Like Riding a Tiger with an Infected Tooth

Budgeting for FY24 – Reading the Tea Leaves

In yesterday’s webinar, we explored the key factors shaping IT budgets as we head into 2024 and beyond. Here’s a quick recap:

• Economic Backdrop: Amidst a range of often conflicting indicators, the general outlook is more positive when the details are examined.
  • Annualized inflation: 3.7% – we forecast it will remain below 5% through 2024.
  • Supply chain issues: moderating – but still not fully resolved. Labor unrest, future trade relations with China, war in Ukraine – all contribute to uncertainty.
  • Unemployment: moderating, upward wage pressures have abated, talent remains tight
  • N. American GDP growth: remains strong – despite weakness in Europe and China
  • Global 2000 corporate earnings: generally strong, with growing cash piles
  • Access to capital: constrained, real borrowing costs are above 10%
• The Impact of Generative AI: There is a sizeable gap between what vendors expect to charge for premium LLM add-ons and what customers are prepared to invest.
  • Users are still looking to understand the best use cases for AI and determine what foundational elements are required (e.g., security, data governance).
  • In most areas of monetization, users simply want assurance their vendors are adopting AI – but many companies are fearful of making major business changes around AI.
  • Vendors expecting a major uplift in ASPs from AI-enabled applications are likely to be disappointed. A more pragmatic view: AI enhanced solutions will preserve margins and mitigate commoditization.
• Recommendations:
  • Invest strategically while avoiding across the board cost-saving measures, even if total costs must come down.
  • Consolidate spend wherever possible, invest in monitoring and management tools, track usage and performance, and turn off unused features and seats.
  • Analyze IT efficiency versus IT efficacy – it’s a smarter way of assessing IT and business outcomes.
  • ROI/TCO models are gaining traction – buyers should expect them when assessing products, and vendors should have them on-hand to share proactively with prospects.
  • Don’t wait to speak with references – Using reference checks for new purchases helps identify pitfalls and avoid hidden costs.
  • Leverage vendor uncertainty and trade it for discounts in multi-year deals. Many suppliers are willing to trade discounts for longer-term agreements/structured payments. This is an opportunity to lower costs with strategic suppliers.

The bottom line | As technology remains critical to productivity increases and business differentiation, IT budgets are likely to increase 4-6% in 2024.

• Significant demographic and business trends remain intact: legacy ERP systems are in need of renewal/add-ons, cyber security and modernization projects demand sustained investment.
• Finance departments are under-invested in modern tools.
• Leading companies smell opportunity and are investing ahead of weakened competitors.

If you missed our webinar yesterday, you can still catch it on-demand here.

Dreamforce 2023 – Like Riding a Tiger with an Infected Tooth

We spent last week at the annual Dreamforce conference in San Francisco. Here are our key takeaways:

• In-person attendance was about 30k people, and the event was pared back in terms of number of days and sessions. The benefit was less chaos in the hallways. It remains a (the?) major industry gathering.
• Salesforce is all-in on the AI bandwagon (for now). Real product deliveries will take some time. The overall hype around AI will give existing products like Einstein renewed attention. This may be true across the industry – AI/ML tools (pre-Generative AI) could be unexpected beneficiaries of the marketing spend on AI overall.
• Customers are curious about AI – practical use cases and even conceptual ROI are a struggle. Companies want to see what’s possible while harboring concerns about security, trust, privacy, and legal issues.
• Revenue Cloud has quietly moved to the back of the stage – fewer sessions, less attention on CPQ and Billing. Until the overall Salesforce organization settles and internal ownership of CPQ and Billing resolves, product development and confidence in Salesforce’s commitment to a specific product is likely to lag.

Early insights | Strategic commitments to Revenue Cloud will be most successful when requirements fall inside the current product offering.

• After a period of extended changes to the team, there was hope that Dreamforce would provide a definitive statement of commitment and direction around the various components of Revenue Cloud.
• This may not be announced until the plans and budgets for CRM’s next fiscal year (beginning 2/24) are solidified.

Between the lines | Like riding a tiger with an infected tooth, Salesforce is managing a lot of complexity without a standard playbook. It has clearly been consumed by responding to activist shareholders and pressure to lower costs/increase profitability.

• The company results speak for themselves. Investor rewards, however, have come at the price of slower progress on product roadmaps.
• It may not be until 2024 (CRM’s FY25) that the organization stabilizes and promises a return to a faster product delivery cadence.
• As an industry mega-vendor and strategic supplier to many customers, Salesforce is in a strong position to benefit from user interest in AI-based sales and marketing applications.

More conferences are coming up!

Next week, we’ll be at:

• Workday Rising – San Francisco, CA, Sept. 26-29
  • Get the Workday 360 Rating and Use Case Note in Agile Billing

Next month, we’ll be at:

• SuiteWorld – Las Vegas, NV, Oct. 16-19
  • Get the NetSuite 360 Rating and Use Case Note in Agile Billing
• Money 20/20 USA – Las Vegas, NV, Oct. 22-25

Feel free to reach out here if you’re going to any of these events and want to connect face-to-face.

Monetization A-Z

Monetization is a broad discipline, with topics ranging from quote-to-cash to contract management to finance automation to customer success (and much more) falling beneath its umbrella. Definitions and even names for various components of monetization differ depending on who you ask. Buzzy trends and features du jour often dominate the conversation, and it becomes increasingly difficult to separate signal from noise when crafting plans for optimizing business processes and outcomes.

With decades of experience observing and advising the world of quote-to-cash, we at MGI are uniquely positioned to address this problem. We are excited to announce our upcoming Monetization A-Z project: a comprehensive encyclopedia of thought leadership, practical insights, and industry wisdom compiled by and for monetization experts.

Starting now, MGI is inviting experts from across the spectrum of quote-to-cash to join us for guided discussions about the topics in which they have proven expertise and unique insights.

• These conversations will be turned into both written reports and on-demand videos, which subscribers will be able to access on our website, and participants will be able to share with their own customers and prospects.
• At the end of this process, each expert conversation will ultimately become a chapter in the final compendium of monetization knowledge that is Monetization A-Z.

Who should be excited | Finance, business, sales, legal, and IT executives, practitioners, and investors.

Why you should care | Monetization A-Z is an opportunity to learn from trusted sources, get inspired by new ideas, take advantage of practical insights, and engage in conversation with leading brands, innovators, and rising stars.

Stay tuned for updates – we expect to publish the final guidebook in early 2024.