And the Survey Says...

Monday, May 1, 2017

Surveys are a relatively simple way to gauge current trends. William Blair equity research analysts use surveys to measure temperament across our covered sectors. Compiling data from these surveys for multiple years can reveal cyclical industry trends, purchasing trends, economic sentiments, healthcare outsourcing needs, and more. We highlight just a few of our analysts’ surveys below.

In its fifth year, consumer analyst Dylan Carden’s biennial handbag survey is limited to women in the United States who have considered purchasing at least one of several brands that he believes represent a dominant share of the aspirational luxury handbag market.  The 2017 spring survey continues to indicate a collective hangover in the aspirational luxury handbag market following a near-decade run of solid demand to 2014. As would be expected in this environment, forward purchase intent continues to trend downward, with nearly one-third of all respondents suggesting that they do not intend to purchase a handbag in the coming year.

“Oversaturation and price sensitivity remain the largest deterrents to purchasing,”  according to Carden, “while spending per bag has remained relatively constant now over the last three years. This creates a challenge to growth, as unit comp is likely to remain pressured on top of limited pricing power even with the introduction of newer fashion and designs.” Indeed, while Carden expects companies to continue to push newness to counteract market dynamics, lack of newness remains a relatively inconsequential consideration when deciding not to buy a handbag, in favor we believe of product quality. Overall, he believes these results support no growth to a slight contraction in the coming years.

Healthcare analysts John Kreger and Amanda Murphy worked in conjunction with the Life Science Strategy Group for their 18th survey of pharmaceutical and biotech sponsors regarding outsourcing experience and general trends affecting the contract research organization (CRO) industry. In addition to research-and-development budgeting and deployment trends, the recent survey was focused on overall outsourcing demand, penetration rates, the CROs best positioned to win new business, which CROs offer the best solutions in several key areas, how CROs’ performance has changed over the prior year, and implications of recent M&A activity.

“General responses indicate a more cautionary fundamental demand environment,” concluded Kreger, “most notably from larger and midsize clients, compared with both our spring 2016 and fall 2016 surveys.” The CRO survey indicated that midsize and large pharma companies expect incrementally less growth in R&D budgets over the next three years as compared with expectations in our previous surveys, while small biopharma respondents expect a greater increase in R&D budgets over the next three years compared with prior spring surveys. Outsourcing penetration is expected to continue the upward trend over the next several years. Current penetration is roughly 50% for late-stage development, with a longer-term target of 65%-70%.

With the William Blair Enterprise Tracker, which started in first quarter 2009, technology analyst Jason Ader seeks to provide a broad view of enterprise infrastructure spending with a deep perspective. His team held in-depth interviews with 46 U.S. and European (United Kingdom, Western Europe) resellers to gain a qualitative and quantitative perspective on enterprise demand as it relates to networking equipment, storage, security, software, and services spending.  The main conclusion from the March-quarter survey was that the overall demand environment for enterprise infrastructure was relatively healthy and better than this time last year, but not as strong as last quarter—as post-election euphoria has faded. The majority of VARs are seeing higher activity levels and customer willingness to spend on strategic initiatives. However, pricing is challenging (due to higher prices on DRAM and SSDs, squeezing margins), deal sizes are often smaller than what VARs have seen in the past, and the cloud continues to put real and perceived pressure on infrastructure spending.

“Healthy enterprise activity can be attributed to pent-up demand from last year,” explained Ader, “when many customers stalled projects and pushed off refreshes because they were facing budget uncertainty or were waiting to see if the cloud would make sense for various workloads. According to our survey, many customers have learned that the cloud is not appropriate for many workloads (and in some cases the cloud is more expensive than on-prem infrastructure), which drives the need for on-premise refreshes for existing infrastructure.”

For a copy of the most recent survey from these analysts or for more information on the companies covered by Dylan Carden, Amanda Murphy, John Kreger, and Jason Ader, please contact your William Blair representative.

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