07 Oct CFO Jonathan Cartu Reports – What Recession? Solution Providers Bullish On 2020 Economic…
Greenpages Technology Solutions CEO Ron Dupler doesn’t give much credence to the pessimists predicting a recession in 2020.
“We see a lot of momentum going into 2020,” said Dupler, who has architected a recurring revenue, secure cloud services strategy that is paying big dividends for Kittery, Maine-based GreenPages, No. 201 on the 2019 CRN Solution Provider 500.
In fact, he expects 50 percent-plus growth in his company’s security and cloud services businesses next year. “Our cloud business is screaming. It’s growing very rapidly. Adoption is strong. People need help moving toward cloud and hybrid cloud business models. That is driving a lot of business,” Dupler said. “The investments we made in cloud and security are very well aligned with what the market needs right now. Cloud and security have been important for many years, but now it is exploding. You can’t hire people fast enough.”
Dupler said that in 30 years in the business, with the past 15 years at the helm of GreenPages, he has never felt better about the road ahead.
“Never,” said Dupler emphatically. “The opportunity to differentiate businesses with technology has never been greater. So the opportunity is as high as it has ever been for businesses to leverage technology for competitive advantage. Balance that with the fact that there is a lot of complexity. That is why there has never been a more exciting time.”
That strong demand for digital transformation, cloud and security services is one of the reasons Dupler expects the overall economy next year to weather macro-economic issues like the U.S.-China trade war and Brexit.
“I think the economic fundamentals are looking really strong right now,” Dupler said.
Dupler is not alone in his sanguine view. In a recent survey of solution provider CEOs attending this month’s Best of Breed channel thought leadership conference—hosted by CRN parent The Channel Company—69 percent of those surveyed said they do not expect a recession next year. What’s more, the majority of those CEOs characterized their view of the 2020 economic prospects as “optimistic.”
The 2020 sales outlook for North America’s top solution providers is off the charts. Forty-nine percent of BoB Conference attendees surveyed expect sales to soar above 20 percent and another 49 percent expect growth of up to 20 percent. Just 2 percent expect no sales change, and none predicted a sales decline.
The outlook for EBITDA—sparked by the rapid adoption of monthly recurring revenue subscription models—is also skyrocketing. Thirty-nine percent of BoB Conference attendees surveyed expect EBITDA growth above 20 percent, while 56 percent expect growth up to 20 percent. Just 5 percent of those surveyed expect a drop in EBITDA.
Dr. Douglas Holtz-Eakin, former chief economist of the President’s Council of Economic Advisors under President George W. Bush, said he is “cautiously optimistic” with regard to the economic outlook for next year.
“I think this is a very resilient economy,” said Holtz-Eakin, who is president of the American Action Forum, a Washington, D.C., policy institute that has been critical of President Donald Trump’s trade tariffs. “It is continuing to grow. The fears are outsized compared to the data. So I am cautiously optimistic. There are things that I can see that could go wrong. If they do, it will have a big impact.”
Holtz-Eakin is predicting GDP—a commonly used indicator of economic health that measures the value of produced goods and services—will slow in the U.S., moving from 2.2 percent to 2.5 percent this year to 1.6 percent to 2 percent in 2020.
Most economic models call for a 20 percent to 30 percent chance of a recession next year. Holtz-Eakin sees a recession as the “less likely” possibility in what has become a tale of two economies, with strong consumer and household spending on one side versus a business sector that is becoming increasingly pessimistic in the wake of the trade war.
Holtz-Eakin said the upbeat outlook from BoB Conference solution provider CEO attendees is in sharp contrast to the “broad consensus” of CEOs—the majority of whom see a recession as likely next year.
“[The surveyed solution provider CEOs] sound more optimistic than the average CEO,” he said. “That makes some sense. Tech has been growing faster than the rest of the economy. They have a little more momentum than the rest. But you still have 31 percent [in the survey] who think there is going to be a recession next year, and that is above what the data would say.”
One reason for the optimism from solution provider CEOs: the fundamental shift in how corporate America views technology solutions. Many CEOs realize that their businesses will succeed or fail based on how effectively they utilize technology to drive customer experience and business outcomes.
“Organizations are realizing they need to leverage technology in ways they’ve never leveraged technology before to either grow their revenue streams or reduce operational costs,” said Manak Ahluwalia, president and CEO of Aqueduct Technologies, a CRN Triple Crown winner for the past consecutive years (see story, p. 54). “So there’s still a big appetite for them to make investments in technology, especially if it’s technology they can [implement] relatively quickly to give them the agility they need or has a short-term [return on investment]. That’s been the mind-set for most executives and their boards for the past few years. I don’t see that letting up.”
Ahluwalia, who founded Waltham, Mass.-based Aqueduct eight years ago, expects his company’s sales to increase upward of 30 percent in 2020. Businesses simply can’t afford to cut corners when it comes to IT, he said. “I can’t imagine there are many businesses out there, many sectors out there, that are not thinking technology is a beneficial way for them to move forward in 2020.”
The channel, he said, is overall in good shape for next year as a result of shifting to a recurring revenue, monthly services model for many customers. “The necessity for us to repeat netnew business next year doesn’t need to be there for us to grow 20 percent,” said Ahluwalia. “January 1, 2020, is not Groundhog Day for us. Many of us are walking into next year with 60 percent or 70 percent…