Currents Research - November 2023

Introduction

In this latest installment of Currents, our recurring research report, we delve into the present state of startups in an uncertain economic landscape. Focusing on key players in the tech ecosystem—founders, executives, and employees—we explored how they’re navigating issues like fundraising, hiring, and future-proofing their businesses.

With the world of work in flux, we gauged sentiment toward remote work and return-to-office policies. As the artificial intelligence boom continues, we also examined how businesses are adopting AI technologies, from conversational agents like ChatGPT to complex machine learning models, and the challenges they face in doing so. Naturally, we also touch upon critical areas like cloud computing and cybersecurity.

To capture a well-rounded view, we surveyed a diverse group that includes respondents from domains such as developer tools, tech infrastructure, fintech, blockchain, gaming, and entertainment. The survey has a global reach, featuring respondents from around the world—from Belarus to Brazil.

The findings are based on 665 completed surveys, with 58% of respondents identifying as full-time employees, 19% as self-employed or entrepreneurs, and 15% as company owners or founders. Let’s get to the details.

Key findings

Economic downturn affects small businesses but optimism persists:

2023 has been characterized by rising inflation, elevated interest rates, and widespread layoffs in the tech sector, posing challenges for both businesses and consumers. We found that 42% of respondents indicate that the current economic situation has negatively impacted their business. However, many businesses remain optimistic—asked about the outlook for their business in the next year, 37% had a somewhat positive stance, while 15% had a very positive posture.

Widespread adoption of artificial intelligence (AI) and machine learning (ML):

Despite economic challenges, most companies remain committed to investing in emerging technologies like AI/ML to improve operations, though ethical concerns and implementation costs are top barriers. Software development tools and data analytics are seen as the most promising AI applications across industries, though the current hype cycle has left many uncertain about tangible benefits. The survey uncovered that 43% of respondents are currently using AI/ML tools for both personal and business use. Meanwhile, 78% of those surveyed believe that their use of AI/ML will increase compared to last year.

Remote and hybrid work structures dominate the tech landscape:

The post-COVID work landscape is diverse, featuring a mix of remote, hybrid, and in-office arrangements as companies adapt to new operational and employee preferences. Answering the survey, 47% of respondents reported that their companies are hybrid remote, while 40% reported being fully remote. A minority, 13% reported that their company is fully in-office. However, 19% of respondents reported that their companies had instituted a return-to-office policy.

Multi-cloud strategies are rising in tandem with cybersecurity investments:

Multi-cloud strategies and cybersecurity investments are becoming increasingly central as organizations strive for both scalability and security. In 2023, 35% of organizations are employing multi-cloud approaches, underscoring the diversification in cloud infrastructure. Concurrently, 37% of businesses plan to increase their cybersecurity spending, indicating a heightened focus on security in tandem with cloud expansion.

For the complete findings, continue reading this edition of Currents.

Economic impact on business operations

While a significant portion have weathered the economic storm unscathed or even benefited, the largest share of businesses report taking a hit from broader economic troubles. The high percentage of companies feeling negative effects suggests the wider trends of inflation, rising interest rates, and recession fears are creating strong headwinds for many organizations.

We asked respondents how the current economic situation has impacted their business operations and performance. Forty-two percent said the economic climate has had a negative impact on their business, while 38% indicated they have experienced no impact from the downturn. Additionally, 9% noted a positive impact on their business from the economy.

When asked to rate their level of agreement with the statement “the current economic situation has negatively impacted my business,” 92% agreed or strongly agreed and just 4% disagreed or strongly disagreed that the current economic situation has negatively impacted their business.

When we asked about the outlook for their business over the next 12 months, sentiments were mixed but leaned positive overall. The largest share (37%) hold a somewhat positive outlook, while 31% remain neutral on the prospects for their business. Fifteen percent describe themselves as very positive on their one-year ahead business outlook. However, 15% also hold a somewhat negative outlook, and 3% are very negative on the future business landscape.

