IT Spending on the Rise, But Frugalnomics Still Reigns

The latest IT spending metrics have been released by Gartner, and the news is good for the second half of this year and 2011 overall.

Worldwide IT spending is estimated to grow by 7.1% in 2011, this despite headwinds from the Japan disaster, Greece debt crisis, high oil / gas prices, and doubts over US spending / debt. Gartner’s forecasts are up significantly from estimates earlier in the year, when 5.6 % growth for 2011 was the prediction, despite the disaster and perceived pause in the global recovery.

Leading the recovery is a resurgence in infrastructure investments, with Computing Hardware expected to grow 11.7%, followed by Enterprise Software (9.5%), Telecommunications (6.9%) and IT Services (6.6%) and IT Services (6.6%).

During the Great Recession, infrastructure investments were put on hold, leading to a postponement in important additions and upgrades. This has led to a snapback in hardware spending in both 2010 (12.1% growth) and now again in 2011.

In prior recoveries, it has been Enterprise Software that has led the way, as organizations sought an edge in productivity to capture recovery revenue opportunities.

The priority of cloud services could be changing the equation, with spending in this area predicted by Gartner to be growing four times faster than spending in overall IT, predicted to grow from $89 billion this year to $177 billion by 2015.

In Enterprise Software, cloud is important as well, with SaaS growing to 10 percent of enterprise applications software spending, estimated to be $10 billion in 2011, growing to 20 billion in annual spending by 2015.

Worldwide IT Spending Forecast (Billions of U.S. Dollars)
Growth (%)
Growth (%)
Computing Hardware
Enterprise Software
IT Services
All IT

Although Gartner’s predictions bode well for IT vendors, IT buyers have fundamentally and permanently changes since the bursting of the tech bubble in 2001. Buyers are now more:  

1)      Empowered -  using the Internet and social networks to, on their own and with little involvement from sales, do research, discover opportunities, select solution options and competitively compare alternatives.

2)      Skeptical – trusting peers and analysts more than vendors for important decision making advice and support

3)      Frugal – even though a recovery might be at hand, buyers remain economic-focused with over 90% requiring a business case on any significant purchase, and 81% expecting vendors to provide formal cost-justification.

We have coined the change in buyer sentiment, Frugalnomics.
Changes to IT sales and marketing strategies have been made to help  fight frugalnomics, but are still not provocative / outcome -focused enough to meet changing buyer demands. Traditional product / solution focused approaches do not resonate with today’s IT buyer, and must be replaced with a more proactive, facilitative and value focused approach, powered by new marketing and sales enablement content and tools.

1) Provocative - IT buyers are spending the majority of their time "keeping the lights on", often lacking resources to fully understand the issues they face and improvement opportunities available. At the same time, budget pre-allocated for new projects is very light, despite the recovery. Likely, budget has not been allocated for your proposed solution, so a proactive / provocative approach is required - early in the cycle to get buyers to understand that the issues you can address are tangible, and a priority.

2) Value / Outcome Focused - Once the issue is a priority, the buyer needs to understand that the solution represents a great economic opportunity for tangible savings, productivity, and business benefits. The project then needs to be made a priority amongst the universe of potential projects. An ROI business case is now a requirement, to prove the benefits to an ever increasing cadre of decision stakeholders. A TCO comparison is also needed to assure that the selected solution represents the best possible selection from the universe of potential products / services.

3) Facilitative - The purchase journey is a complex change management process for the buyer who needs help in navigating the various decision steps. Buyers are seeking content and consultative advice to help them streamline the decision making process and drive the change, providing a great opportunity for vendors to contribute, not by marketing or selling, but by collaborating and facilitating.
The Bottom-Line
Although, according to Gartner, IT spending is expected to continue a sharp recovery through 2011, IT buyers are still driven by Frugalnomics: more empowered, skeptical and frugal than ever before. This is a fundamental and permanent change that began with the bursting of the tech bubble in 2001, and has only been reinforced by the Great Recession.
Savvy IT solution providers realize that a new sales and marketing approach is required to help facilitate the buyer’s journey– migrating from traditional product / solution approach to a more provocative outcome/value-focused and facilitative methodology.


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