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  • Writer's pictureThe San Juan Daily Star

Beyond Silicon Valley, spending on technology is resilient


Johnson Controls, which set up this booth at a 2018 expo in Shanghai, added 500 technology workers last year and plans to add 350 more.

By Steve Lohr


Johnson Controls traces its origin to the late 19th century in Wisconsin, where a clever teacher and inventor named Warren Johnson designed an early thermostat to turn the heat on or off in his classroom.


Today, Johnson Controls is an international corporation and, like companies in every industry, increasingly a technology business. The company’s software and sensors monitor and manage heating and cooling equipment, fire alarms, security systems and thermostats — to reduce costs and carbon emissions.


Despite forecasts of a recession, Johnson Controls is not trimming its digital projects, as it seeks to make essential technology for smart buildings. Last year, the company added 500 software engineers and other technical staff to its team of 2,500 software engineers. It plans to hire 350 more tech workers.


“We have to continue to invest,” said Vijay Sankaran, chief technology officer of Johnson Controls. “You can’t do what we’re trying to do without technology.”


In recent interviews and surveys, the same theme was struck again and again. The economic outlook is uncertain. Contingency plans are in place. Some initiatives are being trimmed back or slowed down. But business investment in technology remains remarkably resilient, and that trend appears likely to continue in 2023.


In a recent poll of corporate technology managers in the United States by research firm IDC, 82% said they expected a recession this year. But 62% replied that technology spending at their companies would be the same or increase compared with 2022.


The managers who shape technology strategy and spending at companies nationwide hold an important swing vote in today’s economy. Their confidence could help stabilize the economy, even as consumers cut back and Silicon Valley companies trim their payrolls after a period of explosive growth fueled by the pandemic.


Technology plays a larger role in mainstream corporate operations and accounts for a larger share of business investment than in the last two recessions — in 2001 after the dot-com bubble burst and in the 2007-09 financial crisis.


The big difference is software. Business spending on software, including software developed by companies for their own use, more than doubled over the past decade, to $567 billion in 2022, according to an analysis of government data by James Bessen, an economist at the Technology & Policy Research Institute at Boston University School of Law.


That is 37% more than businesses spent on factories and industrial equipment combined.


The role of technology, experts say, has also steadily evolved. It is less an electricity-style utility used to automate back-office tasks and more a key ingredient that contributes to a company’s revenue and profits.


In recent years, new technologies like cloud computing, data analytics, artificial intelligence and cybersecurity software have become increasingly mainstream. Companies now see them as vital tools for conducting business.


“That’s going to be a counterbalance for the economy that didn’t exist in the last two downturns,” said David Yoffie, a professor at Harvard Business School.


Big Tech companies such as Amazon, Alphabet, Microsoft and Meta are laying off workers. But that is not true of the broader tech economy.


Most technology workers do not work at tech companies. And while employment in tech occupations did slip slightly last month, by half a percentage point, it was 7% higher than in January 2022. Nearly 6.5 million people work in tech jobs in America, 430,000 more than a year ago, according to an analysis of government statistics by CompTIA, a technology education and research organization.


The unemployment rate in tech occupations is 1.5%, compared with 3.4% for all workers.


Even the tech giants, after making layoffs, will have significantly more employees than before the pandemic. Most other companies did not go on wild hiring sprees, but had added steadily to their tech workforces.


JPMorgan Chase, the big bank, has a technology staff of 55,000, up from about 50,000 before the pandemic. It has hired people with skills in cloud computing, data science, AI and cybersecurity, and the bank will continue to add people selectively, said Lori Beer, the bank’s global chief information officer.


Global technology surveys point to the weakness in spending on hardware. After a pandemic surge, sales of personal computers and smartphones for remote work and to consumers have fallen sharply. Two major technology research firms, Gartner and IDC, have lowered their growth forecasts in recent months, citing a continued slump in personal computers, the turbulent economy and a strong dollar.


But business investment, especially in software, remains fairly strong. John-David Lovelock, Gartner’s chief forecaster, said spending was growing in every industry he tracks and called that trend “recession-proof.” His counterpart at IDC, Stephen Minton, said business investment in technology was not immune to a downturn but was “more resilient than it’s ever been.”


Sales of remote cloud computing and software may be slowing, but only from the stratospheric heights of the pandemic. Amazon reported this month that its highly profitable cloud business, Amazon Web Services, the industry leader, was generating revenue at an annual rate of more than $80 billion and had grown 20% in the fourth quarter. Microsoft, the second-largest cloud company, reported that sales of Azure, its flagship cloud product, had grown 31%.


The recent results for technology suppliers to business show a similar pattern. Suppliers focused on helping companies convert to digital operations and cloud computing are doing well, including Accenture, Oracle and ServiceNow. IBM announced job cuts but for businesses it is shedding; its cloud and AI sales are strong.


Salesforce, a maker of customer-management software, is cutting jobs and is a target of activist shareholders. But their argument is that Salesforce should reduce expenses to increase profits. The company’s revenue grew 14% in the most recent quarter.


The relentless advance of software in nearly every industry makes tech spending less cyclical.

Take the car business. A modern automobile is becoming “a vehicle that is really defined by software,” said Alan Wexler, a senior vice president for innovation and growth at General Motors.


A sizable portion of the $35 billion that GM plans to invest in electric and self-driving cars and trucks through 2025 will be spent on software. The code will not only animate the cars, but also transmit entertainment, office-style communications services and automated driving upgrades to vehicles, as they increasingly navigate on their own.


BrightDrop, a GM startup that makes electric cargo vans, relies on software to plan routes, conserve energy and optimize package stacking in its electric delivery pallets. FedEx recently placed an order for 2,000 BrightDrop vans, and Walmart has reserved 5,000.


When GM last month announced record profits, the company also said it planned to trim expenses by $2 billion over the next two years. It is a prudent step in an uncertain economy, its executives said.


“But we’re not slowing down with these software-led growth businesses,” Wexler said.

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lekor adams
lekor adams
Jun 18

One key piece of equipment that often goes overlooked is the strap machine. For industries reliant on shipping and logistics, a high-quality strap machine can significantly enhance packaging efficiency and product security. It ensures that goods are tightly secured, reducing damage and loss during transit. As technology spending continues to grow, integrating advanced machinery like strap machines into your operations can streamline processes and boost overall productivity, ensuring your business remains competitive in an ever-evolving market.

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Eddie Simpson
Eddie Simpson
Nov 29, 2023

DTS collaborates with leading IT hardware manufacturers in the industry, to provide a comprehensive selection of network equipment, ranging from desktop and notebook computers to servers, routers, switches, and firewall appliances. Our solutions are designed to optimize uptime, ensuring the seamless operation of your organization. These products are not only budget-friendly but also come with the expertise and professional service that DTS is known for.

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Rose Rose
Rose Rose
Feb 14, 2023

https://youtu.be/ibb15n_QNwE

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Rose Rose
Rose Rose
Feb 14, 2023

https://youtu.be/JI66CjACJsU

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Rose Rose
Rose Rose
Feb 14, 2023

Shout out to the tech companies that did not break Nuremberg codes With the Covid Jab/mask or swabs, that didn’t work….. I Heard through the grapevine that profits are through the roof! So happy to know there are tech companies that actually read the constitution of the USA.

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