Why the tech sector is poised to weather economic headwinds

Like other industries, the technology sector is weathering uncertainty due to economic headwinds. The financial environment is changing as the Federal Reserve raises interest rates and investors become more cautious about where they put their money. As of late October, Joe Brusuelas, chief economist at RSM US LLP, 65% chance of recession over the next 12 months.

Technology companies may need to cut expenses and manage headcount, but they remain uniquely positioned to thrive in any economic changes that may occur. Technology tools will continue to be in high demand for both individuals and businesses, especially as businesses in other sectors look to streamline their operations and introduce more automation. Below, we examine some of the key areas where technology companies have a strong foothold and how they can maintain that position by the end of the year.

3 reasons the tech industry is facing economic headwinds

  1. Strong access to capital and talent.
  2. Providing key infrastructure to other industries.
  3. Adaptable business model.

Other works by Davis Nordell4 points to consider when scaling up to a global workforce

1. Strong access to capital and talent

While investors may be a little more cautious about the overall economic situation, some of the changes brought about by the pandemic remain positive for tech companies seeking capital.

With the rise of remote Our businesses, investors and funds are geographically dispersed to some degree. In the United States, some investors have relocated their headquarters and established additional offices in secondary and tertiary markets. There’s no question that Silicon Valley remains the center of venture capital. But with the proliferation of remote meetings over the past two years, being located there for your first or next round of funding isn’t as important as it once was for startups and late-stage technology companies seeking venture funding. I did.

Access to talent has also increased significantly. With more workers seeking remote options, tech companies can scour more markets to fill open roles. And this goes far beyond small cities in the United States. There is no doubt that companies can now find talent around the world more easily than ever before.

Data also supports this optimism. October is the 22ndn.d. CompTIA survey shows technology sector employment increased for consecutive months Technical job openings in October report. Looking back from a year ago to September 2021, he said, technology employment grew 22% year-over-year. However, the number of job openings has decreased recently, with job openings down 12% in September compared to his August, according to CompTIA.

While these points generally tend to favor technology companies, companies that want to take advantage of this environment need to stay aware of how a distributed workforce impacts their business. As I wrote in another recent article, Considerations include::

  • Regulatory and employment laws across multiple countries
  • Data protection and cybersecurity practices worldwide
  • Managing cultural cohesion between regions

Either way, as the economic picture darkens, technology companies should also be prepared to expand their workforces as needed.

2. Providing key infrastructure to other industries

The rise of remote work is also a boon for technology companies in another way. The technological solutions that many of these companies have launched and grown are the very tools that have enabled other sectors to adapt their operations throughout the pandemic.

Over the next six months and into the second half of next year, many businesses across the economy are likely to use automation to streamline their operations and find new ways to use technology to streamline their operations. sale Tools to strengthen and level up your pipeline safety The privacy that today’s modern businesses require. All of these important areas can lead to new opportunities for technology companies ready to expand their services beyond their current customer base.

Here are two important questions your leadership team might ask to determine where to go next.

  • Do you have the right balance? customer success with team members engineer build something new product What kind of sales will support continued growth? Paying close attention to net retention and customer churn will be even more important next year.
  • Are you looking for the right locations both domestically and globally to find the best talent?

3. Adaptable business model

With recession concerns looming, young technology companies innovating for the future may need to tweak their approach to growth. This adjustment will more closely correlate revenue growth and cash burn, refocus customers and retention to maximize customer lifetime value, and establish business practices that scale in hybrid or remote-first environments. It could mean that.

The rise of subscription-based business models in recent years may offer one approach for teams looking to align and improve customer retention. These models”It can offer deeper relationships with customers, greater pricing flexibility, and the ability to build annuity-based business models. ” RSM wrote in 2021. These deeper relationships and increased flexibility will be key as consumers are likely to tighten their wallets even more in the coming months.

As highlighted in last year’s RSM article, companies implementing or wanting to implement a subscription-based model should consider the following:

  • How customer interactions will change: “Key changes include the addition of customer success capabilities focused on customer health and growth, updated processes and teams to strategically manage customer relationships. This includes leveraging customer relationship management (CRM) and automation through configuration, leveraging price, quote (CPQ) systems to proactively plan touch points in customer relationships.”
  • Systems and Processes: “For B2C companies, payment automation can be a major hurdle in system functionality in the process of switching to a subscription-based model. Outages can be complex. New pricing and bundled product delivery methods can provide value to customers, but can also impact revenue recognition, which must be supported by enterprise platforms.”
  • Pricing and monetization: To take advantage of the flexibility these models allow, leadership teams must figure out how to put together more sticky pricing patterns and strategize about how to package complementary products and features. We need to work on it.”

More about founders and entrepreneurshipDeliver a product roadmap that can withstand startup speed

stay flexible

No matter what economic challenges arise, no sector is immune. But the technology sector’s inherent flexibility, its key role in enabling economic activity over the past two years, and its willingness to constantly change and innovate will be a huge asset heading into 2023.

Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button