Tuesday, July 09, 2013

How Can You Shine as Gartner Lowers IT Spending Forecasts for 2013?


Sometimes you don’t want to be right, and this is one of those times.

To kick off 2013, Gartner predicted that the reigns on worldwide IT spending would loosen, forecasting an increase of 4.2% in IT spend for the year. As I predicted shortly after in this article, I thought Gartner was being overly optimistic, letting the glow of New Year’s celebrations cloud the fact that:
  • Analysts have consistently and significantly lowered their initial annual growth forecasts mid-year for the past several years,
  • Although we are in a recovery, it’s been very slow, creating a frugal mindset for all purchase decisions that will equally be slow to change.
Sure enough, Gartner has had to once again lower expectations , cutting in half their earlier growth estimates, now predicting only a 2% rise.

Gartner blames the revision on exchange rate fluctuations, but I don’t buy this as the main reason for halving their IT spending growth, as similar reasons were given for lowered expectations in 2012 as well (where initial estimates of 3.7% growth were lowered to 1.2% by mid-year).
Although exchange rates may indeed be a factor, I believe that lower 2013 IT spending growth is with us for a couple more years based on:
  • A continuation of our current “Do More with Less Economy”, where frugal and risk averse buyers are slow to increase funding for any business investments, especially for legacy IT such as PCs, data center hardware, telecom and services. Enterprise software remains a bright spot as organizations strive to use software to automate business processes and improve productivity,
  • Emerging investments in mobility, cloud and big data ramping up, but not yet “crossing the chasm” and as such, failing to make up for the growth shortfall.
It will be some time before “Frugalnomics” gives way, where investments in the emerging three: mobility, cloud and big data “cross the chasm” to fuel the next big wave.

As such, it is important to recognize that growth will in the near term remain historically low, below the 6% average annual IT spending increases of the last decade, but that your sales and marketing strategy can be adjusted to drive competitive success.

2013 Challenges for IT Solution Providers

Revenue growth is extremely important for IT solution providers, as this growth is required to sustain high valuation multiples and shareholder equity. As a result, IT Sales and Marketing will again be tasked to deliver incremental revenue regardless of challenging market conditions and despite the historically low spending growth.

But delivering incremental revenue is a challenge, as tech-purchasing decisions have fundamentally and permanently changed.

Even as the economy improves, buyers remain more skeptical and frugal than ever, demanding quantifiable proof that each investment delivers a quick payback and significant bottom-line impact. As a result, Financial Justification / ROI is now the most important content buyers rely on to make purchase decisions (greatly exceeding the importance of case studies, product demos and thought leadership content), and over 90% of IT purchase decisions now require a formal business case for approval (IDC - 2013).

IT purchase processes are ever more complex, with IDC reporting 40% more stakeholders involved in the average purchase decision compared to just 3 years ago (growing from 5 to 7 decision makers per purchase). Not only are more “scrutineers” at the table, but the demographics of the participants have changed. With the continued consumerization of IT, according to Gartner, by the end of this decade almost 90% of tech purchase decisions will be controlled not by IT, but by business groups. 

Solution providers may be caught unprepared by this Teutonic shift - the complexity of ever more stakeholders and the significant shift from technical driven purchase decisions to control of the process by the business buyer.

Frugalnomics is in full effect, with todays’ buyers more empowered, skeptical and frugal than ever before, and sales and marketing needing to evolve in order to meet the challenge.

The 3 Things You Must Do Now to Win in 2013

To help meet the challenge and Fight Frugalnomics, we recommend three “must do” programs for 2013:

Engage Frugal Prospects with Provocative Marketing

Todays’ buyers are more overloaded and risk averse than ever, and as a result, 58% are choosing to “Do Nothing”, to remain with “Business as Usual” versus considering your solution (SBI – 2013).