Capital raising and talent acquisition

In a climate of challenging macroeconomic trends, businesses are neither retreating nor standing still; they are holding the line with resilient intent. While economic uncertainties loom, companies remain undeterred in advancing their fundraising and hiring agendas. This tenacity reflects a broader industry sentiment: adaptability and strategic realignment are not just options, but necessities for navigating the turbulent economic waters.

While fundraising can be a key lever for business growth, the past six months have shown varied results among respondents. In the last six months, 15% of respondents have raised funds for their business, while 85% have not. This gap suggests that many companies may be bootstrapped or have opted for alternative financing models, although various external factors, including macroeconomic challenges, could also be at play.

Amid challenging economic conditions, businesses are making calculated choices about their fundraising strategies. In the context of the current economy, 18% of respondents have increased their fundraising efforts, 32% have maintained the same level, 10% have decreased efforts.

Layoffs have emerged as one response to financial pressures, but not all companies are embracing this approach. In response to the current financial climate, 14% of organizations have conducted layoffs, while 86% have not.

While most companies aren’t resorting to layoffs, it’s worth noting that they aren’t aggressively expanding their workforce either. Over the past year, 5% of respondents saw a significant increase in hiring efforts, 14% experienced a moderate increase, 56% maintained the same level, 8% had a moderate decrease, and 7% noted a significant decrease.

The rise of AI and ML in the workplace

The rapid advancements in artificial intelligence and machine learning are fueling a technological gold rush, transforming automation, predictive analytics, and data-driven decision-making. These technologies are not just streamlining operations but also serving as catalysts for innovation across various industries. As companies navigate the challenges of implementation, they unlock opportunities for growth and competitive advantage.

Regarding the rise of artificial intelligence and machine learning tools, 45% of respondents believe these technologies make their job easier, while 43% feel they are over-hyped. Interestingly, 31% don’t perceive them as a threat to their job, though 8% do. A notable 27% feel that these tools enable a focus on more critical tasks, while 19% stress the need for additional safeguards before trusting them. Another 19% find no difference in their daily work due to these tools. Some 10% remain undecided, 8% state these tools introduce organizational confusion, 3% believe they complicate their job, and 2% admit unfamiliarity with AI/ML tools altogether.

Interestingly, 24% of participants reported using these tools exclusively for personal activities. On the other hand, a modest 6% utilize them solely for business operations. Notably, a significant 43% have incorporated AI/ML tools into both their personal and professional tasks. Some 27% have refrained from using AI/ML tools altogether.

As part of their push for innovation and experimentation, companies are ramping up their use of AI and machine learning. A total of 78% of respondents anticipate an increase in their use of AI/ML this year compared to the previous year, while only 3% expect a decrease, and 19% foresee no change in their usage.

While business leaders identify multiple AI applications as potentially impactful, the tools they actually use may paint a slightly different picture. Businesses have implemented AI/ML in various areas, with 47% using it in software development and coding. Data analysis and insights come next with 34%, followed by process automation at 27%. Marketing, particularly in email writing, stands at 24%, while customer service and engagement have seen a 21% implementation rate. Other areas include product recommendations, other user experience enhancements, and sales at 12%, 12%, and 7%, respectively. Interestingly, 12% of businesses reported not having implemented AI/ML at all.

Remote work and return to office

In 2023, the lasting impact of the global pandemic on the world of work remains evident. Remote work, once an emergency response, has evolved into a mainstay for many businesses, challenging the traditional office-centric model. Hybrid work arrangements have also gained traction, offering a flexible middle ground as companies navigate the complexities of returning to physical office spaces.

According to our research, 39% of surveyed companies operate fully remotely, while 23% follow a hybrid model with required in-office days. Another 25% have adopted a hybrid approach but offer open remote options. Only 14% of companies remain fully in-office.

