The great rebalancing act: Why tech is focused on profitability rather than growth, and why this is good for the industry 6
Nearly three in five (57%)
senior executives from tech
companies with revenues
of more than $5 billion
reported a drop in demand
in the past 12 months (see
Figure 4). Our study found
that 60% of executives
from all companies have
modified their growth
targets or shifted strategy,
and 44% of that segment
are doing so primarily
because demand for their
products and services has
slowed down (see Figure 5).
ECONOMIC UNCERTAINTY
STIFLES DEMAND
This murky economic future has also caused a pullback
in demand from pandemic-era highs, as the pinch from
inflation and the rising cost of capital forces companies to
reduce IT and enterprise spending.
Growth for B2B and B2C tech companies during 2020
and 2021 was fueled by accelerating digital trends that
shifted consumer and enterprise behavior. Pandemicera
enterprise demand for tech reached new heights as
companies sped up digital transformation and scrambled
to equip themselves with the necessary hardware and
software to support remote and hybrid work.
However, this wave of digital transformation that supported
surging demand and rapid growth for tech was soon
disrupted by rising inflation.
Today, tech companies grapple with a new reality.
Enterprise customers are consolidating IT and cloud
costs through increased scrutiny on consumption. They
are integrating platforms and eliminating excess license
spending where they see an opportunity for improved
efficiency. As a direct result, many hyperscalers and B2B
SaaS players have reported lower demand during recent
earnings calls. Further, tech companies have cited a
pullback in demand for some areas of hardware products
(e.g. PCs, wearables, servers, and peripherals) and robotics
due to worsening economic conditions.
In the past 12 months, have you experienced changes in market conditions and/or demand volumes? N=146
FIGURE 4: % OF SURVEYED TECH EXECUTIVES SEEING DEMAND DECLINES IN THE PAST 12 MONTHS,
BY COMPANY SIZE
<$100M $100M-$499M $500M-$999M $1B-$5B >$5B
57%
48%
32%
35%
27%
Have you adjusted your growth strategy and targets as a result of the shifting market conditions?
What is the primary reason you have taken current actions to change your strategy?
What is the primary reason you have not taken current actions to change your strategy?
FIGURE 5: STRATEGIC SHIFTS EXECUTED AS A RESULT OF MARKET DYNAMICS
60%
Demand continues to remain strong
56%
18%
Demand slowing down
Strategic priorities change
44%
36%
Reduced growth targets Have not modified growth strategy
Main reasoning for strategic shift