Uncertainty and Brexit crimping technology demand? Probably.

Profile picture for user gonzodaddy By Den Howlett September 10, 2019
Summary:
Geo-political, economic and Brexit uncertainty is leaving technology buyers in a difficult position. Nothing is clear or clear-cut.

As the UK's legislative machinery grinds to a halt through the quaint mechanism of prorogation, now is a good time to take a gut check to see if the uncertainty over Brexit is having an impact on technology buying behavior. The short answer is 'probably' based on the limited straw poll I've been running on Twitter. See below for the results to date:

We have been covering Brexit since the process began and a search of articles on the topic shows that Brexit has appeared in 648 of our stories. Throughout that time we have been keen to understand from vendors whether Brexit impacts deal flow. On almost every occasion, the question has either remained unanswered or swerved around. Even as recently as this month, Aneel Bhusri, CEO Workday didn't provide a definitive yes or no, preferring to say in relation to Brexit and the escalating trade war between the U.S and China that:

We are taking a wait and see approach and trying to read the tea leaves the same as everyone else.

Despite how many of the Twitterati are voting, Peter Coffee, Salesforce partner contributor to diginomica said:  

It’s not just Brexit: the brakes are being engaged on any investment that’s affected by uncertainty as to supply chains and costs, cross-border talent mobility, and/or (what used to be considered) extreme weather events. So, *any* investment *anywhere*.

On LinkedIn, opinion was divided. Charles Rathman, Technology Marketing/PR and Content Evangelist at IFS said: 

I think [there] are other leading indicators to watch that are less subjective, including business equipment orders. But it just stands to reason that a major source of uncertainty about the ability to source materials or sell finished products will lead to an economic slowdown. Given half a chance, any regulatory or policy change ought to have a long ramp-up and provide adequate visibility to business can plan adequately.

What may 'stand to reason' for Rathman isn't being translated into action. In the UK, business leaders continue to complain that uncertainty is making planning almost impossible. Phil Fersht, CEO HfS Research said bluntly: 

Everything's on hold until politicians stop politicking and start representing their country again - if they remember how.

A PR colleague blamed Brexit for the withdrawal of at least two important projects that were due to start this month.

If you're living in the UK and watching the Brexit slow-motion train wreck in action then it is hard to figure out what's going on let alone what the outcome looks like.  Politicians routinely use hyperbole to say that things are going to be "great" (If you're a hard-line Brexiteer) or they are going to be "catastrophic" (if you are on the other side of the argument,) with a yawning chasm in what would otherwise be the middle ground. 

Perversely, the trade indicators suggest that in the most recent months, the UK has been heading towards a trade surplus for the first time since...forever. Contrary to fears among some observers, the UK has not slipped into recession. Yet. The Brtish pound is doing remarkably well in recent days given the political turmoil. Some believe this is because the hope is the UK will not crash out of the EU in a so-called No-Deal Brexit, but either find a political solution or force a change of government that is less pugnacious than the current leadership. 

More broadly, Bill McDermott, CEO SAP is reported as saying that SAP:

...has an edge over its U.S. rivals because it faces potentially fewer restrictions on doing business with China

As a self-confessed glass half full person, you've got to give McDermott credit for optimism given that the trade war was cited as a reason why the APJ region performed relatively poorly in Q2 FY2019, although as noted in my analysis, SAP is expanding its headcount in China. But then some analysis of a post-crash-out Brexit suggest that Germany will fare especially badly and if that's the case, then McDermott's optimism will prove shortlived since the German-speaking countries (DACH) represent the most important sales region for the company. 

My take

We continue to invest heavily in technology and people. We did enough when the 'sun was shining' to fix our own leaky roof and can now look more purposefully to the long game. Are we being cautious? You bet. But Brexit or not, we will not be deterred in ramping investments where we see value deliverables that positively impact the business model. 

My concern though is that outside of Europe, and here I am thinking about the US-based technology industry, not enough attention has been paid to the events unfolding in the UK and Europe. We are now starting to see solid media coverage in the US - the Washington Post, for instance, has a good synopsis of the current confusion across Europe. But in conversations with US colleagues, I get the impression that Brexit is not on many people's radar. 

Image credit - via Eric Doyle

Disclosure - Workday is a premier partner at the time of writing

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