Digital Transformation Predictions for 2023
As 2022 ends, the pace of innovation continues to accelerate. Manufacturers face a litany of challenges when it comes to fully utilizing the potential of digital transformation initiatives, many of which are as much about mindset as they are technology.
Nevertheless, now is certainly not the time to stand still. 2023 will be a year of continued evolution, development, and shifting expectations regarding digital transformation – and the dominant force behind much of the push will be the shift to software-as-a-service (SaaS) platforms. Manufacturing is at an inflection point, and the time has come to leave on-premises software infrastructure behind and embrace what is possible with cloud-native solutions.
This common theme, “the year of SaaS”, dominates our predictions for 2023. It isn’t simply about a technology upgrade, it is about embracing what’s possible with decentralized software solutions that prioritize easier collaboration, improved productivity, and greater organizational flexibility.
1. Investments in SaaS and the Cloud Dominate
2023 marks the 3-year anniversary of the COVID-19 pandemic and the start of the massive acceleration toward decentralized digital infrastructure. According to data gathered by PTC, the majority (63%) of manufacturing organizations believe that, without upgrading or reinvestment, their enterprise software systems will remain competitive for roughly 2-3 years. This means that any organization that upgraded in 2020 before, or at the start of, the pandemic will likely be seeking to reinvest in its software solutions, perhaps around computer-aided design (CAD) or product lifecycle management (PLM).
Options exist for these manufacturers. They can either choose to upgrade existing legacy systems (which are likely built as on-premises solutions) or shift toward cloud-native SaaS platforms. Our research indicates the latter is the far more popular option, especially for PLM. When asked if they were to adopt either an on-premises or a cloud-native SaaS solution, 53 respondents indicated interest in SaaS-based CAD (as opposed to 28 for on-premises) and 69 respondents expressed interest in a cloud PLM solution (as opposed to only 10 for on-premises). For any manufacturing firm considering remaining with on-premises software infrastructure, the message here is clear: You might be comfortable with on-premises, but you cannot assume your competition is.
As 2023 marks the third year since the arrival of the pandemic and many organizations look to upgrade their software solutions, we suspect this excitement for cloud-native SaaS solutions to translate into increasingly significant investments. This does not mean that SaaS will replace on-premises for everyone – but for many organizations the cloud will be a serious consideration.
2. Organizations Start to Move Past Waterfall Product Development
Moving to SaaS means, by nature, decentralizing your organizational infrastructure. This isn’t as extreme as it sounds. Many organizations – especially larger ones – have been decentralized for decades, long before the mainstream internet took a firm hold on civilization. Now, however, the tools fit the situation. This, in many cases, leads to significant new possibilities – not just in technology but in fundamental workflow procedure.
Sequential product development (also known as Waterfall product development) is the traditional standard. A product develops in stages, each one requiring a firm start date and end approval before the next stage can begin. Engineers design a product. Done. It goes into manufacturing. Done. Down and down it goes, with any backtracking being a time-consuming and expensive process.
With SaaS-based infrastructure, however, Waterfall is not the only option. Agile product development has emerged as a serious challenger, giving its user the ability to create hardware like software. Agile is a cycle-based system that depends on frequent, cross-organizational, client-oriented communication. Work happens in short sprints – which often take weeks or only days, depending on the scope of the project. The goal is to get something concrete created quickly and efficiently.
SaaS platforms empower an Agile framework. Cloud-native software is very often designed with decentralization in mind. Think Slack, Jira, and Zoom. All of these are cloud-native SaaS solutions that allow for faster, more efficient collaboration. At PTC, we have solutions like Onshape, Arena, Windchill+, Codebeamer, Vuforia, ThingWorx, and others – all designed to increase collaboration and deliver data consistency through single, authoritative sources of truth.
We understand that Agile will be seen as a massive shift in thinking for many hardware manufacturers, but we strongly believe it will bring results, and we have the data to back it up. In a recent PTC survey, 72% of Agile users believed their organization was leading the competition when it came to leveraging the latest technology platforms and solutions. Only 39% of Waterfall users could say the same.
PTC strongly believes in the principles and power of Agile product design and its ability to help most any customer. Look for this to be a major topic for us in 2023, and we can’t wait to share more with you at LiveWorx.
3. Organizations Prioritize Sustainable by Design Products
As the impacts of climate change continue to intensify, sustainability will become an even larger priority across the extended enterprise. This creates an opportunity to build sustainability into every aspect of an increasingly circular product lifecycle, one that is increasingly mandated by government regulations. It all begins with the idea of sustainable by design, envisioning and designing products with a focus on their environmental footprint and using no more material than is physically necessary. Artificial intelligence (AI) -- also set to make large strides in 2023 – will be a driving force here in terms of technologies like using generative design to automatically ensure that only the essential materials are being used to create the strongest design.
