Dec. 8, 2020 | InBrief

High-tech & software’s greatest challenges in 2021

The high-tech & software space is ripe for dealmaking, but the industry still faces issues brought on by the pandemic

This piece was originally published as part of West Monroe’s latest Signature Research report, “High-Tech M&A Defies the Odds.” The full report examines the leading high-tech & software industry trends and explores the implications for dealmaking and value creation beyond 2020—a period that will create both challenges and opportunities for dealmakers as the industry and its consumers navigate through the COVID-19 pandemic. 

The greatest challenge facing high-tech & software companies heading into 2021, according to the respondents we polled in our latest Signature Research report, is delivering new features and capabilities in a timely manner to meet market needs (chosen by 41% of respondents). The ability to provide meaningful differentiation in the market was next, cited by 38% of respondents, followed by cyber risk and data privacy-related concerns (34%). 

Although technology companies have transitioned more easily to working from home, work schedules have been disrupted by lockdowns, making it more difficult to release new features and upgrades in line with pre-crisis timetables. Google, for example, put upgrades of its Chrome browser and Chrome OS operating system on hold when the San Francisco Bay Area locked down. With the risk of recurrent waves of infection still a possibility, the delivery of updates and new features could face further disruptions. 

Lockdowns have also made it difficult to differentiate, with consumers and businesses hawking a myriad of tech options in a competitive market. Companies must deliver fast, reliable services to win market share and have a clear view of their customers’ needs.

Getting rid of latency issues and providing solutions with higher standards should be the focus of software companies,” a corporate development executive said. “There is greater competition, so companies should analyze client expectations well before planning and development.

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To address issues around latency, technology companies should also dedicate more resources toward delivering on their roadmap priorities, releasing new capabilities and, more than ever, continue to foster innovation in an increasingly competitive market.  

One surprising finding is that hiring and retaining talent didn’t rank higher on the list of challenges. In fact, it was the lowest-ranking answer (9% of respondents) of the 11 options. This could be a result of COVID-19 uncertainty making it more difficult for companies to headhunt and for employees to change jobs. Over the medium to long term, however, opportunities to hire could emerge. 

“There will be more suitable talent available, since the job markets have changed,” one CFO said. “Given financial pressures, companies have let go of talented staff. Companies looking to hire niche talent will have a better choice, with chances of success being higher.” 

COVID-19 itself didn’t rank as high on the list as expected either, adding further weight to the view that technology hasn’t been as adversely impacted as other industries. Still, consumers affected by the pandemic need access to features and capabilities and are looking for technologies that differentiate in the market. Those challenges will remain well into 2021 and beyond.

High-Tech M&A Defies the Odds

Software continues to attract investment—but meeting customer (and deal) expectations gets tougher.

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