Selling to Information Technology
The IT sector moves at the speed of disruption, where innovation cycles are relentless. To win enterprise deals, your sales team must look past technical specs to prove how your solution drives scalability while mitigating risk.
Computer Hardware Highlights
- Computer hardware companies often experience moderate to high profit margins, depending on their level of innovation and pricing power.
- Established players generate significant cash flow, driven by high-margin products and strong operational efficiencies. New entrants might have weaker cash flow due to high capital expenditure.
- For hardware tied to ecosystems (such as Apple or Microsoft products that work together seamlessly), customer retention rates are crucial to measuring brand loyalty and the ecosystem’s stickiness.
- Companies in this industry often maintain substantial fixed assets, including advanced manufacturing facilities and proprietary production equipment. Intellectual property (patents, designs, and trademarks) is also a vital asset, protecting innovation and ensuring competitive advantage.
- Effective inventory management is critical due to the risk of obsolescence, as rapid technological advancement can quickly render products outdated.
- R&D as a percentage of revenue is tracked carefully and typically falls between 8% and 15%.
Compare your client's results to industry and S&P 500 results.
|
Computere Hardware |
S&P 500 |
|
|
CASH |
||
|
Cash and Cash Equivalents as a % of Sales |
23.7% |
22.7% |
|
Cash Generated from Operations as a % of Sales |
27.5% |
20.9% |
|
|
||
|
Gross Profit Margin % |
56.1% |
49.6% |
|
Operating Profit Margin % |
22% |
23.2% |
|
Net Profit Margin % |
17.8% |
12.9% |
|
|
||
|
Return on Assets (ROA) % |
12.4% |
8.4% |
|
Equity Ratio |
38.7% |
33.7% |
|
|
||
|
Revenue Growth Rate % |
5.9% |
6.3% |
|
Net Income Growth Rate % |
8.2% |
8.1% |
|
|
||
|
Revenue per Employee |
$1.2M |
$1.6M |
Notes:
-
Because cash amounts can vary dramatically from company to company based on a company’s overall “size,” we’ve presented the numbers as a percentage of sales or revenue: the cash metric divided by total revenue or sales and then multiplied by 100.
-
S&P 500 averages are calculated based on 3 years of annual reports as of July 2024, rounded. However, because certain financial industries, like asset management companies and diversified banks, hold large amounts of cash, they have been removed from the cash calculations.
-
Most industry or sector averages are also calculated based on 3 years of annual reports from S&P 500 companies. However, certain companies or subsectors in the S&P sometimes skew the data far from what is typical for an industry, so we have occasionally removed some companies or subsectors or changed periods in our calculations to provide a more accurate set of comparison data.
What are Health Insurance CEOs telling Wall Street right now? We analyzed the latest annual reports from five top players to identify the mission-critical priorities shaping their 2026 spending.
1. Profitability and LTV Over Raw Growth:
The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
2. Massive AI and Automation Initiatives:
Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
3. Hyper-Focus on Specific High-Cost Trends:
Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
4. Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.
The Scenario:
A SaaS vendor selling an AI-driven claims tool was struggling to overcome the "we already have a large internal team for this" objection from a C-suite executive at a mid-sized health insurer.
The Strategy:
Instead of focusing on software features, the rep used the Revenue per Employee metric ($8.9M industry average). They proved that while the insurer’s revenue was growing, their headcount was growing faster—dropping their specific ratio to $7.2M (underperforming the industry).
The Pivot:
"Your business model requires high leverage; every employee needs to support nearly $9M in revenue just to protect your 3.3% net margin. Currently, your claims team spends 40% of their time on manual entry. We aren't here to replace your team; we are here to get your Revenue per Employee back above the $8.9M benchmark by automating 'low-value' touches."
The Result:
The executive shifted from seeing a "software cost" to a "margin protector." The deal closed because the vendor aligned with the executive’s hyper-focus on operational efficiency and headcount leverage.
The Scenario:
A workplace consultant was pitching a space-utilization audit to a COO facing a "return to office" dilemma. The COO was considering a generic mandate to bring everyone back just to justify lease costs, despite the risk to retention.
