Digital Transformation Predictions for 2023

Written By: Eric Kimberling
Date: November 14, 2022

Technology is evolving at a breakneck speed, the economy is shifting right before our eyes and there's a lot of change that we have to navigate as we think about digital transformations in 2023 and beyond. In this article we will discuss the top predictions and trends for digital transformation in 2023 and beyond.

As we enter 2023 and start to plan our digital strategies for 2023 and beyond, there's two macroeconomic things to have on your radar. The first is that most of the world, if not all of the world, is entering a soft economy and in many cases it's expected that 2023 will be a year of recession for many global economies. That's one headwind that organizations are confronting as they enter 2023. In addition to that you have technology that's changing at an extremely rapid pace, that's another obstacle that organizations need to navigate so what I want to do today, is talk about the trends and predictions that I have for the digital transformation space as we enter 2023 and beyond.

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The Death of the Big 3 ERP Vendors

The first thing we predict for 2023 is the beginning of the end for the big ERP vendors. The big ERP vendors have had a good run, these big three software vendors, SAP, Oracle & Microsoft have had dominant market share for a considerable time but I think 2023 will be a turning point, where more upstart software vendors will chip away at the big vendors and the big vendors will find that they just simply can't keep up with the pace of change of technology. Add to the fact that organizations need more flexibility than ever and they don't have time, patience or the resources for large bloated ERP implementations. When you combine this with a recession, I think you're going to start to see the market share shift from the big ERP vendors to more of the smaller, upstart, best of breed solutions. I don't think the big software vendors are going to fail anytime soon but I do think they're going to become less relevant as 2023 proceeds and as organizations enter future years as well.

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Who replaces The Big 3 ERP Vendors?

If it is the beginning of the end for the big ERP software vendors, who's going to take their place? What we're seeing in the market is the rise of open software platforms. We're seeing more software vendors like Salesforce and their Force platform or software vendors like Odoo and ERPNext, which are open source systems. These open source systems are evolving and becoming more prominent or they're providing more of an open platform that you can mix and match different applications on top of. What I think we're seeing is that is becoming more appealing to organizations, this whole concept of open software platforms because it provides more flexibility, it can be lower cost, lower risk and you can get more immediate value out of those implementations. Again you contrast that with the big, bloated ERP implementations of years past and that's why we think that more market share is going to shift from the big software vendors to more of these non-traditional open software platforms like odoo, Salesforce Etc. So, be on the lookout for some of these smaller upstart providers which can provide better alternatives and higher ROI alternatives to the big ERP vendors.

Rise of Middleware Solutions

In addition to the rise of the open software platforms, I think we're also going to see more software solutions and digital transformation solutions that are focused on interoperability and integration. In other words, not focusing on one simple solution across the entire organization. Instead, having different applications and different solutions that address different needs of the organization and allow for integration between those solutions. Some might say that sounds like a step backwards, it sounds like it's creating other problems with data management and integration issues, which could be true if you have the wrong technology. With integration tools as advanced as they are today and the flexibility of some of these solutions, I think you're going to see more of those integrated tool sets will become more relevant than in years past. In addition to best of breed, you also have software solutions like Palantir and other sorts of middleware and business intelligence types of solutions that really provide interoperability and really provide that integration and that integrated visibility into an entire organization, without necessarily having to rip out all of the back office systems that an organization has grown up with. These are some of the things to think about or to consider as you consider some of these interoperable and Integrated solutions for your digital strategy in 2023 and beyond.

Supply Chain Management

Next, as we enter 2023, broken supply chains continue to be a problem. For that reason, more digital transformations are going to need to continue to focus on Supply Chain Management. I anticipate you will start to see the prominence of Supply Chain Solutions increase in visibility and I expect that some of those best of breed Supply Chain Management Solutions like Manhattan Associates, for example, will become more and more prominent, continue to pick up market share and continue to be front and center of digital transformations. Watch for Supply Chain Management technologies that can better enable the industry to become more relevant and more prominent in digital transformations in 2023 and beyond.

