Read the full interview HERE

We recently interviewed a former Product Marketing Director HCM Solutions at Sage, who has over 25 years experience in the Enterprise Resource Planning (ERP) and Human Capital Management (HCM) software industry, on the resilience of HCM market in a downturn, and some of the fundamentals of SaaS business models.

We explore:

  • How HCM software vendors are likely to perform in a weaker economy
  • Tactical options software vendors have to address weakening demand
  • Outlook for pricing for cloud HCM solutions
  • Comparing 2020 to the 2008-9 crisis as it impacts HCM software vendors
  • Why smaller vendors are going to struggle more than larger ones
  • How Xero and Workday differentiated their offering by creating sense of community with customers and through better customer support
  • The risks to a buy-and-build strategy: how a company like Sage has added complexity to its customer offering and how competitors are capitalising on this
  • Software vendor strategy: the merits of best-of-breed vs a portfolio of solutions

It’s a market that is moving in so many ways. There’s really interesting structural trends going on. There’s the cyclical dynamic of what is a major economic crisis, for the buyers of this software, all influenced in quite different ways, of course.

As to your question as to how the industry will actually bear the current situation, in terms of revenue and profitability and so on, as you perfectly put it, the jury is still out. If this impact hits more than two quarters or half a year, in terms of revenue, the consequences might be significant, in terms of who is left standing. If you are only looking at a hit of one quarter, say three or four months of revenue, whether it’s permanent or recurring revenue, I think the market will stay pretty much the same. Again, unfortunately, we don’t know yet what is really going to happen.

As it stands right now, most vendors, from SME-focused vendors, like Sage, to enterprise vendors like SAP, are going to see negative growth rates, year on year, quarter on quarter, starting from March and April onwards. Most likely, this will be for the whole year. It is going to be very hard to avoid that. In reality, the Covid crisis has, essentially, obliterated most of the pipe that they had for the rest of the year. If you look at the forecast today, everything is either put on hold or it’s not there anymore. No matter whether your customer is a Phillips or a Unilever of the world, or a very small mom-and-pop shop, in the UK; it doesn’t matter. It’s a very tough situation out there.