Recurring versus Transactional Business Models in an Economic Downturn

TSIA believes technology companies should be assessing how they can strengthen their business model.

COVID-19 will undoubtedly create an economic downturn. How long or how deep is impossible to predict. Even with this low visibility, TSIA believes technology companies should be assessing how they can strengthen their business model to both navigate the downturn and exit the downturn in a stronger position. 

In a long-term study of the 2001 recession by Bain & Co. that analyzed the net profit margins and sales growth of more than 2,500 companies, it was found that one-fifth of all leadership companies—those in the top quartile of financial performance in their industry—fell to the bottom quartile. Battening down the financial hatches and optimizing current revenue models may not be the winning strategy for many technology providers.

This paper has four sections:

1. Critical observations on the technology industry pre-COVID-19.
2. Why XaaS business models are more recession resilient.
3. Why leadership teams should be reviewing their XaaS initiatives right now.
4. What will the analysts be asking after the economy stabilizes?