and on putting in place strong cloud economics capabilities, called
FinOps. Recent research has shown that companies tend to not really focus on cloud costs until
they break $100 million, which is not just a tremendous waste but also a wasted opportunity to
generate value.

8 New year’s resolutions for tech in 2023

 Measure your ‘dark matter’ to pay your tech debt

Sven Blumberg
Senior partner, Istanbul

For all the difficulties and suffering during the pandemic shutdowns, it was also a time when
technology took center stage and allowed companies to pull off incredible feats that kept busi-
nesses running—and innovating—at a pace that had previously seemed unimaginable. Surpris-
ingly, the pace continued at many companies through 2022. But achieving those feats required
workarounds and quick fixes that in many cases added to organizations’ existing technical
debt—the “tax” a company pays in the form of resources needed to address legacy technology
when developing new tech. For example, updating core enterprise resource planning (ERP)
systems might require engineers to do multiple rounds of fixes and testing to address such
complexities that have accrued to the system over time.

CIOs estimate that such technical debt can add up to 20 to 40 percent of the value of their
entire technology estate (before depreciation).¹ This coming year is going to be one when much
technical debt comes due for CIOs and business leadership, as realizing the full benefit of critical
technologies such as cloud and AI often requires resolving that tech debt. Migrating an applica-
tion with significant amounts of tech debt to the cloud without refactoring it, for example, means
you’re simply moving your tech debt issues from one place to another, without getting the cloud’s
full benefits.

Paying down the debt starts with a task that sounds simple but isn’t: identifying and costing it
out. Tech debt is a little like dark matter in the universe—people know it exists, but finding and
quantifying it is challenging. This quantification effort has to happen at the application level to be
meaningful and requires a cross-functional team to do it because tech debt in one application has
effects on the business and also on technology performance at the infrastructure level. Unless
the business understands the dollars-and-cents value locked away in its tech debt, making the
right trade-off decisions and maintaining support for them becomes challenging.

Once an organization has quantified its tech debt, it needs to think in terms of managing future
tech debt in all projects going forward by adding 15 to 20 percent of resources to the cost of
applications to clean them up. While this focus will be difficult given pressures to build resilience
and, in many cases, to reduce costs, the value to the business can be so large that the CIO will
need to hold the line. This is why undertaking the value analysis of what tech debt lies where in a
company is so important.

1
Vishal Dalal, Krish Krishnakanthan, Björn Münstermann, and Rob Patenge, “Tech debt: Reclaiming tech equity,” McKinsey,
October 6, 2020.

New year’s resolutions for tech in 2023 9

 Do what it takes to keep your best tech talent

Suman Thareja
Partner, New Jersey

The recent spate of layoffs in tech and the likelihood that belt-tightening measures continue into
2023 are laying a big trap for companies: they’re in danger of losing their best tech talent. While
it’s important to be ready to capture the expanding pool of talent entering the marketplace,
companies cannot afford to lose focus on their own people. There are two reasons for this. One is
that the best talent hitting the marketplace is snapped up quickly, making it hard for larger
companies to compete. Of the approximately 160,000 tech workers who have been laid off so
far in 2022 in the United States, 72 percent of them have found new jobs within three months,
according to an analysis from Revelio Labs.¹

And two, whether we think of it as the “great resignation” or the “great reshuffling,” it isn’t over.
Though we can expect the numbers to moderate some if economic conditions worsen, many tech
workers are still choosing to leave their jobs. The number of technical job openings in the United
States, for example, has grown to over 5.5 million, adding more than 130,000 jobs in November
2022 alone.² And when tech workers change jobs, 80 percent of them move to different
organizations to do so.³

These realities mean that leaders need a plan to retain their best tech talent in 2023. To keep
people engaged, companies should take three actions. One, they should actively keep their talent
involved in decision making (even the small decisions). Two, they should use the “quiet” to upskill
their people to demonstrate commitment to their growth and prepare for when the economic
outlook brightens (a surefire way to lose their best people is have them work on mundane
technology maintenance tasks). And three, they should maintain trust of their people by honor-
ing offers, for example, because tech talent and others pay attention to how companies behave
during what could be tough economic times.

1
“You got laid off. What’s next?” Revelio Labs, December 20, 2022.
2
“The Employment Situation Summary,” US Bureau of Labor Statistics, December 2, 2022.
3
“Human capital at work: The value of experience,” McKinsey Global Institute, June 2, 2022.

10 New year’s resolutions for tech in 2023

 Do your data due diligence

Holger Harreis
Senior partner, Düsseldorf

In 2022, we saw a surge of companies trying to create exciting use cases with AI. But what
came through over and over was that, without good data, good AI was not possible. Small-scale
minimal viable products (MVPs) that looked promising sputtered when companies tried to scale
them and found their data management practices and architecture were insufficient.

