Will Gartner's Latest IT Forecast Put a Chill in your Growth Plans?

Gartner has revised worldwide IT spending down for 2015, predicting a 1.3% YoY decline from 2014. The spending decline is likely to make winning your next deal even more competitive, and make it much harder to meet your revenue growth goals.

This latest estimate comes on the heels of Gartner RAISING forecasts to kickoff the New Year, expecting a 2.4% increase compared to 2014. This time, Gartner blames the decline on the strength of the US dollar. However it was just a couple of years ago that Gartner blamed growth headwinds on weak US currency. Unfortunately over the past five years Gartner’s growth predictions have been overly optimistic.  

We think there is a more systemic issue in the predictions: a major "sea change" in technology spending and purchase decision-making – one that could put a significant chill in your organizations‘ sales and marketing strategy.

Frugalnomics in Effect

So what are the real reasons behind the continued slow growth? We believe it is all about Frugalnomics:

1) Do More with Less - Although there has been an economic recovery, top-line revenue growth remains a challenge for most companies. With a focus on performance, companies turned to improving the bottom-line and have learned to permanently “Do More with Less”.

2) Hype-Cycle - Although new technologies like Mobile, Big Data, , Social, the Internet of Things and the Cloud are hot topics, and they promise to fuel the next big IT investment wave, they are still in the hype cycle, and are not significant enough to affect the annual growth figures - yet.

3) Central IT Irrelevant? - Most technology spending decisions are now driven and controlled by business groups vs. formal IT. In fact, According to IDC, 48% of IT spending is controlled or influenced by the business. At the same time, more and more spending is occurring in the shadows, by individual users and groups, especially Cloud / SaaS purchases, without the formal knowledge of IT. With the businesses and individuals making more purchase recommendations, the language of technology selling has changed. And the spending has changed as well, with smaller monthly spending versus larger investments.

4) ICE - Purchase decision-making is now driven by buyers who are as “Cold as ICE”:
  • In-Control - Highly empowered by access to incredible amounts of solution research and information via the Internet and social media, buyers have taken control of the decision making process with sales reps being invited later to the game, and ever more competition for each deal.
  •  Cautious – buyers are Risk averse, afraid of making a wrong decision, not willing to spend as much per project, and more often than not, choosing to remain with business as usual / status quo rather than considering projects they view as too risky.
  •  Economically Focused – buyers are more frugal, with over 95% of technology purchase decisions now requiring a solid business case with significant ROI and fast payback according to IDC. CFOs are also more involved through all stages of the purchase decision.

 These are the trends of Frugalnomics, and as a result we expect that IT spending growth for 2015 and beyond will remain challenged, with little reason for optimistic spending growth predictions.

More importantly, you need to take Frugalnomics into account as you evolve your sales and marketing strategies and investments to meet the challenge.

Surviving Frugalnomics - The 3 Things You Must Do Now to Win in 2015

 To help meet the challenge and Survive Frugalnomics into 2015 and beyond, we recommend three “must do” programs for this year and beyond:

#1 – Break the ICE - Engaging Prospects with Provocative Marketing
Todays’ buyers are more risk averse and frugal than ever, with 58% choosing to “Do Nothing” versus considering your solution (SBI).

Prospects will choose to stick with the status quo unless you can proactively and provocatively quantify that they have a pain worth addressing. 

And those opportunities you thought were progressing through the waterfall / sales process to “wins” will stall unless you can help successively convince the prospect that the issue you can help solve is real, that it is a high priority worth addressing over all other issues on their plate, and that your solution / services represents a real low risk / superior value solution with 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 Consider a Change? - the Prospect has a pain worth addressing and a significant cost of “Do Nothing”.
  • Why Change Now? – the Prospect should not wait to address the issue because every day is costing them, 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 Your Solutions?– that your solutions / services can deliver unique and superior value at a lower total cost of ownership (TCO).

 So how well does your current content marketing help answer these 3 key decision making questions, in a compelling and quantified way?

#2 – Empowering Sales with Value Messaging and Quantification
According to SiriusDecisions, the #1 reason why sales reps fail to meet quota (for the 4th 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 asking a few questions and then jumping into canned “death by PowerPoint” presentations. According to Forrester, prospects indicate that less than 12% of sales engagements are focused on outcomes and 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 communicate and quantify your value?

#3 - Seal the Deal – Delivering 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 advanced 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 approved unless you can prove your solution has a lower total cost of ownership (TCO) / better value than competitive offerings.

 Although IDC indicates that 95% of proposals require an ROI business case, the research also indicates that 2/3rds of your prospects don’t have the metrics, research, knowledge, tools and time to prepare the business case themselves, leaving it up to you to stand up and deliver if you want their business (or have your proposal approval significantly stalled and delayed).

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 financial business cases / ROI that CFOs demand?

The Bottom-Line

Gartner has predicted low IT spending growth forecasts for the next several years. With Frugalnomics in full effect and buyers as “Cold as ICE”, technology solution / service providers need to implement a more value-focused approach to their sales and marketing strategy, content and tools.

If value marketing and selling are not effectively implemented to account for Frugalnomics, the majority of your deals will continue to stall, sales cycles will get longer, and heavy discounting will prevail.

For 2015 and beyond, IT sales and marketing professionals should consider three initiatives as a top priority to help Survive Frugalnomics:
  • Break the ICE - Engage Frugal Prospects with Provocative Marketing
  • Empower Sales with Value Storytelling and Quantification
  • Close the Deal with CFO-Ready Business Cases

 To learn more about our suggested best practices get the book: Frugalnomics Survival Guide – The definitive guide on using your unique value to market better, stand out and sell more.


Sources:
IDC 2014 Buyer Experience Study (Oct)
Forrester Sales Enablement Conference 2014
SiriusDecisions SiriusIndex, results from 2011 – 2015

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