The Strategy:
The consultant ignored aesthetics and focused on the 3.3% Net Profit Margin. They analyzed the insurer's footprint and found three regional centers were only 40% occupied, creating a massive "administrative leakage" that was eroding the bottom line.
The Pivot:
"Your real estate overhead is a significant drag on your 3.3% margin. By rightsizing your footprint through activity-based zones, we can exit 30,000 sq. ft. of space, saving $1.2M in annual OpEx. To generate that same $1.2M in profit via new business, your sales team would have to close $36M in new premiums. We can give you that result today without a single new sale."
The Result:
The COO realized the audit wasn't a design project—it was a capital allocation strategy. They greenlit the study because the cost was negligible compared to the $36M in "equivalent premium growth" it uncovered.
- Profitability and LTV Over Raw Growth: The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
- Massive AI and Automation Initiatives: Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
- Hyper-Focus on Specific High-Cost Trends: Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
- Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.
Information Technology Services Highlights
- The IT service industry includes companies that offer a range of products and services to other companies, primarily.
- Employee teams require high degrees of specialized knowledge, experience, and certifications to deliver customer solutions, which requires IT service companies to have a strong focus on attracting and retaining top talent. It’s a dynamic, fast-changing industry, so employee development is critical to keep up with shifts in the market, technology, related industries, and client needs.
- Some companies develop proprietary systems that require invest-ing in R&D.
- Cash is important to IT services companies for talent costs, developing new capabilities and service offerings, and marketing. Cash flow can be especially important because many companies hire contractors to meet shifting project needs.
- Although IT companies may generate high revenues through their services, the high cost of labor leads to generally low profit margins, and so they focus on building and managing efficient teams. They closely track labor utilization rates (keeping their employees highly billable). For many IT companies, small improvements in utilization rates can mean millions of dollars in incremental earnings.
Compare your client's results to industry and S&P 500 results.
|
IT Services Sector Avg. |
S&P 500 |
|
|
CASH |
||
|
Cash and Cash Equivalents as a % of Sales |
17.3% |
22.7% |
|
Cash Generated from Operations as a % of Sales |
19.5% |
20.9% |
|
|
||
|
Gross Profit Margin % |
41.6% |
49.6% |
|
Operating Profit Margin % |
17.5% |
23.2% |
|
Net Profit Margin % |
11.4% |
12.9% |
|
|
||
|
Return on Assets (ROA) % |
7.2% |
8.4% |
|
Equity Ratio |
33.2% |
33.7% |
|
|
||
|
Revenue Growth Rate % |
3.9% |
6.3% |
|
Net Income Growth Rate % |
10.7% |
8.1% |
|
|
||
|
Revenue per Employee |
$1.1M |
$1.6M |
Notes:
-
Because cash amounts can vary dramatically from company to company based on a company’s overall “size,” we’ve presented the numbers as a percentage of sales or revenue: the cash metric divided by total revenue or sales and then multiplied by 100.
-
S&P 500 averages are calculated based on 3 years of annual reports as of July 2024, rounded. However, because certain financial industries, like asset management companies and diversified banks, hold large amounts of cash, they have been removed from the cash calculations.
-
Most industry or sector averages are also calculated based on 3 years of annual reports from S&P 500 companies. However, certain companies or subsectors in the S&P sometimes skew the data far from what is typical for an industry, so we have occasionally removed some companies or subsectors or changed periods in our calculations to provide a more accurate set of comparison data.
- Profitability and LTV Over Raw Growth: The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
- Massive AI and Automation Initiatives: Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
- Hyper-Focus on Specific High-Cost Trends: Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
- Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.
Semiconductor Manufacturing Highlights
- Because of high profit margins, companies in this space generate strong cash flow from operations and tend to have a lot of cash and cash equivalents.
- This industry can be cyclical, so revenue and profit growth rates can vary widely.
- Technology change is rapid, requiring companies to be close to customer needs, keep innovative employees, and often invest in new assets.
- Another key measure that companies in this industry track is R&D as a percentage of revenue, which usually falls between 10% and 12%.
