Hello, everyone! Once again, we meet with you on our tech news column. Here, therefore, is a rundown of the noteworthy events that occurred throughout January in the year 2023. Quick overview: tracking three KPIs led to profitability, the new AI service in Zoom, Microsoft stopped selling Windows 10 licenses, why Google laid off employees, and, as a cherry on the cake, Cyber Resilience Law for software products in the EU. Let’s get started.
EU’s Act May Influence Open-Source Software
Open-source software experts are concerned about the potential unintended consequences of a proposed EU Cyber Resilience Act for software goods, and which intends to tighten cybersecurity rules to make hardware and software products more secure. This law has four specific goals:
- To require manufacturers to improve the security of products with digital elements throughout their lifecycle;
- To propose a harmonized cybersecurity framework that can be used to measure compliance;
- Increase transparency of digital security of products;
- Enable customers to safely use products with digital elements.
The Open-Source Initiative (OSI) has sent feedback to the European Commission asking it to continue working on the exclusion of open-source from the requirements contained in the main text of the law. The OSI would like to see the responsibility for compliance removed from any entity that is not a direct commercial beneficiary of the deployment. It is likely that a legislative change to this mechanism will have unintended consequences for the innovation economy in Europe.
Monitor These Three KPIs on the Road to Profitability
Technology companies have demanded a transition from growth at any cost to profitability. To survive the downturn, entrepreneurs and scalers must be confident and prepared for any difficult situation to survive without losses. Three indicators have been identified that provide valuable diagnostics among the many indicators you can track:
1. Lower loss of capital
Starting and growing a business costs a lot of money, so you have to spend it wisely. The ratio of net new money ARR to losses of 1 or higher is considered above average. A value above 1.5x is considered best in class, while a value below 0.6x requires further investigation. We track cash efficiency as a quick indicator. Spending more than $2 to generate $1 may indicate “forced” and unsustainable growth.
2. Additional profit margin
Profitability is usually reported in absolute terms, but companies tend to move closer and closer to profitability. This increase may be steady, indicating a strong economy, or erratic, requiring closer scrutiny. An increase in the profit margin can be a sign of profitability. This statistic measures the conversion of revenue into operating profits. The peak is 40%, and more than 20% is considered healthy. Review your cost structure if the incremental profit margin is less than 10%. Finally, the incremental profit margin should be equal to the gross margin minus variable expenses (e.g., customer acquisition).
3. Profit margin before S&M
Operating costs for technology companies include S&M, R&D, and G&A. If your product is extremely low-key, S&M can be a variable expense and a growth investment. R&D and G&A are fixed costs because they keep money coming in and maintain customer loyalty. Since S&M is an investment, pre-S&M revenue can help analyze cost structure. Pre-S&M margin. S&M is affordable if your pre-S&M margin is 20% or more. The best in class is 40%+. Look to trends, not incremental profit margin, to ensure healthy growth. Differential evaluation of cost structure violates standards. Profitability measures go beyond that. Financial indicators include the Magic Number, LTV to CAC ratio, and the Rule of 40. Most companies now prioritize capital efficiency, so these measures are critical.
Zoom AI Chatbot Will Reduce Customer Service
Zoom has launched an AI-driven live chat feature called “intelligent conversational.” The goal of a virtual chatbot is to reduce the need for human customer service agents, thereby lowering support costs. Zoom Virtual Agent connects to multiple live chat, CRM, and Contact Center-as-a-Service (CCaaS) solutions and will be part of the company’s Zoom Contact Center.
Zoom acquired Solvvy, a conversational AI provider, in 2022, which led to the announcement. Mahesh Ram, former founder, and CEO of Solvvy and now head of digital customer experience at Zoom, was very positive about the new chatbot. Zoom Virtual Agent will support the rapid growth of internet startups by solving an important problem for them as quickly as possible while saving time and money for larger companies by reducing the need for employees.
Microsoft Will Discontinue Selling Windows 10 Licenses
Microsoft has announced that it will stop selling Windows 10 licenses through its website as of January 31. Many users felt that Windows 10 was a welcome change from the bugs of older versions and a return to a simpler, more efficient user interface.
Windows 11, the latest operating system, was released at the end of 2021, so it’s already more than a year old. However, adoption has been slow. As of December, last year, Windows 10’s market share was still more than four times that of Windows 11.
Windows 10 will continue to receive important security and stability updates for some time. If you have not already, there’s no need to rush to upgrade to the latest version of Windows, as Microsoft has announced that official support will end on October 14, 2025. While Microsoft will no longer make Windows 10 available for download directly from its website, third-party vendors will likely continue to offer the operating system for some time.
Large-Scale Layoffs at Google and Why Did It Happened?
Meta, Google, Microsoft, and Amazon all announced large-scale layoffs in a matter of months, ushering in one of the worst times in the industry’s history. The cuts came after a period of rapid growth. Only Apple has not announced any layoffs, even though its workforce has grown by 20%.
Executives cite rising prices, corporate spending cuts, and fears of recession. Inflation remains high, down to 6.5% from 9% last summer. This year, a lot of experts predict the United States will go into recession. Executives at major technology companies are concerned that customers may cut spending, which would worsen the economy.
According to the Computing Technology Sector Association, the technology industry employs almost 9 million people in the United States (about half the population of New York) and contributes $1.8 trillion to the U.S. economy. And the entire stock market can change depending on how well technology stocks do. In other words: if Big Tech falters, so can the local economy and people’s investments, including their retirement savings.
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