Caught in the Headlights: Legacy Tech Giants Struggle to Keep Pace With Rapidly Evolving Markets
Technology stocks are setting new records, and driving the global economy to greater heights. But the headlines obscure an underlying reality: Legacy tech companies are struggling to keep pace with the new demands of modern markets.
No matter how rosy the general outlook, many firms seem trapped in the past, “as they struggle to stay relevant,” writes Eric J. Savitz in Barron’s. “Cisco Systems (CSCO), IBM (IBM), Intel (INTC), Oracle (ORCL), Seagate Technology (STX), Western Digital (WDC), Xerox Holdings (XRX), HP Inc. (HPQ), and Hewlett Packard Enterprise (HPE) still employ a total of 900,000 people. They account for $363 billion in annual revenue and $840 billion in stock market value. But their sales, accounting for inflation, are mostly going in reverse. The best of the bunch, Western Digital, is forecast to grow 4.4% next year. Xerox, the worst, is likely to see a 4.7% decline.”
I have been predicting a major shakeout in the technology industry, and it seems like the moment of truth is drawing near.
“By 2025, half of the world’s data will sit in public clouds, according to market research firm IDC. Amazon Web Services, Microsoft Azure, and Alphabet’s Google Cloud are vacuuming up the enterprise sales that once went to on-premises data-center providers, a world dominated by companies like Oracle, Cisco, and IBM.,” writes Savitz.
I strongly recommend reading this excellent article. It paints a grim picture of formerly great companies that cannot evolve quickly or dramatically enough to remain powerful in a business environment that moves at astonishing speed.
Goldman Sachs Sees a Great Year Ahead
It’s good to know the experts at Goldman Sachs are incredibly bullish on the U.S. economy.
A team of economists at the legendary firm “is optimistic about the US economy in 2020,” writes Yusuf Khan in Business Insider. “They expect the US-China trade war to subside and consumer spending to remain strong, offsetting weak business investment and causing growth to accelerate. They also predict unemployment will drop to its lowest level since the Korean War and see the risk of a recession dropping, from one in three earlier this year to one in five.”
From my perspective, it feels too early to tell whether 2020 will be a banner year, or the beginning of a downward spiral to recession. I predict lumps and bumps in the road ahead, but nothing catastrophic. That said, I’m hedging my bets.
Now More Than Ever, the Customer Experience is Absolutely Critical and Essential for Success
I hope you subscribe to Fully Charged, a free email newsletter from Bloomberg Technology. It’s a great source of insight and information, and the columns usually include unusual twists and angles that make for good reading.
For example, in last week’s Thanksgiving edition, Shira Ovide reminded us of the benefits we derive from our tech-driven economy. Here’s a brief snippet from her column:
“Every business is terrified of being mowed over by technological change, and that means they have to try harder than ever to keep us happy. Customers of retail stores, car-rental services, telecom providers, airlines, banks and (yes) news organizations are better off with companies that are no longer insulated by monopoly economics. There's nothing like being scared of death to bring out the best in organizations.”
Her humorous approach masks the serious level of fear that keeps many technology executives awake at night. In a digital economy such as ours, disruption is only a heartbeat away, and providers strive to offer the best possible customer experiences at every conceivable touchpoint. For every successful incumbent, there are hundreds of startups waiting for their moment in the sun. It’s a sobering thought, but worth remembering as the year winds down.