Compare your client's results to industry and S&P 500 results.
|
Semiconductor |
S&P 500 |
|
|
CASH |
||
|
Cash and Cash Equivalents as a % of Sales |
19.9% |
22.7% |
|
Cash Generated from Operations as a % of Sales |
34.6% |
20.9% |
|
|
||
|
Gross Profit Margin % |
55% |
49.6% |
|
Operating Profit Margin % |
30.2% |
23.2% |
|
Net Profit Margin % |
24.1% |
12.9% |
|
|
||
|
Return on Assets (ROA) % |
16.6% |
8.4% |
|
Equity Ratio |
53.8% |
33.7% |
|
|
||
|
Revenue Growth Rate % |
4.6% |
6.3% |
|
Net Income Growth Rate % |
0.6% |
8.1% |
|
|
||
|
Revenue per Employee |
$1.1M |
$1.6M |
Notes:
-
Because cash amounts can vary dramatically from company to company based on a company’s overall “size,” we’ve presented the numbers as a percentage of sales or revenue: the cash metric divided by total revenue or sales and then multiplied by 100.
-
S&P 500 averages are calculated based on 3 years of annual reports as of July 2024, rounded. However, because certain financial industries, like asset management companies and diversified banks, hold large amounts of cash, they have been removed from the cash calculations.
-
Most industry or sector averages are also calculated based on 3 years of annual reports from S&P 500 companies. However, certain companies or subsectors in the S&P sometimes skew the data far from what is typical for an industry, so we have occasionally removed some companies or subsectors or changed periods in our calculations to provide a more accurate set of comparison data.
- Profitability and LTV Over Raw Growth: The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
- Massive AI and Automation Initiatives: Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
- Hyper-Focus on Specific High-Cost Trends: Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
- Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.
Software Highlights
- The software industry is predominantly subscription (SaaS) or licensing-based. This model leads to strong, predictable cash flow, particularly for mature firms with established customer bases. Startups may burn cash due to aggressive customer acquisition.
- This industry enjoys high gross profit margins (70% to 90%), as software incurs minimal costs once developed. Net margins vary depending on R&D and marketing spend.
- Software companies serve diverse markets, from individual users (B2C) to enterprise solutions (B2B). Enterprise clients often account for the majority of revenue, but among all markets, reducing churn is critical and customer retention is a primary focus.
- Companies rely on minimal physical assets. Rather, intellectual property, such as proprietary software and algorithms, along with cloud and data assets, form the bulk of the asset base, and investments are focused on funding R&D, sales, and marketing rather than fixed assets.
- Key metrics for the software industry include annual recurring revenue (ARR); net dollar retention (NDR), which tracks upsell success and customer retention; and R&D spend as a percentage of revenue, which measures focus on innovation and competitive advantage.
Compare your client's results to industry and S&P 500 results.
|
Software |
S&P 500 |
|
|
CASH |
||
|
Cash and Cash Equivalents as a % of Sales |
42.7% |
22.7% |
|
Cash Generated from Operations as a % of Sales |
36.9% |
20.9% |
|
|
||
|
Gross Profit Margin % |
76.2% |
49.6% |
|
Operating Profit Margin % |
22.4% |
23.2% |
|
Net Profit Margin % |
16.4% |
12.9% |
|
|
||
|
Return on Assets (ROA) % |
9.4% |
8.4% |
|
Equity Ratio |
12.2% |
33.7% |
|
|
||
|
Revenue Growth Rate % |
10% |
6.3% |
|
Net Income Growth Rate % |
19.4% |
8.1% |
|
|
||
|
Revenue per Employee |
$1.2M |
$1.6M |
Notes:
-
Because cash amounts can vary dramatically from company to company based on a company’s overall “size,” we’ve presented the numbers as a percentage of sales or revenue: the cash metric divided by total revenue or sales and then multiplied by 100.
-
S&P 500 averages are calculated based on 3 years of annual reports as of July 2024, rounded. However, because certain financial industries, like asset management companies and diversified banks, hold large amounts of cash, they have been removed from the cash calculations.
-
Most industry or sector averages are also calculated based on 3 years of annual reports from S&P 500 companies. However, certain companies or subsectors in the S&P sometimes skew the data far from what is typical for an industry, so we have occasionally removed some companies or subsectors or changed periods in our calculations to provide a more accurate set of comparison data.
