Is IT Core To Your Business?

The answer, obviously and increasingly, is yes.  Every department within your company is investing in technology.  Consider:

• The network that is used for daily duties (i.e. Microsoft, Apple, Adobe, etc and the various hardware players)
• Phones (VOIP networks as well as handhelds / smartphones)
• The ERP system your company uses.  For distributors it could be Epicor / Eclipse, Infor, xTuple, and more. For manufacturers consider SAP, Oracle, Infor (yes, Infor offers manufacturing ERP systems) and others
• and there are systems for dispatching, logistics, freight management, CRM, marketing automation, SFA, etc… (consider some of the software companies that attended the NAED regionals as an example.)

And now many are looking at e-commerce providers / web developers / storefronts. The issue is that these are all software companies. An increasingly cloud-based services. And their pricing models typically have an implementation cost plus either services / support fees and/or monthly subscription fees.  The challenge is that the valuation of these businesses and their operating revenues need to come from monthly revenues as one-time implementation is, unfortunately, one-time.  So cash on hand becomes important to a sustainable business model. What got me thinking about this?  One of the e-newsletters I received comes from Fortune.  It is written by Dan Primack from www.pehub.com.  Dan wrote:

Just asking: If and when America goes back into recession, how will it affect typical enterprise software companies? Particularly all of those unprofitable SaaS companies that have been going public? Will new orders stop as they did the last time around, with CTOs unable to convince boards to spend now to save later? Or will enterprise tech be fine, due to: (a) Giant corporate cash piles; (b) Lower prices/easier integration than in the past and (3) Fewer VC-backed customers as part of the TAM?

Now…

• I’m not saying we’re going into a recession, but the economy has been known to go in cycles … so, perhaps someday.
• I’m not referencing any specific company.
• I am defining an “enterprise software company” as a company that offers software that is critical to the success of your business.  Obviously this is your overall network, your ERP provider, your website / storefront system, perhaps others.