In my role heading up the Subscription Sales research practice at TSIA I’m often asked to make predictions. This, in my experience, is a risky business unless you’re able to back up the prophecy with some data and hard facts. 

This is what the TSIA model is all about. We work with hundreds of the largest tech firms in the world, under strict NDA, and we analyze all the non-public, and public data to look for patterns. We’re looking for both patterns of success and patterns of failure and sharing those insights with our members. We then spend time with our membership community to discuss and validate these insights.

Making predictions at a time like this (I’m writing this at the start of April 2020 when the COVID-19 pandemic has not yet reached its peak in many Western economies) is especially hard, but there are some new realities that we’re seeing that make some things more likely in the future. We’ve been polling the industry over the last few weeks to collect data that we can use to help the industry navigate through this time of uncertainty and prepare for what lies beyond.

There are three new realities which are shaping the world today as we are in the midst of the crisis. And, we believe that these new realities make it easier to forecast what the world of sales is going to look like in 6, 12, and 18 months’ time. 

 Are you looking for a path through these uncertain times? We’re in this together, and we’re here to help.

 

1. Technology Just Got Even More Important

There are numerous sectors in the technology and services industry that have seen significant boosts in demand over the last months. One of our members described the sequence of events that they’ve seen as follows:

Step 1 – Enable a remote workforce

Step 2 – Make sure that everything is secure and compliant

Step 3 – Make sure that they can perform effectively

Step 4 – Designing the future operating model on digital platforms

If you think about these four steps it’s easy to see how infrastructure, software, and services businesses can help companies as they navigate this rocky path. You can see from the chart below the impact on bookings over the last 3-4 weeks:

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Here’s a summary:

  • Technology bookings are a mixed bag, but more down than up. 32% of companies have seen bookings rise compared to the same time last year, 52% have seen them fall.
  • Bookings for services are completely polarized. 
    • Services that are delivered on site have fallen through the floor, only 9% have seen an increase on last year and the majority have seen their bookings fall by more than 10%.
    • Remotely delivered services are a different picture. While more than half of companies are reporting increases in bookings for this kind of service, 32% are down, with only 16% down by more than 10%.

It is therefore reasonable to accept that the arrival of COVID-19 has accelerated many companies’ journeys to a more digital future. Technology providers, who can help enable and speed-up this digital transformation, are positioned well for the future.

2. Sales Transformation Just Got Accelerated

Thomas Lah pointed out very early on in this crisis that it is a proven best practice that companies that excel after a crisis do so because they spent time on their business strategy during the crisis. They do not simply focus on the short-term issues, but rather longer term strategies for how to recover and come out stronger on the other end 

We’ve talked for the last several years about how sales in the technology industry is undergoing the greatest period of change in history. Over the last ten years we’ve gone, as an industry, from being product-centric to being services-centric. When it comes to services, the two sectors that are growing faster than any others are Managed Services and Subscription Offers. And lastly, an increasing share of new technology spend now sits with the business buyer (Microsoft predicts it will be 80% in 2020).

What you sell, how you sell, and who you sell to is unrecognizable from where we were five years ago.

There is a global acceptance that we are about to enter into a period of worldwide economic recession; very few people are confidently estimating how long the downturn will last and some of this will only become clear when we get to the other end of this crisis. West Monroe Partners research recently showed that 54% of companies have already started implementing their recession “plan of action”.

There is starting to be a “redrawing of the lines” between inside sales and field sales functions.

We’re already seeing some interesting tactical moves in response to the current situation. There is starting to be a “redrawing of the lines” between inside sales and field sales functions. The line is becoming blurred because field sales is inevitably going to change – more on that later in this blog. 

We’ve also heard of companies using this as a catalyst to move headcount from traditional hunting roles to farming activities to protect and grow the existing customer base – which is a very natural instinct in lines of economic pressure.

When you combine this inevitable increased pressure on costs, along with the already shifting sands of the sales environment, it’s easy to see that sales leaders are:

  • Accelerating their plans to redesign customer engagement models 
  • Revisiting org structures, roles, responsibilities and capabilities 
  • Relooking at how individuals are measured and remunerated 
  • Assessing whether they have the right systems and tools in place to enable all this change

3. Subscriptions and XaaS are the Future

Over the last ten years, TSIA has written extensively about the shift in the industry towards buying technology as a service. We refer to this as XaaS, where the “X” can stand for anything. We know from our research that subscription offers are growing roughly eight times faster than the technology industry overall (33% vs 4% as at the end of 2019).

The reasons for this shift are well documented and it’s clear that everyone benefits from a subscription model compared to a traditional transactional model. Shareholders like the predictability of recurring revenue and customers like the fact that they pay for what they need.

It looks likely, as we enter tough economic times, that the shift to the XaaS model will become more pronounced. One of the largest resellers and distributors of technology equipment in the Americas has provided a very clear perspective on where they see their customers prioritizing efforts in the coming months.

  • Managing Liquidity (the availability of liquid assets)
  • Managing Risk (credit risk, cyber risk, etc.)
  • Cost Containment (discretionary spend reductions)

Within this context we see more technology purchases moving away from traditional capital expenditure to a contractual and consumption-based model.

There is clearly demand from customers for Subscription and XaaS models and the chart below shows the benefit to the organization in a downturn. In our recent Rapid Research Response polling we asked about the impact of COVID-19 on technology bookings performance. This chart shows the results broken down by business model type (majority recurring revenue vs majority transactional). 

56% of Transactional businesses are reporting bookings down by more than 10%, compared to only 23% of Subscription businesses. And, 38% of Subscription businesses are seeing bookings up on last year compared to only 28% of Transactional businesses. More evidence that the Subscription business model is the way to go.

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In order to keep you updated with the latest data and insights, I will be writing another blog in the next 10-14 days to start looking at other predictions for the future of sales in the technology industry.

TSIA is Here for You

We understand that our member companies, the technology industry, and the world at large have been impacted by COVID-19. Whether you are prepared for Revving or Retooling, now, more than ever, we need to work together to get through these challenging times. TSIA is committed to providing visibility as quickly as possible into the changing industry trends and practices that come as a result of COVID-19. Visit our Rapid Research Response Initiative resource page for more information.

If you have any questions related to how COVID-19 is impacting your organization, we’re here to help.

 
 
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Martin Dove

About Author Martin Dove

Martin Dove is the vice president of subscription sales research for TSIA and brings a unique set of experiences and insights on outcome-based selling and subscription sales methodologies. In this role, he works with TSIA members to help them navigate the journey to being more outcome-based in the way they sell and to optimize their organization’s sales of subscription, or “as a service” offers, to both new and existing customers.

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