Apr 03, 2020 Anna Rawsthorne

COVID: A New Virus for Software?

The growing impact of COVID-19 on the global economy can be felt far and wide. Every industry is already hurting and for many young businesses, this will be the most challenging obstacle they have ever faced. For software vendors, the introduction of a lockdown has left them detached from their customers, removed from people’s minds and scrambling to find new ways in which to appeal to a penny-pinching market. Forrester’s latest IT spending forecast for 2020 predicts that software spending growth will slow down to around 2% - 4% at best within the next year, with the very real possibility of no growth at all in the face of a recession. How then, can a software company stay successful in these trying times?  

To help tackle this troublesome question, proSapient interviewed an enterprise SaaS executive with experience at Uber and Servicenow to ask how the Software sector can adapt to its new surroundings and utilise the very nature of its business to retain its core customer base.  He comments on some of the key areas of focus that every organisation within the Software industry should consider if they want to emerge as a winner.

Six key areas of focus for organisations

First, what crisis and response models could software firms deploy in the face of COVID-19?

Companies need to develop a “covid leadership framework” so that they have a holistic response model. There are many ways in which to structure this, but I have found one option that really seems to stick:

1. Team health and safety: This comes before anything. You need to reduce the risk of transmission, support those that are / may be infected, ensure compliance with regulation, manage stress and above all, boost morale!

2. Second, Business Strength: It’s vital to reserve top-line and build trust with customers during this period. While you’re building this trust, reinforce your ability to supply and adapt resources to meet business needs. It is crucial to monitor and respond to the market and competitive dynamics as it moves day to day. These initial steps will help retain business strength in the short-term, but you must always also prepare for “bounce back” scenarios. Have these preparations to hand at all times so that you are the first to burst from the flames.

3. Financial resilience: Manage cash and liquidity, ensure cost discipline, revise your financial plan and perform scenario-based stress tests.

4. Finally, Human Resources: Coordinate and scale response and planning adaptively, engage the organization and empower the team. Always lead with purpose & integrity in difficult times.

Which critical business functions do you foresee being most disrupted by the impact of COVID-19 on the software industry?

Specific to the software industry, I see the following being most disrupted:

1. Naturally, any work that cannot be performed remotely will be majorly affected by COVID-19. In the IT department this is things like data centre maintenance, resolving IT issues for employees (e.g. hardware problems, new equipment needs) and automated system testing. For some, these are major issues that may impact the speed and efficiency of their work and developers may have less defence against regressions. In times like these it’s important to focus your efforts only on the tasks that can be performed remotely – do not waste energy and resources trying to fix things that cannot be deployed at home easily. If your employees are restricted by not having these business functions, it’s time to adapt their roles so that they can fulfil the crucial tasks.

2. Software design: these discussions involve a lot of brainstorming that is hard to do even with virtual tools. Working remotely will again really impact the quality and speed of these designs so having the best virtual tools available that enable your employees to still think creatively will really help to maintain the body of the business.

3. Workplace services: any maintenance tasks that need to be performed will simply not happen; this includes office construction, workplace remodelling, etc. All such services will be postponed which may slow things down later. Be prepared for a slow start once you’re back in the office and push these services into the summer months when things are naturally a little quieter.  

Which fixed / variable costs can be reduced in the wake of the crisis?

Rent and utilities are the #1 costs for any software company outside of the R&D expense. You don’t need that much office space to be productive and people will be quick to realise this.

Post lockdown I foresee a trend towards more remote working which is likely to be more prevalent in the software industry. If more software companies take the initiative to occupy smaller offices and encourage a more mobile workforce, this will allow them to shed their rent expense on the other side. This won’t be an immediate reaction but will help to cut some of those fixed cost when we need it most.  

In the meantime, it’s important to think about short-term liquidity measures. Debt levels across the European software sector are high and increasing. While Covid may bring about new ways to reduce fixed costs in the long-run, cost-cutting measures today will need to be more centred around optimising human resources and slimming down design teams where necessary.

What strategies can sales leaders undertake to secure existing revenue lines?

Sales leaders need to ensure that they build trust with their customers and reinforce their ability to serve them as trusted advisors. Offer them things they need and be there to listen, don’t just focus on the sale. It's only natural that resources will need to be adapted to meet business needs, but this may well change week on week. Companies need to be adaptive and innovative in this period and the best way to do this is by monitoring and responding to competitive dynamics. Keep a clear eye on what your competitors are doing and listen to the market. Don’t be afraid to create something new during this time, it may just be the thing they need. Trust, adaptability and a sharp ear to the ground will help to mitigate renewal risks and secure existing revenue lines.

Given that versatility is so important in these times, how can firms adjust their product offering to fine tune their value proposition?

One key tip for all companies within the software industry is to pivot to the SaaS business model if not done already. On-premises businesses need employees on the ground at the customer end, SaaS does not. Open yourself up to the technology available and make yourselves more accessible.

All sales professionals have now become virtual/inside salespeople. In light of this, what operational best practices and collaboration and productivity tools can teams use?

The deep-rooted best practices of a software salesperson will never change that much. You will always need to sell value to the customer, i.e. identify the business problem, identify the champion, build the business case, provide reference customers and build trust. If you are still able to do this, revenue will continue to grow.

However, we are now lacking the vital intimacy with our customers that really helps to build up trust. Events are being cancelled, meetings moved, large projects postponed and without that personal interaction it’s easy to slip from the forefront of their mind. Now is the time to invest in the tools that will save your business, the likes of Slack and Zoom will become hugely important in maintaining professional communication. Google docs and Office 365 should be used for collaboration – your team needs to be connected and boosted through shared virtual spaces. Don’t be afraid to spend on the best quality appliances as they will be the tools you than the most in the end.

And finally, how can firms successfully exit this ‘crisis’? What is going to define the successful companies within this period?

Winners will be the companies that can do the following 5 steps:

· Manage cash and liquidity

· Ensure cost discipline

· Revise financial plan and perform scenario-based stress tests regularly

· Cultivate employee and customer loyalty

· Pivot their business model to work in the new world of post-Covid

Take a good look as the money you are spending and enforce some discipline, while virtual tools are an investment, pre-planned offices fixes are not needed now. Save that money for the small fixes you will need to make to ensure your workforce is still effective in the long-run. For software, keep your sales staff at the core of your business and always reserve the top-line. Test your business to its max and have your ‘bounce back’ scenarios ready. Be adaptive and do all you can to maintain the trust of those you value the most, they will be the ones to help see you through the most difficult times.

If you would like to speak with our topical advisor in more detail about his comments or any of our industry experts contact us

https://www.forbes.com/sites/louiscolumbus/2020/03/16/covid-19s-impact-on-tech-spending-this-year/#418e15d52d67 - link to the stats from Forrester’s in first paragraph.

Published by Anna Rawsthorne April 3, 2020