Big Tech is getting smaller

The Future. The high-flying years of Big Tech are coming to a close, thanks to spiking interest rates and Wall Street’s renewed interest in the bottom line. That could lead to more financial responsibility but less future-thinking innovation… a change that could slow down the endless industry disruption of the past decade.

Ambition ceiling

Writing for Insider, tech analyst Alex Kantrowitz breaks down what the new tech era will be about.

The minuses

• Companies will likely double down on current experimentation because they can’t afford for their investments to come up short. Case in point, Meta’s bet on the metaverse now has to work.

• And it will be harder for them to fund new big-swing experiments, which may keep them from building a runway to innovation… or, as a former Snap employee said, “their big competitors in three years are going to be built right now.”

• Speaking of new startups, the loss of experimentation may force Big Tech’s most-entrepreneurial employees to head for the exit and start their own companies… which could lead to a loss of innovation.

The pluses

• In the new era of frugality, Big Tech companies can cut their R&D budgets, which will boost their margins… a quick fix that will make Wall Street happy.

• And instead of looking for the next big innovation, companies will put their renewed effort into perfecting their current offerings, cleaning up the glitches that annoy people.

• All of that could lead to more “efficiency and profitability” if they strike the right note in cost savings and current platform polish.

Granted, some companies will forge ahead with massive rehauls despite macroeconomic forces making that risky. For example, Google is entirely reshaping Search for the TikTok generation… maybe because if it doesn’t do it now, the new era of return on investment will make a transformation even riskier down the road.