As the US enters its second consecutive quarter of economic reduction, the threat of a looming downturn has dominated news cycles and stirred economic malaise. Although recession fears remain unconfirmed -- they are certainly a cause for concern among enterprises looking to maintain consistent growth and profitability. This is especially worrisome for the technology industry where funding from venture capital and private equity firms is drying up or sitting on the sidelines and many companies are shifting their focus from topline revenue growth to profitability and margin.
This combination of market volatility with rapidly accelerating business transformation rates makes it more important than ever for tech enterprises to adapt their go-to-market strategies regularly. Remaining nimble, however, requires an outside-in perspective, which can be informed by the interconnected web of partners, customers, and the broader technology ecosystem. Technology enterprises must observe and act upon a fundamental ebb and flow of market evolution through all three of these lenses to overcome disruptions to their business development.
Shifting Customer Demands
The needs of customers have matured markedly in recent years. There’s been an increased demand for pay-as-you go and consumption-based options from those in pursuit of both software and hardware solutions. In fact, according to TechCrunch’s 2021 State of Usage-Based Pricing Report, 45% of SaaS companies had a usage-based pricing model in 2021, up significantly from 34% in 2020 and 30% in 2019.
Wide-spread migration from on-premises to cloud-based infrastructure and delivery systems, fueled by the rise of hybrid work, has driven digital transformation in new directions. Tech enterprises, therefore, must plan their strategies for designing and selling their solutions around these preferences. Buyer’s access to information has also significantly expanded. Tech enterprises are now forced to have a higher value conversation in earlier stages of the buyer journey in order to stay competitive, given the ease of access to information.
Enterprises, in-turn, must now have strategies to migrate their on-prem customers to the cloud while offering modern, cloud-based products and offerings. Observing the impact of pricing/contract options (one-time services or hardware, subscription, consumption based) on GTM coverage models, job roles and compensation plans is also essential. Finally, to maximize partner value, enterprises must update or reconfirm their partner eco-system.
Partner Relationship Expansion
Partners look for more valuable and substantive relationships with their tech providers than ever before. Business model adaptation is an attractive opportunity and facilitates the creation of recurring revenue models. This requires enterprises to adapt their channel programs and enablement to support this evolution and understand their partners’ changing business models in greater depth. Enterprises and their GTM leadership need to review and update their partner incentive and enablement programs, and update their own channel facing organization, to take advantage of an expanded role for Partners.
Partners also increasingly offer enhanced capabilities and services to augment customer support and success while driving better end-customer outcomes. Interestingly, in 2020 researchers reported a 571% increase in incentivizing non-transactional referral partners, while also noticing a 23% decline in the inclusion of volume resellers in channel incentive programs. By expanding the breath of services, partners can simultaneously become more niche in who they serve as customers look for proficiency in their vertical industry and specific use cases.
Provider Ecosystem Augmentation
As partner relationships and specialization expand, customers expect more value from their business solutions investment than ever before. Forrester has found that 73% of B2B buyers say buying through marketplaces is very convenient and predicts that 17% of B2B spend will flow to marketplaces by 2023. A closer look at the evolution of the broader technology ecosystem reveals that customers want and require a symbiotic relationship between the tech enterprise, partners, and other technology players including independent software enterprises (ISVs), managed service providers (MSPs), distributors, integrators, indirect competitors and more.
The previous need to compromise on selections and features by buying a fully integrated solution from one mega-enterprise is not as valid today where more solutions are available, highly integrated, and transferrable on the cloud. This means that customers expect offerings to uphold those principles of integration, high levels of user experience and best of breed applications and services. As a result, more traditional platform software companies need to find the right mix of other software enterprises and services companies within the ecosystem to meet this demand.
Observing Nimbleness Holistically
Tech enterprises must maintain their agility and responsiveness to shifting competition if they wish to keep pace with accelerating transformation rates. Within the last decade, we’ve seen business model transformation times decreasing from three years at a time to just 12-18 months. We can expect such contraction to continue in the years to come, following an algorithmic curve of increase in its rate of innovation.
Although economic instability is difficult to predict and can exacerbate the challenges posed by one of the world’s fastest moving industries, technology enterprises can overcome market hurdles by better understanding the technology industry’s evolution. Leveraging these basic principles in long-term planning will provide enterprises with the foresight to employ tactics which skirt the impacts of an economic downturn for successful future planning and consistent growth over time.