“The emerging tech companies are going to struggle for funding and will be mostly focused on cash preservation.”
Stability might seem hard to find in the tech and telecom industry, especially for smaller companies. “The emerging tech companies are going to struggle for funding and will be mostly focused on cash preservation,” Perkins said. But there are some factors that can help you find as much stability as possible.
Subscription and as-a-service models have become essential starting points for tech revenue stability, and there are still some new ideas to explore. Gothelf explained, “In many situations, it’s the classic razor-and-razor-blade model being applied to technology.” Companies can look for new opportunities to apply the razor-and-razor-blade (or printer-and-cartridge) pricing model to products in their sphere.
“Everybody loves the recurring revenue model in software. When the external economy is driving your growth, you can cover up some churn,” Walker said. “But when things slow down, the best in class focus on retaining their customers — which in some cases involves deployment of tools or working with other companies that help them capture renewable revenue.”
To keep customers, you need to keep demonstrating value — even new value. This is especially important to keep business customers, which can give you more resilience than a purely consumer customer base. “Have a value proposition that demonstrates how your tool will save customers money,” Walker said. “That’s how the sale gets repositioned,” Perkins added. One of the ways to demonstrate value is through the ongoing shift to cloud-based services and solutions.
“One of the growth areas for tech will be the continued transition of companies to cloud,” Perkins said. “I don’t think that’ll slow down. I think there will be incentives to move more quickly. If you think about clients that had a big tech project on the board, which was going to cost six or seven million dollars to implement and begin to show a return 18 months after it’s implemented, they can move to the cloud and go to an op ex model very quickly.”
“I think you’re going to see a continued — and even accelerated — move to the cloud, and to companies positioned in that space who can help,” Perkins said.
Some things will stay the same
The economic climate might be turbulent, but regulators will remain. “What will be a constant in the industry, despite all of the headwinds, is that there will still be regulatory pressure on the industry,” Perkins said. If companies have gaps they need to cover for ESG, privacy or other regulatory compliance, those might be at the top of the priority list.
When tech and telecom leaders understand all of their unique opportunities and risks, they can map the priorities and actions that will help turn the headwinds in their favor.
“They have to figure out how they get growth in a slow-growth environment,” Perkins said. “Maybe that’s M&A, maybe it’s getting better at securing recurring revenue. Maybe it’s a product shift that allows you to respond to what clients need in your marketplace,” Perkins said. “And some of it is probably retooling your internal operations to be more efficient and effective.”