The evolution of return-to-office policies reflects ongoing adjustments to the new normal at work. In the past year, 20% of companies have implemented a return-to-office policy. A majority, at 63%, continue to support remote work, while 9% never adopted a remote work model to begin with. Additionally, 8% of respondents are unsure about their company’s stance.

When we asked about their preferred office experience, 47% of respondents favor a fully remote setup. A hybrid model with open remote options is preferred by 29%, whereas 16% opt for a hybrid model with specific required in-office days. A mere 8% prefer a fully in-office arrangement.

Cloud computing and cybersecurity insights

The rise of cloud infrastructure has dramatically transformed business operations, offering flexibility, scalability, and significant cost benefits. As organizations migrate their systems and data to the cloud, the complexities surrounding security and scalability grow proportionally. Ensuring seamless cloud performance while maintaining robust cybersecurity is crucial for businesses to remain competitive and secure.

When addressing the scalability of their cloud infrastructure, 45% of organizations leverage their cloud provider’s automatic scaling features to ensure flexibility. In contrast, 17% employ in-house cloud management solutions for custom scaling. Utilizing a hybrid cloud approach for optimized scalability is a strategy for 23%, while the same percentage of organizations (23%) indicate that scalability isn’t a primary concern. A small proportion (3%) have adopted AI technologies for this purpose, and 9% do not use any of the aforementioned methods.

The cloud infrastructure setup of organizations varies. About 33% of organizations rely solely on a single cloud provider. On the other hand, 35% utilize multiple cloud providers, indicating a multi-cloud approach. Meanwhile, 31% of organizations have adopted a hybrid model, integrating one or more cloud infrastructure services with their on-premises setup. A mere 5% maintain an on-premises-only infrastructure, while 7% are unsure about their organization’s cloud infrastructure setup.

The decision to increase spending on cybersecurity is influenced by multiple factors. Both the need to invest in advanced security software and updating older systems motivate 37% of businesses. The emergence and risks associated with generative AI account for 34%, while 31% are concerned about vulnerabilities in hybrid work environments. The aspiration to utilize managed security services drives 29% of organizations, and a recent security incident is the impetus for 20%. Hiring more cybersecurity professionals is a reason for 18%, and 8% have other reasons driving their decision.

Cloud computing is key for organizations seeking scalability and flexibility. As they adopt different strategies like automatic scaling and hybrid clouds, cybersecurity remains essential. This highlights the interconnectedness of digital infrastructure and security.

Methodology

This survey was conducted through an online survey link from September 13, 2023 to October 17, 2023, and garnered 665 completed responses. The link was distributed to DigitalOcean email lists.

Approximately 26% of respondents were full-stack developers, 13% were CEOs, founders, or owners, and 10% were back-end developers. CTOs made up 7%, while systems architects and systems administrators each accounted for 5%. All other roles, spanning from DevOps specialists to marketing professionals, summed up to 34%. The remaining 5% fell into the “Other” category.

Respondents represent 68 countries, with 34% being in the United States, 8% in the UK, 4% in India, 4% in Germany, and 7% in Canada. The questionnaire was developed by DigitalOcean and was distributed via link through email and social media channels to both DigitalOcean customers and non-customers.

Respondents came from a range of digital industries. A significant 30% were from software or software as a service providers, followed by 13% from technology consulting or agencies. Financial services and other technology businesses were represented by 9% each. Healthcare and education had an equal share with 5% each. Ecommerce, retail, manufacturing, transportation/warehousing, and advertising/marketing firms each made up between 2% to 3% of the responses. The remainder spanned sectors like utilities, construction, and hospitality, with most having less than 2% representation. Additionally, 11% specified other industries not listed.

The gender breakdown was 88% male, 6% female, 1% non-binary, 1% who self-describe, and 4% who preferred not to say their gender. Respondents represent a range of ages: 6% were aged 18-24, 26% were aged 25-34, 31% were 35-44, 22% aged 45-54, 10% aged 55-64, and 4% 65 and older.