Perform Ventures Blog

High Tech Industry Sees Positive Growth

Cassy York — Wed, 14 Jul 2010 19:31:00 GMT

The High Tech and Electronics Industry was projected to experience positive growth in 2010 after two bleak years caused by the recession. As many organizations implemented cost-cutting strategies, many IT budgets were frozen. This especially affected hardware, in which the semiconductor industry saw 11.4% decline in revenue in2009. However, most analysts predicted that 2010 would be a positive year for the entire High Tech Industry, and many companies are surpassing their earnings projections. A leading headline from the Wall Street Journal on July 12, 2010 stated, “Tech Sector Defies Gravity as Web Drives Upgrades. ” Intel’s record-breaking quarterly earnings release the following day only bolstered that claim.

Intel’s somewhat shocking 34% quarterly revenue increase was the result of positive earnings across all major divisions. Some of the trends influencing this growth include:

Increased investments in cloud computing servers as companies providing data centers strive to meet ever-increasing Web-based services demand.
Corporations upgrading servers and increasing laptop and PC purchases.
Even netbook sales have increased –this is typically an incredibly low-margin division for Intel and it saw a 16% increase despite Apple’s iPad being released in the same quarter.

As emphasized in the Wall Street Journal , increasing Internet services – including everything from email to video conferencing to online gaming – and demand for them is a primary driver in the High Tech Industry’s growth. In response to the economic downturn, many organizations began adopting cloud computing initiatives primarily due to their lower cost. Ease of use, upgrade capabilities, application integration, variety of services offered, and improved security are other factors that have contributed to the increasing interest in cloud computing. Organizations are realizing the high value they can receive from implementing web-based services and are implementing the necessary technologies to support them.

In addition to the growing popularity of Internet-based upgrades, the Wall Street Journal cites additional High Tech Industry trends including:

Apple’s record release sales of iPhone4 (topping 1.7 million sales in the first week) and stronger than predicted sales of the iPad.
In addition to consumer interest in personal electronics as supported by Apple sales, consumer spending on home computers including both laptops and PCs has also steadily increased.
Rising prices and key tech component shortages due to heightened demand levels (many popular semiconductors are now taking 18-20 weeks for delivery compared with the previous 10 to 12 week time.)
Strong increase for chip-manufacturing equipment makers – Gartner predicts a 113.2% increase in spending in this sector for 2010.
Increased stock offerings, M&A activity, and venture funding are all contributing to industry growth as some investor confidence rebounds.

In somewhat of a contrast, the Federal Government has implemented a $3 billion Federal IT spending freeze while it evaluates many current IT projects that it believes to be ineffective or that need improvements before proceeding. According to the Wall Street Journal, this freeze may impact such leading companies as IBM, Accenture, and Oracle that currently hold many of these large contracts. The White House and Federal CIO Vivek Kundra are emphasizing the need for IT efficiency and effectiveness, noting the numerous expansive contracts currently in place that have failed to produce the desired results. Many of these include financial management systems that have simply failed to integrate all the disparate systems existing within individual agencies, precluding any inter-agency integration and collaboration. The entire Federal IT budget tops $80 billion, so there will be no cessation for the majority of IT projects and functions, but it remains a White House priority to begin reducing the cumbersome nature of these projects so that they can be implemented in more successful, localized parts. The Administration recognizes that increased transparency is vital to IT project success, although many vendors remain concerned about the current lack of transparency regarding the frozen projects. The ideal outcome of this budget freeze is to improve IT project transparency going forward so that vendors are aware of expectations and that Government Agencies have a way to ensure their project outcomes are achieved in a timely fashion. Also, reinforcing the overall trend towards implementing cloud computing, Kundra is especially interested in implementing cloud computing initiatives in the Federal Government to reduce costs and improve efficiency.

In both the public and private sectors, high demand for Internet-based services are underscoring many major IT investments and upgrades which is very good news for the High Tech Industry as it continues its revenue growth efforts in 2010.

Manufacturing Software Trends

Cassy York — Tue, 18 May 2010 19:41:00 GMT

The manufacturing industry has entered what appears to be a period of sustainable growth as manufacturing activity reached a level not seen since July 2004 according to the Wall Street Journal . This has resulted from increased consumer and business spending, despite spending levels being higher than income increases. Business are finally replenishing inventories as consumers become steadily more willing to spend, which has supported much of the increased manufacturing activity.