Even the shift to SaaS plays into digital transformation’s impact on sustainability. By outsourcing data processing to centers specifically designed for energy efficiency, organizations can drastically reduce their own carbon footprints. A 2019 451 Research report found organizations that shifted on-premises workloads away to SaaS infrastructure reduced their workload carbon footprint by as much as 88%.
Factories and the people who manage them will always face pressure to become more efficient because efficiency impacts business margins. However, in 2023, manufacturers should face even more pressure because energy costs are rising, and “stakeholders” are increasingly demanding that businesses prioritize sustainability.
This will take many forms, such as the shift to remote operations where possible, the movement of data processing and storage, and the optimization of existing materials and local supply chains – as well as the optimization of in-house electrical energy consumption (a feature of IoT platform ThingWorx). Embracing SaaS will help manufacturers meet these challenges. Our surveyed, self-identified technology leaders (many of whom had embraced decentralized work operations to at least some extent pre-pandemic) found a host of advantages from their investments, not even including sustainability initiatives.
Spreading out workflow energy consumption allows for a re-examination of where and how it is being used, and that creates the opportunity for reduction wherever possible. Going forward, we expect that 2023 leaders will maximize the sustainability benefits of digital transformation and put even more pressure on those who don’t.
4. The Move to Flexible Work Continues – and Deepens
Many believe that the COVID-19 pandemic marked the long-term shift to an unprecedented level of remote and flexible work – however, this is not entirely true. The pandemic forced organizations to operate remotely, there’s a difference. Now, however, is when the long-term shift is starting to fully crystallize. Initial investments that were made to safeguard operational longevity are now being re-evaluated and, as with any significant change, some are attempting to whiplash back to pre-pandemic operations. LinkedIn data gathered from their own servers showed a decline in remote positions as many companies attempt to reign employees back to centralized work environments.
This reaction was inevitable; however, the data (including the chart above) shows that it is just that – reactionary. In any form of progress, there will be dissent, but the results speak for themselves. SaaS, by design, works as well in a decentralized environment as it does a centralized one. The tools no longer demand many employees commute to pre-determined environments in order to achieve peak productivity, especially for knowledge employees.
As a result, many organizations (currently primarily in the software space) are rethinking the need for expensive, sprawling corporate headquarters and offices. Amazon is one such company that is currently redesigning multiple new constructions with flexibility in mind. As it has been with so many other recent trends, we predict this movement – once again originating in software – will spread to hardware as well.
Technologies like augmented reality can utilize a decentralized infrastructure to communicate information more readily, regardless of location. Just look at how Atlas Copco equipped their service technicians with vital training and operational data:
While the factory or office will likely never completely disappear, the mindset around work is shifting dramatically. SaaS has created a reality where centralized operations are increasingly not essential for vital work and productivity to occur. We expect that 2023 will showcase that not only is flexibility here to stay, but fully realized flexibility will look quite different than the knee-jerk reaction to the pandemic.
5. The Importance of a Secure Digital Thread Crystallizes
SaaS has numerous benefits, but not all SaaS products are created equal, and not all SaaS partners can provide the same level of service and protection. The move to digital has not been without challenges. Cybercrime rates continue to increase, and the variety and complexity of attacks are growing. Organizations must not only worry about malicious single actors but internal sabotage and even hostile foreign governments as well.
By shifting toward SaaS, organizations can free their IT teams to be more proactive in digital transformation initiatives and strategy. Data indicates that currently, way too much IT bandwidth is spent on maintaining operations (68%) rather than facilitating new business strategy (32%). IT professionals are often among the most tech-savvy professionals within and organization and their time should not be consumed effectively keeping the lights on and performing digital custodian duties – especially when many cannot possibly hope to compete with the litany of well-resourced external threats.
Security must be maintained at every stage of the product lifecycle and, for organizations to accomplish this, they must first have complete visibility themselves. By implementing and maintaining a complete digital thread underlying infrastructure, organizations can track, utilize, and safeguard their data.
Final Thoughts
2023 will be a year of advancement and a year of crystallization. Now three years into the pandemic, many organizations are finalizing long-term investments in SaaS and cloud-native technologies that will empower higher levels of decentralized operations. As a result, Agile product development will become more appealing for many manufacturers looking to streamline collaboration and reduce time to market. The leaders of 2023 and beyond will be the organizations that can do this sustainably and securely.
While we expect at least one or two surprises to unfold over the next year, readers can depend on the continued growth and prevalence of SaaS platforms and services, and all the possibilities that implies.