Most high-tech companies—the ones you’ve depended on for years for security, connectivity, devices, and storage, and more recently for high-performance computing products to power your generative AI and digital transformation programs—are well on their way to transforming and reinventing themselves. However, our latest report revealed that only 5 per cent of high-tech companies have built the capability for continuous reinvention, which must become the default strategy for leading firms trying to weather ever-higher levels of disruption driven by new transformative technologies like generative AI.

And yet, the changes high-tech companies have undertaken thus far have made it easier for them to deliver and scale high-tech services instead of simply selling products. As a result, their sales representatives have an increasing focus on building long-term, meaningful client relationships over large-volume deals. They’re starting to bypass conversations about product upgrades in favour of discussions on innovations coming to market, data-driven value comparisons, and as-a-service models that align with industry-leading best practices. They’re looking at measuring success by lifetime customer value, rather than focusing only on shorter-term sales metrics and one-off transactions.

This can be great news for your company if you’re prepared. Your company needs to know what it can and should be getting out of these new strategic contracts to get more value, save time and money, and reduce risks. You also need to learn how to work with your high-tech providers as they transform themselves. In many cases, their learning curves vis-à-vis new technologies aren’t that different from your own, but somehow their mandate is to lead even as they learn. You need to know how to help them help you. If you put in the effort, you’ll be setting your company up to consistently have newer, smarter, more affordable technology at your fingertips.

To that end, we’ll examine five steps you can take to arrive as quickly as possible at a valuable, durable, win–win arrangement with your high-tech provider. But to set the stage, let’s first consider what’s going on in these companies in a bit more detail.

High-tech firms are reinventing themselves for lots of reasons. The rate of change affecting businesses in general has risen sharply by 183 per cent since 2019 (33 per cent in 2023 alone), and 88 per cent of C-suite executives are currently anticipating an even faster rate of change this year. Like companies in other sectors, high-tech providers also face a tough economic environment challenged by residual pandemic effects. Meanwhile, geopolitical tensions, new trade policies, and ventures into onshore manufacturing are also having a significant effect. Collectively, these factors are exerting downward pressure on their already margin-sensitive industry.

Technological disruption is the most significant factor of change affecting the sector right now. When it comes to high-tech offerings, customers have been asking for more flexibility at more manageable and predictable costs. And like businesses in other industries, high-tech suppliers may still be burdened with legacy systems; their data may be siloed, hindering their ability to become more efficient, increase productivity, and innovate faster and smarter. One telling data point? A 2023 Accenture study found that 87 per cent of high-tech organizations plan to engage an external vendor for cloud computing within the next two to three years.

These companies must also contend with challenges that are unique. For one, high-tech businesses are having to learn and lead at the same time. Take generative AI as an example. Its proliferation is not only accelerating the need for transformation but also serving as a crucial catalyst, with 77 per cent of high-tech leaders pointing to generative AI as a key lever in their reinvention strategy. Indeed, like most other businesses, high-tech companies are investing in generative AI tools to drive transformative change across the organization. This includes the way people work, the way they’re trained, and the shape of their careers. Yet the high-tech industry will also supply the means of enabling and powering generative AI for other companies. Their offerings—including semiconductors, high-performance computing servers and processing units, smartphones, PCs, and high-end medical equipment—will be the foundation for customers across industries harnessing generative AI’s potential.

The answer to these pressures points to one solution: the recurring revenue model. High-tech companies are expanding their recurring revenue models with as-a-service (AaS) offerings. On the one hand, this is an opportunity to please shareholders. On the other hand, it’s an opportunity to create a runway for the salesforce to balance customer needs and product lifecycles to deliver profitable, scalable solutions and ongoing innovation. That said, adopting this model requires an enormous change effort. It means shifting the organization from product-led to service-led.

As Accenture research showed, 60 per cent of high-tech executives believe the ability to scale new business models is the top benefit of adopting an AaS model as their primary go-to-market strategy. Take Hewlett Packard Enterprise (HPE) as an example. When the organization was created in 2015 as part of the splitting of the Hewlett-Packard company, HPE primarily sold hardware and software products, with customers then needing to build, deploy, and maintain these products themselves. With the June 2018 launch of HPE GreenLake, its hybrid cloud AaS platform, the firm began offering a full range of IT services on a pay-per-use basis.

HPE GreenLake was billed as a way to offer a more flexible and scalable means to consume IT resources versus the traditional and cumbersome on-premises model. The latter’s simplicity of cost, coupled with on-premises or private data-centre infrastructure, makes for a compelling proposition, especially for organizations working within highly regulated industries. But the intrinsic flexibility baked into GreenLake makes it an even more attractive option. HPE GreenLake has continued to evolve, with the addition of new services and features such as generative AI.