With this recovery, the manufacturing industry is placing a renewed focus on technology investments that were previously canceled or delayed. In the two-part blog series, “2010 Manufacturing Software State of the Industry Roundtable,” the Software Advice blog presents the views of manufacturing software industry leaders about the state of the industry – with specific emphasis on manufacturing ERP solutions. Software Advice notes that large manufacturers are primarily focusing on replacing or updating legacy ERP that were implemented during the Y2K craze but are no longer fulfilling all manufacturers’ ERP needs. And, for organizations that have already updated their systems, many are expanding them so that all plants (including offshore facilities) are on the same corporate ERP system to improve functionality and data accuracy.

Small and medium sized manufacturers are also embracing technology investments as technology solutions become more affordable and customizable than ever before – primarily through SaaS. In the Software Advice Roundtable , Jonathan Gross notes that, “One of the primary drivers [in SME manufacturers’ SaaS adoption] is the fact that end-users are not required to support and maintain the software. The provider does this work... Another key driver is that no supporting infrastructure (databases, networks, etc.) is required.” With the improve functionality and lowered cost of SaaS-based ERP solutions, manufacturers of all sizes are now able to receive the benefits of ERP systems to achieve their cost cutting and revenue growth goals. Some small and medium manufacturers have actually used ERP integration solutions to provide the business value in offshoring, despite some remaining skepticism from manufacturers about data security and dependability when not hosting their data solutions on site. Increasingly the value of SaaS-based ERP solutions overrides this skepticism as SME manufacturers try to become more competitive in the industry.

Software Advice also cites the following trends in manufacturing software:

Lower prices as software companies compete to gain customers that delayed IT investments as a result of the recession
Increased integration of enterprise-wide information and systems including those from supply chains, offshore plants, and disparate internal reporting systems
A slight preference towards adopting integrated ERP suites instead of best-of-breed applications – especially in new adopters. Manufacturers with legacy systems are still more likely to incorporate best-of-breed applications to enhance the functionality of existing solutions to accommodate new and changing information.

These trends are reflected in a recent IDC Manufacturing Insights Supply Chain Survey , where 43.6% of manufacturing respondents cited “improving profit margin” as the primary business goal driving IT investments. As market activity improves and manufacturers continue to experience growth, a primary goal will be to maximize revenue. Leveraging new and existing IT resources to improve planning will be critical for manufacturers to achieve this as many have fully implemented other cost cutting measures in wake of the recession. With improved capital from increased production, the time is right for manufacturers to assess their technology needs and determine which solutions can truly add value to their organizations - especially while prices are reduced.

Industries are Increasing Customer Engagement to Drive Revenue Growth

Cassy York — Mon, 29 Mar 2010 14:07:00 GMT

As organizations look for new ways to increase revenue growth, customer engagement becomes more important than ever for several reasons. First, as customers - and businesses - have learned to “do more with less,” consumers of virtually all industries are spending more time researching the products and services they want to buy. Consumers are also willing to spend more time finding a lower price. Second, as a result of the economic crisis, many organizations realized that they were not employing their data effectively resulting in not only operational inefficiencies but also greatly hindered customer service initiatives. Third, as consumers across industries receive an onslaught of digital marketing materials, marketers and customer service departments have to work even harder to ensure that their campaign stands out from their competitors.

In a recent article, The McKinsey Quarterly notes that despite increased digital marketing budgets and activities – many campaigns fail to generate more leads than when operating at their previously lower budgets.This largely results from marketers spending additional budget dollars on advertising and other paid placements of brands that already have a strong recognition resulting in increased spending with little to no increase in results. The McKinsey Quarterly says that “Most companies have now essentially become publishers, with a more complex set of cost and quality concerns, yet continue to behave like simple advertisers.” When companies in any industry do not readily adopt a flexible, dynamic model their outreach efforts often fail and simply become another piece of the noise that consumers must sort through every day.Therefore, McKinsey claims that a more effective strategy is to become an active digital marketer where less of the marketing budget is spent on advertising and more on content creation and other engagement activities that empower consumers to interact with their brands within the parameters the organization establishes. This allows consumers to access and share the information they want, while still enabling the organization to have active input into what consumers will take away from their encounters with their brand.