Tight Labor Markets

The next prediction for 2023 is something that affects organizations internally as well as their outside technology and consulting partners and that is a tight labor market. Tight labor markets are leading to disruptions for both internal and external resources and what this means is that organizations are probably going to be short staffed at the same time they're trying to go

through a digital transformation, which in and of itself is a heavy lift. Not only will organizations struggle to fill key internal positions but they'll also likely struggle to find qualified outside consultants largely because of the great resignation and general employee attrition that is plaguing a lot of Industries right now. Additionally, there is a huge spike in demand right now for technology consultants because so many software vendors have created an end-of-life, sun-setting program that's essentially forcing their customers to migrate to new technologies.

This spike in demand, combined with the great resignation and other dynamics in the economy, are going to create labor shortages that will materially affect digital transformations in 2023 and beyond. Some ways to mitigate these risks would be to first of all do what you can to find the best possible resources and also perhaps more specifically is to ensure that you have plenty of buffer within your implementation timeline. In other words, you might have to extend the duration of your digital transformation to accommodate for potential labor disruptions, not only with your tech consulting partners but also with a potential shortage of internal resources.

The final macro trend that I'll add to this theme is that with the recession, I think you're going to see a lot of organizations that are cutting back on internal staff, which is going to

further perpetuate this problem, so, with all those things in mind, you really want to make sure you understand these landmines as it relates to labor shortages as it relates to your digital transformation in 2023 and beyond.

Increased Rate of Digital Transformation Failures

Given the backdrop of some of the other predictions I've already mentioned, these trends point to an increase in digital transformation failures. In other words, the labor shortages, the rapid pace of technology change, the changing technology landscape, combined with the fact that so many software vendors are essentially forcing customers onto Cloud Solutions in a short compressed period of time, that's all leading to a higher rate of transformation failure. This is something that we've seen percolating and bubbling under the surface for some time now. In 2022 alone, we've seen a dramatic increase in expert witness services, which are essentially transformation lawsuits and groups that are hiring us to be their independent experts to testify in court as to why a transformation failed. We had already started to see some of those early signs in 2022 but I think when you start to look at what software vendors are doing in terms of sun setting products and really aggressively forcing customers into Cloud Solutions in a short period of time, that's going to lead to more failure. 

Forced Cloud Solutions Implementations

Furthermore, you also add to the fact that Cloud Solutions are still being developed in many cases. The legacy, on-premise vendors, are still trying to replicate their on-premise competencies into the cloud and it's creating some deficiencies and problems with digital transformations which lead to failures. With that, risk mitigation becomes more important than ever and so ensuring that you have a proactive and a technology agnostic and independent way to assess and mitigate risks, becomes extremely critical during times like these. Watch for transformation failures to increase in 2023 but do what you can to make sure that you're not one of them. 

Given the fact that transformation failures are increasing, technology is changing faster than ever and becoming more advanced than ever and the fact that software vendors are essentially forcing many of their legacy, on-premise customers into the cloud prematurely, in many cases it's creating a general distrust of software vendors. That distrust of software vendors and their system integrators is causing customers to conduct more due diligence as part of their planning for their digital transformation. In years past, if you look back, say, 10 years ago, I think customers generally trusted software vendors and system integrators. I would argue that they trusted them to a fault. Dynamics in the digital transformation space are changing. Challenges and opportunities are causing customers to become more diligent about how they vet their potential solutions and their potential system integrators. This is generally a good trend, I think customers should take more ownership, be more skeptical, ask more questions and not necessarily drink the Kool-Aid that software vendors are selling them. These are the things that I think you should be most aware of as you plan your digital strategy for 2023 and beyond.

If you are looking to strategize an upcoming transformation or are looking at selecting an ERP system, we would love to give you some insights. Please contact me for more information

Be sure to download the newly released 2023 Digital Transformation Report to garner additional industry insight and project best practices.

Kimberling Eric Blue Backgroundv2
Eric Kimberling

Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.

Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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