In the early days of cloud computing, Amazon Web Services and other providers of cloud-based servers and storage struggled to grow because IT departments of large companies took a long time to approve such purchases.
Now, those bureaucratic barriers are being exacerbated by macroeconomic pressures on corporate spending, hammering a host of companies that sell cloud-based artificial intelligence services, such as Palantir, C3.ai, DataRobot and H2O.ai. Shares of C3.ai tumbled 20% in one day last week when the company projected its revenue growth would slow to between 3% and 6% in the current fiscal quarter, from 25% in the July quarter, because customers are becoming more wary of getting locked into contracts that can cost tens of millions of dollars.
“Lengthy sales cycles” are “not well suited to the deliberate decision and approval processes inherent in the current economic environment,” C3.ai CEO Tom Siebel, one of the most experienced enterprise software executives in the industry, told analysts last week. The shift in attitude by companies highlights a vulnerability for enterprise software firms in times of economic weakness—and one with ramifications across the tech sector.