So, what are various industries doing to increase customer engagement to meet new revenue growth goals?

Several industries are leading in improved customer engagement programs including Banking, Telecommunications, Retail, and Consumer Goods with Energy and Manufacturing also implementing programs to better gauge consumer demand. To achieve this goal, these industries have discovered the value of fully leveraging both existing technologies and new technology applications. When organizations did not possess a complete view of their customers and the projected performance of customer-facing departments, they continuously lost cross and up-sale opportunities in addition to sometimes weakening their brand by not providing customers will all the information they needed in one location. Much of the High Tech industry has been a leader in this area – or at least when implementing their own solutions that are designed to improve enterprise visibility and improve customer engagement. When high tech organizations fail to do so, they encounter the same challenges as other industries when trying to increase revenues through improved customer engagement activities.

Therefore, as various industries continue in their efforts to better understand and interact with their customers, they need to be mindful of their methods of outreach and interaction ensuring that customers receive the same level of attention and service at each level. A vital component of this process is for customer facing staff to have the resources they need to speak knowledgeably about not only their organization’s product or service, but the industry in which their target operates. Simultaneously, organizations need to effectively monitor customer interactions – whether they be an online chat session, social media message boards about the company,customer service or sales calls, purchase orders and usage volumes, or even just website volume in addition to traditional campaign tracking – to guarantee that their marketing and sales departments are in an optimal position to convert their customer engagement activities into sales and strong revenue growth engines.

Are the Retail and CPC Industries Prepared for Permanent Changes in Customer Spending?

Cassy York — Mon, 01 Mar 2010 19:44:00 GMT

Information Resources, Inc. (IRI,) a leading Retail and CPG analyst group, recently published its 2009 CPG Year in Review report. The report makes some unique insights,but most importantly addresses the permanent changes retailers are going to see in consumer behavior. The McKinsey Quarterly published a study of retailers in December 2009 which also echoes this prediction in consumer behavior. McKinsey states, “Many companies with strong premium brands are anticipating a rapid rebound in consumer behavior—a return to normality, as after previous recessions. They are likely to be disappointed.”The reason being is that consumers have tried lower cost items and been satisfied. Or, if not 100% pleased, they now feel that it is not worth the extra expense to buy the higher-priced item even if they do prefer it.

IRI calls the cost-saving strategies employed by many consumers as “draconian” insofar as people have gone far out of their ways to save money on things like food and beauty products. This has resulted in an increase in the purchase of do-it-yourself home goods and has also included increases in self-subsistence projects such as gardens. IRI predicts that some of these more extreme measures will eventually be scaled back, but that a commitment to frugality and value products will remain.

So what does this mean for Retailers and CPG manufacturers?

First of all, private label goods have cemented their position as desirable goods that actively sought after by a wide range of customers. With cost saving and frugality still being important, consumers will most likely continue to embrace private label goods indefinitely - despite some gradual return to higher-priced premium goods.

Second, many CPG categories saw price increases in 2009which are expected to continue through 2010. IRI remains somewhat doubtful that consumers will not rebel against these increases as companies turn to innovation to capture market share through creating appealing value-priced goods. According to the Wall Street Journal, there appears to be a chance of nominal rebound in premium brands as producers implement pricing and promotiona strategies such as selling larger quantities for the same price or creating a better product whose value outweighs the price. Still, retailers have a harder job than ever of convincing consumers why they should consider purchasing the higher priced item. Marketing effectiveness therefore remains of paramount concern in addition to product innovation.

Ultimately, technology providers for Retail and CPG need to understand that many of the market shifts caused by the recession will have long lasting – if not permanent – effects as consumers continue to embrace cost savings measures despite improved Retail and CPG earnings and projections for 2010. Competition will remain fierce for increasingly demanding and informed consumers who have learned to do more with less. Technology providers therefore have a unique opportunity to capitalize on organizations' needs to better understand their consumers and maintain reduced operating costs so that they can be successful under these new conditions.