What are Enterprise Technology leaders telling Wall Street right now? We analyzed the 2026 strategic outlooks across the hardware, software, and semiconductor sectors to identify the mission-critical priorities shaping the next wave of IT investment.
1. From "Assistants" to "Agentic Autonomy":
The focus for 2026 is "Agentic Workflows"—systems that don't just suggest text but independently orchestrate complex business processes, from supply chain reconciliation to automated software patching. Investment is flowing toward platforms where AI takes the first five steps of a process autonomously.
2. Privacy as a Vertically Integrated "Moat":
As generative AI moves to the device level (phones and laptops), privacy has evolved from a compliance checkbox to a competitive product feature. Leading firms are doubling down on "On-Device Intelligence," using proprietary silicon to process sensitive data locally. By minimizing cloud round-trips, they are positioning "Local AI" as the only trusted way for enterprises to handle proprietary IP and for consumers to manage personal data.
3. The ROI Reckoning and "Inference Efficiency":
The "blank check" era for AI infrastructure is facing a rigorous audit. While hardware demand remains high, the 2026 mandate is to accelerate computing efficiency. Enterprises are no longer just buying raw power; they are optimizing for Performance per Watt and Cost per Token. This has forced a shift toward smaller, specialized models (SLMs) that provide 90% of the utility of massive models at 10% of the compute cost.
4. Physical AI and "Digital Twin" Convergence:
IT spend is aggressively leaking into the physical world. Through the use of "Physical AI," companies are connecting neural networks to robotics and factory sensors. By creating high-fidelity "Digital Twins" of entire production lines, IT departments are now responsible for simulating and optimizing physical labor, effectively turning "Operations Technology" (OT) into a subset of the broader IT budget.
The Scenario:
An account executive for a DevOps platform pitched an automated security-as-code suite to a CTO. The CTO was pushing back, stating they had already invested heavily in AI coding assistants and didn't see the need for more efficiency tools.
The Strategy:
The rep ignored the lines of code metric and focused on the Developer Velocity Index (DVI). They proved that while the engineers were writing code faster, the "Time to Production" had actually increased by 15% because the bottleneck had shifted to security bottlenecks and manual compliance reviews.
The Pivot:
"Your team is typing faster, but your products are shipping slower. You’re currently seeing a Revenue per Engineer that is trailing the industry average because your top talent is spending 40% of their week fixing vulnerabilities found at the very end of the cycle. We aren't here to help them write more code; we are here to automate the 'guardrails' so that 90% of your security checks happen instantly as they type. We want to move your DVI from the bottom quartile to the top, allowing your current team to ship 3x more features without adding a single new developer."
The Result:
The CTO stopped seeing a security tool and started seeing a revenue booster. The deal was approved because it solved the "last mile" problem of the AI-coding boom.
The Scenario:
A consultant pitched a hybrid-cloud optimization project to a CFO whose "Cloud Consumption" bill was cannibalizing the company’s operating margins. The CFO was ready to "turn off" several AI initiatives to save the quarter.
The Strategy:
Rather than talking about features, the consultant focused on Gross Margin Protection. They noted the company's massive cost of running high-reasoning, expensive cloud models for simple, repetitive tasks that could be handled by "Edge" hardware or smaller, specialized local models.
The Pivot:
"Your current AI strategy is actually hurting your profit margins by 12%. The reason? You’re using 'Supercomputer' brains to solve 'Calculator' problems.
Think about it: every time a customer asks a basic FAQ, you’re paying $0.05 for a massive cloud-based AI to answer. That adds up fast. By adding an Intelligent Routing Layer, we can automatically push 70% of those simple questions to smaller, 'lightweight' models that run on your own hardware for next to nothing.
This cuts your operating costs by $2.2M a year. We aren't asking you to scale back your AI goals; we’re showing you how to make them profitable by only paying for 'high-rent' cloud power when the task actually requires a genius-level response."
The Result:
The CFO pivoted from budget cuts to efficiency. They greenlit the project because it turned the IT bill from a pit to a controllable, tiered utility.
- Profitability and LTV Over Raw Growth: The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
- Massive AI and Automation Initiatives: Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
- Hyper-Focus on Specific High-Cost Trends: Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
- Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.