3 Key Insights To Help Field Service Leaders Weather A Recession In 2023
By Wael Mohammed, EVP of Strategy, Field Nation
3 key insights to help field service leaders weather a recession in 2023
Let’s face it, 2023 looks uneven at best at this point in the year. The threat of a potential recession looms. Fears of an economic downturn along with stubborn inflation rates have led many companies to delay tech investments and new equipment installs. And the ongoing digitization of the customer experience has put pressure on companies to keep up with evolving technology needs, leading to more demand with not enough talent to keep up.
This has created a lot of volatility in the industry—and it may make you feel like you’re navigating in the dark!
However, as I’ve been looking at data from tens of thousands of work orders facilitated by Field Nation in 2022 and reflecting on previous moments of economic uncertainty, I’ve culled a few key insights I believe may be valuable to the modern-day field service leader.
1 – Investments in infrastructure will continue in 2023, even if a recession occurs
The economic turmoil caused by COVID-19 provided valuable data on which types of field service work are most dramatically affected in an economic downturn and how quickly those service types recover.
In March 2020, when the COVID-19 pandemic began, all types of field service work took a hit. But the intensity and staying power of that hit varied. Infrastructure work involving new store openings and remodels dropped 30-40%. Deployments dropped by 20-30%. However, mission- critical equipment work (i.e., break/fix) did not drop at all–which isn’t surprising given the need to stay open for business and remain competitive in the marketplace.
Despite the dramatic hit, infrastructure work recovered more strongly and actually accelerated. Over the past year and a half, infrastructure work has grown 100%.
This variable recovery model aligns with the priorities we see in the retail space. Retailers are pushing to upgrade their cabling and networking infrastructure––even as the economy remains uncertain––because they feel the pressure to keep up with changing consumer experience expectations with wireless connectivity and IoT technology. I feel this will most likely be the case in 2023.
2 – Store opening and remodel projects will take the biggest hit during a recession
In the event of a recession, I think we’ll see an L-shaped recovery. The timeline will likely be compressed into 9-12 months, but it will follow an “L shape” in nature.
If that happens, complex projects like store openings and remodels will suffer the most in the short-term dropping 30-40%. However, work related to certain in-demand equipment like self-checkouts and security alarms will be mostly exempt from this negative impact.
And since about 70% of quick-serve restaurant revenue comes from drive-throughs now, outdoor menu board spending isn’t going anywhere. So, spending in that space should continue in a recession.
3 – Basic maintenance work will take a mild hit, but will also be the quickest to rebound
Retailers will be less inclined to spend discretionary funds on preventative maintenance. But mission-critical break/fix work is essential to keeping businesses up-and-running. This key work will not be impacted by a recession because businesses simply can’t afford to drop it.
Discretionary maintenance will eventually follow suit, and maintenance spending will recover in roughly one quarter should a recession hit.
As you can see, the market can—and will—change quickly. So, change quickly with it! Stay connected to your customers and their needs. Attune your organization to those changing needs. Engineer fixed costs out of our P&L and embrace a variable cost structure. Take a hard look at your labor sourcing options and consider how a blended workforce can help your company remain agile in the face of dramatic market shifts.
And remember, digitization is here to stay. Successful retailers know that competing on customer experience is a do-or-die imperative, so it should be integral to your business planning as well. Prepare for the continued influx of cabling and networking work. Be aware that client spending may get rationalized and prioritized by geography.
I hope these insights were helpful. If your company can stay ahead of recession-induced shifts in customer spending, you can weather difficult conditions, position yourself competitively, and win in the recovery.
Wael Mohammed has been in the technology industry for 3 decades. He has held leadership roles in startups and large enterprises, including SPS Commerce, IBM, and Target. Wael is currently the Executive Vice President of Product Management & Strategy at Field Nation, and oversees strategy, product management, product design, and data science. He is a master in identifying product and market growth opportunities, taking new products to market, and maximizing product performance