What's Driving Longer IT Decision Cycles and More Discounting?


Recently, the global management-consulting firm L.E.K. Consulting conducted an in-depth review of US IT purchasing trends.

The 2013 IT Decision Makers Study interviewed 228 IT decision makers, from small / medium businesses (SMBs) to enterprises across all key industry verticals. L.E.K. Consulting offered us an early look at the findings, which deserve consideration as you develop your IT sales and marketing strategy for 2014.

More decision makers
Many of you who have been involved in a sales cycle over the past few years realize there are more decision makers now involved in the average IT purchase decision.   The L.E.K. study revealed an increase in stakeholder complexity that even surprised us.

For SMBs, the typical decision now involves six stakeholders, significant considering the size of these organizations, but proportional to the risk aversion all businesses now have to making the wrong investment decisions.

For large enterprises, the study revealed that the number of decision makers has increased to 13 people per average decision, while very large enterprises (defined as 10,000 employees or more) now involve a significant 20 individuals per decision.

According to Mark Arman of L.E.K. Consulting, “Organizations are afraid of making the wrong purchase decision, and as a result, we expect the number of decision makers and influencers to only increase in 2014, driving further complexity into the decision making process and making it harder for companies selling IT products and services  to achieve their goals.”

Business decision makers more in control
Business decision makers are having more influence and taking more control of the process. The L.E.K. survey results also revealed that almost 25% of the decisions are now made wholly outside of the IT department.  This is only anticipated to grow over the next few years as close to half the decisions are expected to be business group versus IT-driven decisions.

The increased involvement of Business Decision Makers (BDMs) has driven up the need for business cases to provide quantifiable bottom-line justification. The L.E.K. study indicated that 50% of IT budget decisions now require financial business case justification.

As opposed to IT managers who focus more on vendor experience and price, BDMs indicated that they were much more concerned more about ease of use, adoption and total cost of ownership (TCO) for any solutions under consideration.

The study highlights how each decision maker has their own “point of value,” with unique challenges and a different perception of what value the proposed solution might provide. For example, an IT manager cares about their current challenges and improving support, administration security and compliance, while a business manager cares more about driving business growth, streamlining business processes and achieving operational efficiency.

“BDMs are most interested in the overall business impact your solutions can deliver - how they can quantifiably improve productivity, streamline business processes, drive operating efficiency, reduce business risks, and drive competitiveness and revenue growth”, says L.E.K.’s Mark Arman.

Longer sales cycles
A third of respondents reported that IT decision-making cycles are taking longer or significantly longer than just a couple of years ago.

This has unfortunately resulted in vendors proactively discounting in order to reduce sales cycles and get the deals moving to faster to “yes.”

According to L.E.K.’s Mark Arman, “Vendors and channel partners must be able to demonstrate and prove their economic value to this new breed of business buyers in order to accelerate the decision process.”

The Bottom Line

So how should your sales and marketing strategy change to address the growing complexity of the IT decision making process L.E.K. ‘s research has revealed?

With more decision makers and more business involvement, we recommend you:
  • Shape and expand your marketing messaging and sales conversations to speak to the multiple roles involved in the decision making process. Doing this can help significantly drive decisions stalled in “committee” to “yes.”
  • Deliver financial justification so essential in convincing ever more influential business decision makers to make faster decisions with less need for discounting. In the beginning of the decision making cycle, this means quantifying the cost of business-as-usual challenges for each stakeholder. Later in the cycle, it is important to deliver more formal business cases quantifying the benefits, ROI and fast payback and lower TCO.

As Mark Arman indicates, “Addressing the increase in IT decision making complexity with role based financial justification can help get stalled decisions to “yes” faster, shorten decision cycles and reduce proactive discounting.”


Source: L.E.K. Consulting 2013 IT Decision Makers Study. L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and analytical rigor to help clients solve their most critical business problems. 

Comments

Brian MacIver said…
Good Blog, Tom.
In the main, certainly number of people in the DMU increasing is true. We can see this from CRM/SFA Customer Files.
This may indicate longer Buying Cycle just from increased complexity in the DMU.

However, CRM/SFA stats do not agree with 'longer' Selling cycle.

From ITT to Decision is far shorter than even two years ago!

The Sales Cycle is shorter, later in the Buying Process, and VERY intense!

As to the discounting 'response' save the money it just does not work. Fair pricing and good Value are doing much better.
Tom Pisello said…
Regarding the sales cycle, it's all in how its measured.

Sales cycle for when sales is involved has indeed become shorter.

Sales cycle overall from interest to close definitely has elongated.

Perhaps needed to refine to say decision cycle longer :>)
Brian MacIver said…
Agreed!

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