The AI boom will reach new heights

Leaving behind a belt-tightening 2022 and 2023, the new year presents a fresh start for many organisations as they seek to enter a period of lean, efficient growth. Automation is high on the list for executives, but I expect to see faster adoption of AI software in the finance function, which has often been described as the canary in the coal mine for new technology. CFOs will use AI to unburden their teams from mundane, time-consuming tasks like invoicing and contract analysis and free up resources for strategic projects.

As well as bringing obvious benefits, the AI arms race presents a serious budgeting challenge for the modern CFO, who will need to closely scrutinise software purchasing. Legacy products will be under the spotlight as new players emerge, presenting a potential new dawn in lots of SaaS markets with companies less willing to stay loyal to the big software players if they can’t keep up.

The threat of “shadow AI” looms large

The acceleration of AI software presents a huge financial and security risk for businesses that don’t have a robust procurement process in place. Next year, we will see more businesses feel the pain of “shadow AI”, where employees sign up for new tools out of sight of official procurement processes.

As well as the risk that unvetted tools might fail to meet security and compliance standards, shadow AI means that finance teams don’t have the visibility they need to forecast spend for future years - leading to a potential time bomb when contracts renew, or prices increase. Without guardrails, the rapid adoption of AI could spin out of control, overshadowing any productivity gains enabled by the software.

The end of the “software price hike”?

In the $200 billion SaaS market, we’ve seen opportunistic vendors hike prices far beyond general inflation throughout 2022 and 2023, relying on complicated tech bundles and opaque pricing strategies to mask significant price increases. 73% of vendors raised prices in the last 12 months alone and, in doing so, have contributed to software inflation of more than double the level of US CPI inflation.

With the slowing of headline inflation set to continue into 2024, I expect to see more modest increases as SaaS vendors find it harder to hide behind general consumer inflation as a reason for hiking prices. For vendors who choose to continue down the path of annual price hikes, there will be far less tolerance from businesses which - worn down by pricing fatigue - won’t hesitate to consolidate applications or cut licenses altogether.

Despite price increases being less extreme, businesses shouldn’t rest on their laurels when it comes to the cost of software. Vendors will increasingly look to make gains through less obvious methods - for example by cutting the discounts they offer or restructuring pricing models to give customers less value for money.

A year of consolidation vs. “growth-at-all-costs”

Long gone are the days of unsustainably rapid growth in tech and a subdued outlook will force organisations to take a more cautious approach. Cost-cutting will continue to top the list of priorities for businesses seeking profitability, but figuring out where to make them will be more challenging than in previous years. Tech companies laid off over 250,000 employees in 2023 alone and CFOs will need to look beyond headcount cuts as their main efficiency lever.

Software, often the second largest expense for many companies after payroll costs, will be firmly under the spotlight after historically being managed in a wild west fashion in many organisations. Against this backdrop, we are entering a phase of stack overhaul, with specialised, innovative tools seen as more effective and value for money than the behemoth suites incumbent at many organisations.

When it comes to cloud, growth will no longer trump cost control

There’s been a perception amongst some companies, particularly fast-growing start-ups, that cloud cost optimization measures should always come second to growth and innovation. But with cloud costs increasing by 35% year-on-year, finance leaders will ramp up their efforts to wrestle control of cloud spending from engineering teams.

Over half of finance leaders surveyed in Vertice’s 2023 State of Cloud Spending Report blamed their inability to control cloud spending on a lack of transparency from tech leaders, with 44% saying they can’t get visibility of cloud costs. Next year CFOs will demand access to accurate forecasting, with shared visibility and automation tools to help them act on cost-saving initiatives.

The outlook for startups will remain muted

The market may have stabilised from the freefall we saw in 2022, but funding levels are still down and costs are way up. Despite some bright spots, realistically I don’t see 2024 being a turnaround year where fundraising returns to the levels we saw in 2021.

With substantially shorter runways, a new wave of cost-cutting measures will hit startups as they become laser-focused on measures that will help make them leaner and more profitable. I don’t just mean layoffs; founders will adjust spending across all areas to extend their runways. Software and cloud costs, which tend to spiral as a company gets to Series B territory and beyond, are often overlooked but some of the fastest and most straightforward ways for startups to realise savings. 

Companies looking for growth should focus on data 

Data has long been described as the ‘new oil’ powering modern businesses, but the reality is that most businesses have struggled to meaningfully analyse data at scale. 2024 will see this change as companies take advantage of AI to transform large volumes of data into actionable insights that will inform everything from new product development to global expansion. The shape of executive teams will start to change to accommodate this shift and I expect to see an uptick in the number of C-level positions dedicated to overseeing data in 2024.

The year where quantum computing goes mainstream

Just like 2023 was the year that 20 years of hype about AI became true, 2024 will be the year that quantum computing becomes mainstream. I’m not saying that people will have a quantum computer in their living rooms, but I think more businesses will be able to integrate quantum computing in a meaningful way. Use cases that I think will become commonplace include using quantum computing for complex financial modelling, optimising prices, and detecting fraud and cybercrime.