Prospects will choose to “Do Nothing” unless you can proactively and provocatively quantify that they have a pain worth addressing. And the opportunities you thought were progressing through the waterfall / sales process to “wins” will stall unless you can help convince the prospect that the issue is real, a high priority worth addressing over all other issues, and that your solution represents a real low risk solution with superior value and unique competitive advantage.

In order to connect and engage with “Do Nothing” buyers, helping them through the decision making journey, you need to help them realize:
  • Why Change?
  • – the Prospect has a pain worth addressing and a significant cost of “Do Nothing”,
  • Why Now?
  • –the Prospect should not wait to address the issue because they are leaving good money on the table (significant bottom-line impact, ROI and fast payback), and they are falling behind competitively (illustrated through peer comparison benchmarks),
  • Why You?
  • – that your solutions can deliver unique and superior value at a lower total cost of ownership (TCO).
So how well do you answer these key decision making questions for your buyers in a compelling and quantified way?

Developing and deploying the right interactive Value Marketing Tools is the key, to provide Prospects the personalized, relevant and provocative answers to these key questions early in the decision making cycle. Click here to learn more.

Empower Sales with Value Storytelling and Quantification

According to SiriusDecisions, the number 1 reason why sales professionals fail to meet quota (for the 3rd year in a row) is their “inability to effectively communicate the value of proposed solutions”.

Sitting in on the majority of sales presentations and you can see that most are still delivering empty product pitches or pseudo-solution selling with a few cursory questions and canned “death by PowerPoint” presentations. According to Forrester, prospects indicate that less than 12% of sales engagements are focused on customer value.

Despite significant changes in prospect expectations, sales leadership recognizing that value selling is needed in order to meet quota, and the millions spent on solution / value selling messaging and training, only about one in ten sales professionals engage with “value”.

So how well do your sales professionals and channel partners engage with value?

There is a way to overcome the value selling adoption challenge … to better institutionalize and effectively deploy your solution / value selling methodology to sales professionals and channel partners so it actually gets used in sales engagements. To empower sales professionals to engage with powerful value storytelling and “back of the napkin” value quantification. Click here to learn more.

Close the Deal with a CFO-ready Business Case 

CFOs are large and in charge of many IT purchase approvals. According to a Gartner and Financial Executives Research Foundation research survey, the CFO is becoming the top IT decision maker in many organizations, with:
  • Over 75% indicating significant decision making involvement,
  • 41% indicating being the main decision maker for IT investments.

    From the CFOs we talk to, they indicate that proposals:
    • Won't be considered a priority without a business case, and the larger the proposal, the more detailed and formal the case has to be,
    • Won't be approved unless you show that the issue being addressed is a priority with a high cost of “doing nothing”, quantified savings / benefits from the proposed solution, and a significant ROI and fast payback,
    • Won’t be advanced unless they show that the proposed project is low risk and with low resource requirements, as “do more with less” applies regardless of the ROI,
    • Won't be signed off unless you can prove your solution has a lower total cost of ownership (TCO) / better value than competitive offerings.
    With Finance playing such a key role in IT decision approvals, it is imperative that proposals contain the business case content that CFOs need to provide approval, otherwise your deals will be stalled or delayed in the final stages, and you may be losing critical deals to competitors who make the better CFO case.

    So how well do you deliver the business cases that CFOs demand?

    There is a way to easily develop and deliver CFO business cases for your solutions. Click here to learn more.

    The Bottom-Line

    Gartner has once again lowered their annual IT spending growth estimates to historically low expectations. Frugalnomics is still in full effect, requiring IT sales and marketing to take a more value-focused approach.

    If not addressed, deals will continue to stall, sales cycles will get longer, and heavy discounting will prevail.

    For the rest of 2013, IT sales and marketing professionals should consider three initiatives as a top priority to help Fight Frugalnomics:
    1. Engage Frugal Prospects with Provocative Marketing
    2. Empower Sales with Value Storytelling and Quantification
    3. Close the Deal with CFO-Ready Business Cases
    To learn more, click here.


    Sources:

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