This AaS platform was the primary driver of HPE’s highest Q1 year-over-year rise in its annual revenue run rate (ARR), a financial metric used to assess the growth of consumption service offerings. HPE’s annual recurring revenue (ARR) grew 41 per cent year-over-year in Q1 2024 and 39 per cent in Q2 2024; the company expects ARR growth of 35 per cent to 45 per cent this year.

Forewarned is forearmed

Armed with a better understanding of why and how your high-tech suppliers are reinventing themselves, you can better prepare yourself for these new sales conversations. The available options are vast, and the service commitment is flexible. By immersing yourself in the planning process, an opportunity exists to carve out a truly customized product and service package to precisely meet your company’s needs—both now and in the future.

Here is a high-level checklist to help your company reap the benefits of the evolving high-tech industry:

1. Figure out how a subscription model can help you: There will likely be overhauls to the support you’re accustomed to receiving, and these may force you into a subscription whether you like it or not. Anticipate changes in licensing agreements, with new and adapted offerings, and assess them against your company’s evolving business needs.
2. Get into the weeds and be strategic—look for purpose, scale, and flexibility: Take the time to understand the different technology needs of each department. For instance, the IT team may need tech refreshed more often than other departments. Now is the time to lay out what your company needs and what you expect your high-tech provider to deliver. Challenge them to meet your requirements head-on. And don’t accept a kitchen-sink offering—instead, work with your supplier’s sales team to pinpoint where service-based offerings can generate the best results.
3. Calculate a cost-to-innovation balance: Figure out where you want to draw the line between deploying new products and services and avoiding rising costs. Consider the financial and operational risks, factoring in the employee experience and training that will ensure that employees can leverage the new to the fullest potential.
4. Zoom in on the fine print: Before you commit to new offerings, ask about, identify, and iron out potential misalignments inherent in new service-level agreements between your business and your suppliers. For example, check security protocols: Is the service provider fostering a proactive approach to threat detection, incident response, and overall security posture? What indicators will there be that the security provider evolves security practices as needed? Also assess the risk of vendor lock-in. Can you foresee a “sunk cost” dilemma down the road, should you want to exit the relationship? Aim for a clear, actionable 12–24-month roadmap.
5. Stay connected: There’s power in flexibility, so be sure to build opportunities for change into your agreements with high-tech suppliers. If the rollout doesn’t go successfully, what are the options for regrouping and shifting to a new plan? Keep an eye on emerging AaS offerings, with a view towards aligning your vision for the future as closely as possible with your supplier’s offerings (and its own view of the future). Additionally, keep asking about the support your supplier might be able or willing to provide. How can the supplier help your company develop the internal capabilities it needs to optimize the way it uses the supplier’s offerings? Remember that this is new territory for them. If you ask for it, they may build it. Alternately, look for a potential combined go-to-market opportunity with your high-tech provider.

As-a-service, at your service

Like so many other changes these days, AaS will likely happen gradually, and then suddenly. For now, there’s a window of opportunity for your company to work with your high-tech suppliers to the great benefit of both. To help them find your company’s sweet spot, you’ll need to be precise, proactive, and preemptive. If you’re up to the challenge—devoting time and effort now to evolve along with them—we believe the rewards will be great. Your suppliers’ innovations will be yours to guide.

HIGH-TECH COMPANY CHANGES AT A GLANCE

 

Change: From legacy IT systems to a robust cloud infrastructure

Result: Reduced manual processes, increased data visibility, reduced security risks, simplified customer lifecycle management, and improved employee experience. All these shifts make it easier to deliver and scale recurring revenue offerings.

 

Change: From hardware-based sales approach to software-based sales approach

Result: Compensation and performance metrics focus increasingly on AaS-relevant metrics such as churn, conversion rates, customer acquisition cost, and customer lifetime value, rather than on revenue and shipments. Generative AI is likely to play a significant role in the new sales approach as predictive analytics and customer data create a more proactive and productive customer–supplier relationship.

 

 Change: From transactional selling to relationship selling

Result: Sales leads will take the time to assess your needs even more closely to pitch tailored product packages that are finetuned to your specific needs. There will be closer management of product delivery and rollout, such as preconfiguring laptops with the required security systems. As well, we will see hugely amped-up after-sales care. With flexibility in long-term contracts comes an enhanced need to maintain client satisfaction. Take Cisco, for example. In March 2024, the San Jose-based high-tech supplier completed its acquisition of Splunk, a cybersecurity software provider. Since acquiring Splunk, Cisco now offers infrastructure, data, security, and observability for companies’ digital systems. As well as broadening the company’s offerings and making Cisco one of the largest software companies in the world, this also generates new AaS revenue and, in turn, provides more stable earnings. Or as Cisco describes it, the “collective partner ecosystem can create new profitable revenue streams through high-value services.”