High tech companies need better financial controls to overcome growing revenue challenges, according to new research.

Cloud revenue management solutions firm Model N announced findings from its 2021 State of Revenue Report, which examines current issues around revenue execution and management in the high tech manufacturing sector.

Model N polled 300 C-level executives during January-February 2021, and 97% say they face revenue management challenges. Some 93% of respondents report that revenue management is a business-critical issue, describing the global COVID-19 pandemic as the biggest factor impacting revenue management today.

 The Evolution of Channel Sales

In response to these changing marketplace dynamics and the ongoing revenue execution crisis, almost all companies reported adopting new business models (96%), changing processes (98%), and seeking out innovative technologies for revenue management (99%).

And while nearly half (49%) recognise that improved revenue management capabilities can increase revenue, a surprising 96% depend on spreadsheets for some revenue management tasks. However, companies do recognise the need for change, as more than 90% say revenue management is business-critical and needs to modernise in the digital era, with 68% of firms reporting an increase in revenue management moments in 2020.

"Today's volatile and constantly changing channel environment places even greater competitive pressure on high tech companies, and the issue of revenue management has become particularly critical as companies seek to recover from the effects of the pandemic," says Chanan Greenberg, senior vice president and general manager, High Tech, for Model N.

"The need to align channels, pricing and incentive programs to the end-customer buying journey has created increased complexity as well as uncertainty about the accuracy and integrity of financial controls," he says.

"By leveraging AI-powered platforms like Model Ns Revenue Cloud, high tech companies can drive channel alignment and maximise revenue opportunities.

 What's more, not all changes brought about by the coronavirus will be temporary. Some 54% of high tech firms say that steps taken during the pandemic will have a long-term impact on revenue management processes.

In addition, according to those surveyed, telecommuting also poses issues, as 61% said remote work made revenue management more difficult.

Revenue Execution Challenges

Against a backdrop of channel evolution and the continued potential for lost revenue, the industry is becoming more aware of revenue execution challenges.

Model N's research findings bear out the urgent need for solutions across the high tech sector, which is plagued by price volatility and discount-incentivised channels.

Rapid channel growth, new revenue models and a lack of visibility, as well as a continued reliance on legacy manual processes, are causing more audit and control issues. Model Ns survey reports:

• 94% of high tech companies face challenges with incentive management
• 93% of high tech companies face challenges with financial controls in their channel
• 58% of high tech companies face challenges around obtaining accurate partner data

Effective High Tech Revenue Management: The Intersection of Technology and Expertise

Deep industry knowledge and expertise are at the core of successful revenue management strategies. And, given the combination of complex channel and incentive sales models and todays highly competitive global environment, semiconductor, electronic component manufacturers (ECMs), and high tech manufacturing companies are seeking new solutions for management of deals, channels, rebates, and market development funds (MDF).

As a result, high tech companies must implement revenue management strategies and tools that integrate both a nuanced understanding of the industry and the most current technologies including data science, artificial intelligence (AI) and the cloud as part of larger, enterprise-wide digital transformation and digitisation initiatives.

According to Model N's research, companies are already on the hunt for solutions:

• 99% of companies are looking for innovative revenue management technologies, especially those that incorporate AI and machine learning (ML), at 74%
• 91% agree that the ideal delivery method for revenue management is cloud-based and that cloud solutions should come from a vendor with deep sector expertise
• More than half (54%) have already augmented their processes with the adoption of additional cloud software

In addition, high tech companies are exploring new revenue models to cope with todays dynamic marketplace, which is driving an even greater need for revenue management solutions.

Some 47% of firms say they have recently adopted subscription or recurring revenue models, and 48% of high tech companies say that more subscription pricing models are causing an increase in revenue management moments.