IT Sector Outlook 2023: Insights and Trends that will Matter

Quick Summary - What awaits the industry next year and what Israeli high-tech companies should prepare for in order to stay afloat - an expert forecast by Aharon Balnen, founder of PerceptionBox.

Blend of insights from the industry trends and the Founder of Perceptionbox for you to get ready for 2023

3 mins read

December 29, 2022


Aharon Balnen, Founder of PerceptionBox


At the moment, a recession has either already begun or is expected in the next quarter in about 20% of countries. Basically, it concerns the EU and partly the USA. There is still enough money in the venture capital funds, but investors are in no hurry to fork out, but seek to negotiate more favorable terms for transactions.

During the pandemic, governments injected a large amount of funds into the market to support the people, which led to inflation.  But in the future, COVID will probably no longer be an economic problem, even for China. Humanity has already adapted to live and work under quarantine. 

The complexity of forecasting is that we don’t know yet the duration of the upcoming recession. But many analysts believe that the current indicators have already reached the bottom, which is naturally followed by an increase. We see in the reports of technology companies that they have budgeted a fall in stocks. With such a background, it will be easier to show growth. This will positively affect the market and lead to a return on investment. 

As for the situation in high tech, it depends on the market. For example, there is a significant decline in retail trade. Mass consumption is decreasing, which, surely, affects companies in this area. At the same time, the luxury segment is traditionally doing fine.

What research shows:

Businesses are cautiously optimistic. According to SWZD, 58% of respondents expect their revenues to increase next year. At the same time, 50% are preparing for an economic recession in 2023. 

Business expectations and preparation for a recession in 2023

Israeli tech sector in 2023: the main tasks and problems to deal with

There are two main problems for the Israeli high-tech industry: attracting funding and lack of staff. The first one is about to become even more urgent in the coming year. As mentioned above, funds are in no hurry to part with money easily because of the recession.

The shortage of staff is due to the fact that today’s specialists are no longer content with working just to feed themselves. They are looking for an interesting idea that they want to work with.

The pandemic contributed to the poor motivation of local techies in Israel. During the quarantine, a procedure was implemented – the so-called “robe”. That is, a person who actually did not work received 70% of the earnings. For a programmer with a salary of about $10,000, this was quite an acceptable amount. So in 2023, it’s still going to be difficult to return developers to the offices for full-time work.

In addition, Russia’s war against Ukraine has narrowed the geography of talent search. Israeli companies no longer hire Russian programmers. It has also become more complicated to manage teams because other developers refuse to work with Russians. As for Ukrainian programmers, many service providers managed to move to European countries. But, saying, for Israel, Ukraine is not the number one place to hire because of high salaries.

Read more about the impact of war on the IT industry in the article “Results of 2022 in Tech”. 

IT management trends: only the focused and disciplined will survive

Another challenge for Israeli IT businesses in 2023 is to learn how to manage precisely. This is driven by the need to lead international teams and work with employees in different time zones. Discipline becomes the most important skill for companies. Those who are able to organize their work in sync get unlimited access to talents all over the world.

Also, using Agile and understanding how it works can solve most problems for small companies and startups.

What research shows:

Optimize, scale and pioneer will be the top topics businesses need to focus on next year, according to Gartner. Sustainability is also listed as one of the key trends. Environmental and social changes are top priorities for investors after profits and revenue, Garner’s survey shows.

Top 10 strategic tech trends in 2023

The most demanded skills of programmers in 2023

Backend development in any case remains fundamental to many Israeli high-tech products. We have 60-65% of the market working on the frameworks of such giants as .NET and Java. Smaller frameworks based on Python or Go account for less than a third of the market.

Startups and small companies up to 50 people do not like to work on .NET and Java. They are looking for faster solutions, with the ability to test the product. Therefore, mobile platforms are the cornerstone in 2023. And they are harder to find and scale.

On the other hand, due to the large-scale wave of layoffs at the end of 2022, the market is flooded with an extra number of specialists. This means that next year, companies will be able to use the situation to their advantage – to hire undervalued but promising specialists and keep their core team.

What research shows:

Cloud, cybersecurity and machine learning etc. will be the most emerging technologies next year, according to Accelerance.

The TOP trending technologies for 2023

In summary, in 2023, PerceptionBox advises to pay attention to the following steps:

Prepare for a possible recession. Reduce your costs by moving R&D facilities to more cost effective locations. Explore your options and prepare business continuity plans for risks your organization, industry or location are exposed to.

– Arrange precise management. Implement a disciplined approach. Make sure your organization is aligned on metrics and all the data is stored properly for analysis and possible actions. Train your team with the values, so they are able to make decisions without your advice in vulnerable moments. Establish regular all-hands meetings and keep your employees in the loop, answer their questions and concerns.

– Use the market situation to your advantage. After a wave of layoffs, it is an opportunity to find and nurture the talent that the company needs.

– Make fast decisions. Reduce sales cycles and time-to-market to test product ideas sooner. 

– Create a CSR strategy for 2023. Focus on sustainability. In times of disruption, this is a good policy to make a valuable contribution and maintain the loyalty of both customers and employees. It’s always better to discuss your vector with the team first to get early engagement and focus on the issues that matter most to your crew.

We in PerceptionBox always keep a pulse on the global IT talent market and know where to look for the rarest specialists. Contact us for a detailed consultation and insights on how to save 30,000 – 100,000 USD per hire annually.


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