Johnson Controls has its roots in late 19th century Wisconsin, where a teacher and clever inventor named Warren Johnson designed an early thermostat to turn heating on or off in his classroom.
Today, Johnson Controls is an international corporation and, like companies in every industry, is increasingly a technology business. The company’s software and sensors monitor and manage heating and cooling equipment, fire alarm systems, security systems, and thermostats — to reduce costs and carbon emissions.
Despite projections of a recession, Johnson Controls isn’t cutting back on its digital projects as it seeks to create 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 keep investing,” said Vijay Sankaran, chief technology officer at Johnson Controls. “You can’t do what we’re trying to do without technology.”
In recent interviews and surveys, the same theme has been brought up again and again. The economic outlook is uncertain. Contingency plans are in place. Some initiatives are being cut back or slowed down. But business investment in technology remains remarkably resilient, and that trend is likely to continue into 2023.
In a recent poll of enterprise technology managers in the United States conducted by research firm IDC, 82% said they expect a recession this year. But 62% responded that technology spending at their companies will stay the same or increase compared to 2022.
Managers who shape technology and spending strategies at companies across the country hold an important vote in today’s economy. Their confidence could help stabilize the economy, even as consumers cut back and Silicon Valley companies cut payrolls after a period of explosive growth caused by the pandemic.
Technology plays a larger role in a company’s core 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 during financial crisis 2007-2009.
The big difference is the software. Business spending on software, including software developed by companies for their own use, has more than doubled over the past decade, to $567 billion by 2022, according to an analysis of government data. James Bessen, economist at the Institute for Research in Policy & Technology at Boston University School of Law.
This is 37% more than businesses’ spending on plant and industrial equipment combined.
The role of technology, according to experts, has also steadily evolved. It is not an electric utility used to automate back office tasks but is an important component that contributes to a company’s revenue and profits.
In recent years, new technologies such as cloud computing, data analytics, artificial intelligence, and cybersecurity software have become increasingly popular. Companies now see them as important tools for conducting business.
“That would be a counterweight to an economy that hasn’t survived the last two recessions,” said David Yoffie, a professor at Harvard Business School.
At Elevance Health, a large insurance company and healthcare provider, the growing role of information technology is clear. 80% of the communications with more than 45 million people the company currently makes are through its website, mobile app or online chatbot. Five years ago, about 30 percent was processed on its digital channels.
Elevance, which last year changed its name from Anthem, employs a tech workforce of tens of thousands of people, including software engineers, user experience designers, data scientists and AI specialists .
They work on automation tasks such as authorization for medical procedures and claims adjudication. They are also building software to make personalized recommendations on treatments and health advice to individuals and medical professionals.
That goal is the strategic direction of the company, said Rajeev Ronanki, senior vice president of Elevance. And it can only be achieved by mining and analyzing the insurer’s vast archive of billing and clinical data for better insights — a job for teams of skilled technical workers .
Mr. Ronanki said a tough economy could mean the company had to readjust its spending plans. “But we’re focusing our investments on our core priorities, and that’s not going to change much regardless of the economy,” he said.
Big tech companies like Amazon, Alphabet, Microsoft and Meta are laying off workers. But that’s not true of the broader tech economy.
Most tech employees don’t work at tech companies. And although employment in tech industries fell slightly last month, half a percentage point, it is still 7% higher than January 2022. Nearly 6.5 million people work in tech jobs. in the US, 430,000 more people than a year ago, according to a government statistical analysis by CompTIA, a technology education and research organization.
The unemployment rate in technology industries is 1.5%, compared with 3.4% for all workers.
Even tech giants that lay off employees will have significantly more employees than they did before the pandemic. Most other companies didn’t rush into hiring but have steadily added to their tech workforce.
JPMorgan Chase, the big bank, has 55,000 tech employees, up from about 50,000 before the pandemic. Lori Beer, the bank’s global chief information officer, said it has hired people with skills in cloud computing, data science, AI and cybersecurity, and the bank will continue to add people one by one. selective way.
Global tech surveys point to weakness in hardware spending. After the pandemic broke out, sales of personal computers and smartphones for remote work and to consumers plummeted. Two major technology research firms, Gartner and IDC, have lowered their growth forecasts in recent months, citing continued PC declines, an uncertain economy and a strong dollar.
But business investment, especially in software, is still pretty strong. John-David Lovelock, chief forecaster for Gartner, says spending is growing in every industry he tracks and Call the trend “recession resistant”. His counterpart at IDC, Stephen Minton, said business investment in technology is not immune to a downturn but is “more resilient than ever”.
Remote cloud and software sales may be slowing, but only from the height of the pandemic. Amazon reported this month that its highly profitable cloud business, Amazon Web Services, the industry leader, is generating revenue at an annual rate of more than $80 billion and has grown 20% in the fourth quarter. Microsoft, the second largest cloud computing company, reported that Azure salesits top cloud product, grew 31%.
Recent results for enterprise technology providers show a similar pattern. Vendors focused on helping companies transition to digital and cloud are doing well, including highlight, prophesy And service now. IBM announces job cuts but for businesses, it is molting; Its cloud sales and AI are strong.
Salesforce, maker of customer management software, is cutting jobs and is a target of activist shareholders. But their argument is that Salesforce should reduce costs to increase profits. The company’s revenue grew 14% in the most recent quarter.
The constant evolution of software in almost every industry makes technology spending less cyclical.
Be in the car business. Alan Wexler, senior vice president of innovation and development at General Motors, said the modern car is becoming “a truly software-defined vehicle”.
A significant portion of the $35 billion GM plans to invest in electric and self-driving cars and trucks through 2025 will be spent on software. This code snippet will not only animate cars, but also infuse entertainment services, office-style communications, and autonomous driving upgrades to vehicles as they increasingly navigate themselves.
BrightDrop, a GM startup that makes electric cargo trucks, relies on software to plan routes, conserve energy, and optimize packing in its electric transport pallets. me. FedEx recently ordered 2,000 BrightDrop trucks, and Walmart has 5,000 preorders.
When GM posted record profits last month, the company also said it plans to cut costs by $2 billion over the next two years. It’s a prudent move in an uncertain economy, its chief executive said.
“But we’re not slowing down with these software-driven growth businesses,” Mr. Wexler said.
