As new deal activity slows Enterprise Software CEOs will shift their focus from signing new deals to maximizing customer retention and renewal rates.
- Sales compensation and executive compensation will be more heavily weighted toward customer retention and dollar renewal rates.
- Enterprise Software companies that execute well ought to be able to lift customer retention and dollar renewal rates by several percentage points, although there may be some customer attrition for a quarter or two before improvements occur as the macro environment bottoms out. Software companies that do not have strong operational execution may be able to generate 5-7 percentage points of lift to customer retention and dollar renewal rates if they make the decision to focus on operational excellence.
- We expect earnings call commentary related to Europe to be negative and for customer attrition to already be quite significant in the U.K., Germany, Spain, Portugal and the rest of Western Europe for that matter as well as for Eastern Europe.
- The U.S. is probably a quarter behind Europe, but thanks to the Dollar’s status as the world’s reserve currency, it will not be an economic wrecking ball here in the U.S. as it is abroad.