With some of those lessons learned, companies will need to thread the needle in 2023 by invest-
ing in developing their data foundations, in particular the operating model, new approaches such
as data products and DataOps, and also data architecture and technology. But they need to do it
in a way that takes two critical factors into consideration.

The first is they need to scale for the business. Often companies think in terms of building data
solutions for specific use cases, without considering other similar cases. This chokes off the
scaling effort and hampers a company’s ability to build real value for the business. For this reason,
developing a few data products in 2023 that meet the most high-value use cases for the business
should be an important focus. But they should have scalability built in right from the start. When
well developed and supported, data products can deliver new business use cases as much as 90
percent faster, while the total cost of ownership, including technology, development, and main-
tenance costs, can decline by 30 percent. Practically minded companies should consider adding
about 10 to 20 percent on top of data development costs to build in scale capabilities (such as
APIs, module code blocks, and standardized coding).

The second factor is that companies will need to build these foundations by sequencing initiatives
and use cases to create value quickly, especially given the increasingly constrictive economic
situation. In fact, if you’re not starting to generate value from your data initiatives in less than six
months, something is wrong. Focus on those initiatives that create near-term value while also
establishing a robust foundation for future development.

New year’s resolutions for tech in 2023 11

 CIO mandate: Make 2023 the year of automation

Brant Carson
Senior partner, Vancouver

In 2023, we are going to see a further evolution in the demands on the CIO to do multiple things
well at once. That includes understanding the business, creating value, increasing productivity,
innovating, maintaining high levels of security, and managing a large organization. The pressure
will especially be on CIOs to reduce costs while creating leaner, faster, and better IT. That might
seem like a tall order, but it presents an opportunity for CIOs to recapture some of the high
ground they occupied during the pandemic, when technology was at the center of many compa-
nies’ responses to the disruption.

In some cases, making these gains will be straightforward. The past few years of plenty, for
example, have led to runaway costs that are relatively easy to cut back. Migrations to cloud
without sufficient attention to managing costs is just one typical example. But the opportunity
and the primary focus for the CIO should be in automating away waste.

One fast-growing tech leader made that a virtual mantra by writing code to drastically reduce
both manual labor and process steps. That includes automating compliance (ensuring code
meets regulatory guidelines before being submitted), testing (ensuring code won’t bring down
the system), and standing up infrastructure (enabling engineers to access safe development
environments on their own). Good automation both reduces costs and drastically improves
the efficiency and speed of development while lowering risk. These are core characteristics of
top-performing companies in the digital age, so investing in automation during a downturn can
put a business in the position to accelerate once the economic environment improves.

The final piece of the automation puzzle for CIOs is how to communicate the gains from automa-
tion in terms of business cases. Companies will have a very high bar in 2023, so CIOs will need
to be crystal clear on ROI for automation cases, incorporate them into all review processes, and
ensure that the promised value is realized.

12 New year’s resolutions for tech in 2023

 Be accessible and inclusive to tap new growth

Gayatri Shenai
Partner, New York

Consider this growing demographic tidal wave: by 2030, all baby boomers (about 73 million
people born between 1946 and 1964) in the United States will be at least age 65. That translates
to one in every five people in the United States being of retirement age. In 2000, by comparison,
there were just 35 million people older than 65.¹ Similar trends hold true for many other countries
as well.

This represents a massive need among people who are today already increasingly dependent on
the internet and technology, and it underscores a broader point: companies should look for how
to adapt to serve this growing population. The good news is that some companies, particularly
in consumer sectors and retail finance, have already taken concrete steps to make their digital
properties more accessible and relevant to people who have difficulties accessing standard
technologies. That includes creating larger type sizes, improving text contrast to make it easier
to read, offering audio options, using chatbots to speak with customers, and incorporating
voice-recognition technologies. Of course, as advanced AI capabilities come online, we can
expect accessibility capabilities to both proliferate and be easier to use.

For companies looking to tap into this growing market through improved accessibility, 2023 can
become an important proving ground to test and implement accessibility technologies and
methodologies. This does not need to require significant investment in many cases. In fact, the
biggest change is in mindset to incorporate accessibility functions and experiences into existing
design and development processes as a must-have.

1
“2020 census will help policymakers prepare for the incoming wave of aging boomers,” US Census Bureau, December 10,
2019.

Aamer Baig and Will Forrest are senior partners in McKinsey’s Chicago office; Jan Shelly Brown and Suman Thareja are
partners in the New Jersey office; Brant Carson is a senior partner in the Vancouver office; Holger Harreis is a senior partner
in the Düsseldorf office; Klemens Hjartar is a senior partner in the Copenhagen office; Vinayak HV is a senior partner in the
Singapore office; Gayatri Shenai is a partner in the New York office; and Lareina Yee is a senior partner in the San Francisco
office.

Copyright © 2023 McKinsey & Company. All rights reserved.

New year’s resolutions for tech in 2023 13

January 2023
Copyright © McKinsey & Company
Designed by Darby Films
www.mckinsey.com
@McKinsey
@McKinsey