For about a month this spring, I zipped around the US on a research trip. Of course, the primary purpose was to meet as many people as I could to further specific parts of my upcoming research, but at almost every meeting, someone would ask, “So Brexit, is it going to happen?” Even a fellow passenger on the Bay Area Rapid Transit (BART), probably noticing the old British Airways stickers on my dented suitcase and rightly assuming my nationality in the process, asked that same question and followed it up with, “So if it happens, what next?" The only response I could offer was the certainty of uncertainty. Regardless of your opinion on the long-term prospects of the UK as a result of the referendum, it’s hard to disagree that the short-term picture is one where nothing is certain.
A bit later, I was back in the US to hear Oracle Co-Chief Executive Officer (CEO) Mark Hurd talk to an assembled group of journalists and analysts at what promised to be a Q&A, but it turned out instead to be him polemicising on the economy at large. Counterintuitive as it might sound, when CEOs go unscripted, they tend to be less judicious with what they say than almost any other employee; they like to make the sort of definitive statements that run contrary to any media training manual. As a consequence, they generally make for compelling listening.
Rather than extolling the virtues of products or services, Hurd, instead, pointed to the relatively poor gross domestic product (GDP) growth exhibited by economies, both major and emerging, and how hard it is for companies to grow their revenues in such conditions. He believed that what growth you were seeing in the GDP was the result of expense reduction rather than anything organic, citing that the average CEO is in post for roughly 18 quarters, meaning that right now, the bulk of their focus is on the next quarter rather than long-term strategy.
This ability over time to reduce expense is becoming harder to do, so in Hurd’s opinion, the next phase is to “steal market share.” In essence, if you’re an organization sitting on a big pile of cash in a low-growth, low-interest-rate economy, buying business makes sense. It also starts to make the comments made by Marketo’s CEO Phil Fernandez in their last couple of earnings calls about seeing “pricing pressure” from their rivals in deals into sharper focus. It might also explain Marketo’s keenness to accept the deal to take them into private hands, which was announced at the end of May, and away from the market's desire to see constant revenue growth.
Uncertainty tends to lead to indecision—a natural state of affairs when the indices on which a decision could be made are unpredictable. Hurd’s assertion that CEOs are actually primarily focused on activities that keep the needle pointing upward right now, rather than those that might do the same in four quarters from now, is telling. It is telling us that tactics are suppressing strategy, something that I touched on last time. For now, nobody really wants our grand designs; they just want some help nailing the door shut.
Matt Mullen has been deep in the weeds of the software industry since the mid-1990s. For the last few years, Matt has been an industry research analyst, focusing on sales and marketing technology, advising large enterprises and software vendors alike on emerging technology, market intelligence and organizational strategy. Follow him on Twitter @MattMullenUK.