This Industry Outlook is a portion of the 2019-2020 Arizona CFO Spotlight Survey Report
Levels of Optimism: Moderate
Technology companies experienced slower growth in 2018, which was expected due to some local merger activity and a focus on research and development (R&D) to get new products ready for the market. Leaders are cautiously optimistic with expectations of 10-20 percent growth in a crowded and competitive environment. Technology companies made modest price increases last year and raised wages for key employees, but they are reining in spending after large investments in R&D. The atmosphere is one of continuing innovation, leaders say, because product shelf life is much shorter.
Leaders say that growth areas are in cyber and data security (including managed services) as well as SaaS (Software as a Service) rather than in actual software. Cloud and subscription-based services are taking the lead as well as Internet of Things, data collection and connectivity innovations. Recently, stratospheric technology company, World View named a new CEO to lead continued innovations in unmanned flight systems and aerial remote sensing.
Tech Launch Arizona prompted 16 start-up companies over the past five years.
High-tech leaders are seeking efficiencies of scale to deal with labor shortages and more remote workers. Leaders admitted that their in-person cheerleading events with employees–some of whom work in other states and countries–are transitioning to virtual communications in order to reduce costs. Office space is also shrinking due to remote worker trends and more virtual collaboration.
As competition increases, leaders expect to see fewer public contracts and even tighter budgets. For example, in 2017 it was reported that the City of Phoenix wanted to purchase a new Pavement Management Van. The previous van was already 10 years old. The new van is a significant purchase, equipped with updated technology to detect the condition of roadways and help the transportation department prioritize their infrastructure improvements. The van is already scheduled to survey more than 5,000 miles of roadway over the next two years.
“We’ve put a lot of time and energy into our recent merger and into R&D, and getting the products we sell to be very marketable. We are optimistic on that side, but we have learned from the past to be more cautiously optimistic.”
High-Tech Controller, Tempe, 2019
However, investor appetites for technology are still high. Results from the University of Arizona’s Tech Launch Arizona over the past five years recorded 275 invention disclosures from faculty, researchers and staff campus-wide, 112 executed licenses and options, and 16 startups–all record-breaking numbers. The majority of TLA’s work is licensing inventions to existing companies, according to a spokesperson. Arizona’s academic history in sciences likely provides a solid foundation for continued high-tech innovation among existing and new companies.