Costs Are Rising Everywhere – What Do Our Customers Need from Us?

You can’t fill your car or buy groceries without feeling the impact of inflation. It’s pervasive and impacts all aspects of our lives – personal and business.

I’ve been thinking a great deal about inflation lately, especially after the consumer price index (CPI) reached a 40-year high in June of 9.1%. And, while CPI declined a little in July (to 8.5%), the impact of inflation remains far reaching.

From raw materials, labor costs to manufactured goods, energy (up 41%), transportation, and the cost of financing where interest rates are on the rise – everything and I mean everything – costs more. There seems to be no escape from skyrocketing costs.

With inflation rates hitting the highest rates in 40 years, every business has had to start adapting their operations to a high inflation environment. The technology sector is not immune either.

What has this meant for business operations? Companies are:

• Taking a hard look at operations to find efficiencies
• Reviewing subscriptions and recurring costs for consolidation
• Cutting borrowing costs (or deciding to put expansion plans on hold to reduce capital demands)
• And, unfortunately, passing higher costs on to customers

Technology’s Inflation Impact

The 2022 Conference Board survey found inflation is the number two issue worrying CEOs so we need to be aware of how this issue is impacting customers. It’s top of mind for them.

IDC’s Stephen Minton expects “18 to 24 more months of elevated rates of IT inflation, in the range of 7-8% across all IT categories, followed by a moderation to slightly below average rates in the 2 to 3 years following that.”

While everyone acknowledges that the future is going to be a little rocky as we navigate high inflation, higher interest rates and a looming recession, we can’t lose sight of how important technological transformation remains to the future.

“The secret sauce for any company is how to position itself to navigate any potential downturn, but simultaneously, how to be prepared to accelerate when the markets are at their strongest.” Alex Smith, Canalys.

It can be tempting for businesses to tap the brakes in an era of uncertainty, but that could be short sighted. In a world where technology is accelerating, easing off transformation efforts could provide competition with an edge if they are continuing to modernize their operations.

“High rates of inflation have a huge impact on companies by increasing the costs of doing business and creating market uncertainty,” explains Elaine Daly, global head of business consulting in Ireland for Grant Thornton. “But well-planned and implemented business transformation initiatives can offset this, having a long-term deflationary effect on business costs and, subsequently, the price of products or services.”

“The key is that companies are not complacent and move quickly to build their digital resilience.”

Navigating the Turbulence

For the IT ecosystem, inflation is already causing costs to rise. No one ever wants to raise prices but in an environment where every single raw material, the cost to manufacture goods and the incremental increases in the cost of transportation, there is no choice but to increase rates to cover the shortfall.

Now more than ever, we need to work closely with out customers to help them prioritize their projects, look for efficiencies and identify areas where operations could be streamlined without impacting competitiveness or ongoing transformation efforts.

According to IDC, many organizations are continuing to invest in strategic technology projects to support business initiatives such as Analytics, Automation, CX, EX and supply chain transformation, as part of broader digital transformation efforts.

There are technologies or initiatives that, I believe, will weather the storm a little better than others, and should remain at the forefront of our customer priority lists.

• Cloud will continue to play an important role for business. Investment in cloud infrastructure remains critical to support remote work, digital resilience and provide scalability to address demand changes.
• Expansion in the role of IoT with smart buildings, virtual meeting spaces, automation and sensors, which will also require low latency, high throughput of 5G networks.
• Moving costs from capex to opex as XaaS offerings continue to multiply. Service-based offerings can also help companies manage cashflow.
• And, regardless of the economic outlook, we are not seeing an end to the value companies derive from data so solutions that help businesses turn data into insights for real-time decision-making is a priority.

For the IT ecosystem, we need to recognize that our customers are taking a good hard look at their expenses so they can find places to save.

Gartner’s Robert Naegle had some good advice: “For vendors that are vital, look to enhance partnerships using win-win strategies where possible.”

Customers are looking for guidance during these turbulent and uncertain times. This can create opportunities for all of us to collaborate. Be indispensable. Offer advice and strategic counsel. Now more than ever, our customers need guidance and support and we’re in the best possible position to help.