2023: The Year of Conservation and Optimization
Steep economic challenges will strain all businesses — including technology vendors and solution providers — necessitating a rethinking of operational priorities and value propositions.
By Larry Walsh
The start of the new year brings bad news for the economy, as economists predict a slowdown or even a recession in 2023. This tough outlook is expected to extend through the rest of the decade as the world enters a protracted low-growth period.
However, there’s some good news: Technology may provide an antidote to the economic downturn. As businesses face high inflation and supply-chain disruptions, they’ll continue to invest in IT goods, services, and support to increase productivity and make the most of limited resources.
Capitalizing on this downturn and helping other businesses navigate the challenging low-growth period means IT vendors and solution providers must focus on improving their fiscal and operational health. Channelnomics believes the way forward is conservation and optimization, which means preserving as much capacity and resources as possible and then optimizing systems and processes for maximum value.
The technology channel is already undergoing this transition, with vendors cutting channel budgets and investing in automation tools to stretch their resources and solution providers consolidating their technology stacks and re-engineering processes to focus on better service delivery. These changes are necessary as high inflation and a decreasing demand for commodity technologies lead to rising costs. Yet the demand for software and services will likely increase. Even with that increasing demand, though, customers are pressuring vendors and solution providers on price and expecting more for their dollars and euros.
In this climate, conservation means holding on to as much capacity as possible to meet customers’ expectations. Preserving cash, sacrificing profitability in favor of operational flexibility, and redoubling efforts around effective go-to-market relationships will maintain the operational foundation that enables vendors and solution providers to continue with their go-to-market activities amid the economic pressure.
Optimization means fine-tuning a business to produce maximum output and the best possible efficiency and effectiveness with minimum resources. Vendors and solution providers should rethink their operations, processes, automation stacks, and service delivery protocols to wring out unnecessary steps, add new tools to simplify and expedite output, and deliver higher levels of value. Through optimization, vendors and solution providers will find what parts of their operations and infrastructure are truly necessary and generate value.
Conservation and optimization aren’t just about survival; they’re about thriving. Vendors and solution providers — particularly solution providers that engage in vendor ecosystems — can use this same approach to aid their customers in finding higher levels of efficiency and output through their IT investments in products and services.
The need to do more with less should give everyone in the technology industry and channel reason for optimism. Industry analyst firm Gartner says global IT spending in 2023 will top $4.8 trillion — an increase of 5.1% over 2022 — despite the sour economy. The reason for Gartner’s rosy outlook is the need for businesses to invest in new productivity and process management to remain viable amid high competition for limited opportunities.
According to the economic think tank The Conference Board, global growth will remain between 2.5% and 3% through 2030. Conservation and optimization aren’t about cutting spending and resources to the bare necessities. They’re about forging a path forward for delivering better value and experiences. While many in economic and industry circles will talk about dire straits, the channel may find that it can thrive by taking measures of its capabilities and transferring its technology knowledge to customers.
Channelnomics believes the adoption of a “conservation and optimization” guiding principle for strategy development and operational planning will put the channel on a better footing for the challenging short- and long-term economic conditions. Implementing this guiding philosophy includes:
- Diversifying products and services: Expanding the range of products and services offered can help IT vendors and solution providers stay relevant in a changing market and provide more value to customers.
- Leveraging partnerships: Building strong partnerships with other companies and organizations can provide access to new markets and resources, as well as help IT vendors and solution providers stay competitive.
- Investing in training and development: Ensuring that employees have the necessary skills and knowledge can help IT vendors and solution providers stay agile and adapt to changing customer needs.
- Prioritizing customer satisfaction: Focusing on providing excellent customer service and meeting the needs of customers can help IT vendors and solution providers stand out in a crowded market.
- Consolidating technology stacks: By streamlining and consolidating their technology stacks, IT vendors and solution providers can reduce costs and improve efficiency.
- Optimizing operations: This involves streamlining processes, automating tasks, and finding ways to do more with less. Optimization can help IT vendors and solution providers improve efficiency and reduce costs.
By implementing these strategies, IT vendors and solution providers can not only survive the economic downturn but also position themselves for long-term success in the technology industry.
Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert in the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide. Follow him on Twitter at @lmwalsh_CN.